Home-Appraisal Row May End Up in Court

Wall Street Journal (05/08/08) P. A4; Hagerty, James R.
The appraisal code of conduct orchestrated by New York Attorney General Andrew Cuomo and slated for implementation by Fannie Mae and Freddie Mac on Jan. 1 likely will face litigation if Cuomo fails to collaborate with the mortgage industry to revise the regulations, says Steve O'Connor, a senior vice president at the Mortgage Bankers Association. The code of conduct aims to prevent lenders from pressuring appraisers for inflated valuations, would make it illegal for bank employees and mortgage brokers to select appraisers and would ban the use of in-house or affiliated appraisers by lenders. The mortgage industry and certain federal regulators worry about disruptions in the appraisal industry and higher borrowing fees as a result of the code, and some are criticizing Cuomo for instituting new rules without soliciting feedback from federal regulators or Congress. While Cuomo insists the code is an agreement between the New York Attorney General's office and the government-sponsored enterprises, Washington-based attorney Raymond Natter of Barnett Sivon & Natter says it "is tantamount to federal regulation" and should be forced to comply with the U.S. Administrative Procedures Act, which mandates that rules are issued as a proposal and undergo a public comment period before final rules are adopted.