Bankers Pan Appraisal Revamp Plan

Wall Street Journal (05/01/08) P. A6; Hagerty, James R.
In a recent letter to New York Attorney General Andrew Cuomo, the Mortgage Bankers Association (MBA) voiced opposition to an agreement he forged with Fannie Mae and Freddie Mac to reform the appraisal industry and a new code of conduct to be implemented by the government-sponsored enterprises on Jan. 1. Under the code of conduct, lenders cannot exert pressure on appraisers to inflate residential values or underwrite loans using in-house appraisals, affiliated appraisal companies or appraisals ordered by mortgage brokers. Additionally, appraisers cannot be selected by bank employees involved in the underwriting process. While the code of conduct aims to prevent inflated appraisals, MBA worries that it will boost borrowing costs. In urging that the plan be withdrawn or altered, the industry group insists that Cuomo has neither shown that in-house appraisers are more vulnerable to coercion nor taken into account that lenders already are motivated to seek out fair appraisals because they reduce losses tied to inflated valuations.