The Home Valuation Code has long been surrounded by controversy. The code, originally instituted by lending giants Freddie Mac and Fannie Mae, has resulted in higher fees for consumers and lowball property appraisals which have caused many pending home sale contracts to fall through.
The new proposal would require the appointed agency director to replace the current code with a new set of regulations which would be developed by way of regular administrative procedures and feedback from the public.
Under threat of investigation from authorities, the co-creator of the Home valuation code, New York state Attorney General, Andrew Cuomo agreed to the adoption of new rules and regulations. The original intent of the code was to make appraisers independent from lending agencies and brokers, to avoid any undo influence on appraisers to appraise the value of a property at a sufficient amount to enable a loan to be funded. In many cases in recent years, the value of a home was overstated by unscrupulous appraisers to get loans funded in return for repeat business or other form of kickback.
Even though the original intend of the code was to create appraiser independence, the code has been criticized by many citing that many lending institutions were encouraged to hire appraisal management companies. In contrast to the intent of the code, some of these appraisal management companies were owned or affiliated by the lending institutions themselves.
Management companies will often pay appraisers less than the standard fee which they would charge. Some management companies have been known to charge the consumer the full amount and collect the difference for themselves.
Other factors surrounding the need for change are the concern amongst the industry that appraisers who are willing to work for lower than average rates tend offer lower quality home appraisals. Also, results of a recent survey conducted by the NAR (National Association of Realtors) and the National Association of Home Builders showed growing concern over the methods that are utilized by appraiser when distressed homes in neighborhoods are taken into account when conducting the appraisal of a nearby home which is not in a distressed situation.
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