According to an article in the Dallas Morning News, three months after the new rules regulating the appraisal of homes were implemented the changes are now being fought by the mortgage industry, realtors, homebuilders and the appraisal industry itself.
The article said:
“The new guidelines essentially put a firewall between lenders and home appraisers. They also ended the practice of lenders using their in-house staff for initial home appraisals and prohibit the use of appraisal-management companies owned or controlled by lenders.”
“This thing is not only preventing the housing market from recovering, it’s destroying the housing market,” said Marc Savitt, president of the National Association of Mortgage Brokers. “We’re eliminating competition, and we all know what happens when you eliminate competition: Prices go up.”
The truth of the matter is that one of the causes of the foreclosure crisis is that there was actually too much fraternizing between the appraisal industry and the mortgage industry. Many homes were overvalued, sold to unsuspecting buyers who were then given mortgages that matched those inflated appraisals.
When many of those unsuspecting buyers wanted to refinance or sell, they were often hit with much lower appraisals. Many others faced foreclosure because they were unable to sell their home which was not worth as much as the original appraiser claimed it was. This is why the regulations were put in place, to prevent the commingling of appraisers, mortgage lenders and real estate industry professionals.
This type of regulation helps to protect future homeowners from foreclosure because it minimizes the risk of over inflated appraisals that only serve the interests of mortgage lenders and those in the housing industry. These industry leaders need to understand that strong regulations that protect homeowners from foreclosure are good for business.