New Appraisal Requirements Stir Controvery, Criticism

January 21, 2010 · Posted in News For Homebuyers

People considering purchasing a home with an FHA loan in the coming months would do well to check out today’s USA Today. The newspaper takes a look at the controversy surrounding new home appraisal regulations that are getting ready to take effect in mid-February.

Beginning Feb. 15, mortgage brokers, Realtors and anyone else who might earn money on your transaction must have a third-party appraisal management company (AMC) conduct an appraisal of the home in question. The days of brokers ordering their own appraisals are dwindling.

Legislators have argued the new process will curb appraisal inflation and fraud. But organizations that represent Realtors, brokers and other stakeholders claim the change will lead to delays, shaky appraisals conducted by people unfamiliar with the market and, ultimately, considerably lower home valuations.

AMCs and others in their industry defend their practices, claiming that low home values are a direct result of the market.

For many prospective homeowners, this will likely play out somewhere in the middle. Appraisal times will probably rise. Home values probably won’t. The reality is, it’s just more difficult to navigate the process in some parts of the country. Establishing a value is taking longer in places where the market continues to lag.

Borrowers should check with their loan officer early and often. Ask for constant updates. Poke and prod when necessary. But don’t abandon all hope.

FHA loans remain one of the most flexible and productive loans on the market, especially for first-time buyers and those with lower and middle incomes. Borrowers might want to keep that idea of flexibility at the forefront of their minds in the coming months, as the industry continues to adjust to these new requirements.

Image: Neubie