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New housing regulations could cost consumers more

Posted June 25, 2009

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— The national mortgage crisis is hitting appraisers, like David Cozzarelli, of Apex, in ways they never imagined.

"What it did, effective May 1, is about 40 percent of my business went away," Cozzarelli said.

That's when new rules adopted by mortgage giants Fannie Mae and Freddie Mac went into effect, tightening regulations that steer lenders toward real estate appraisal management companies, instead of independent appraisers like Cozzarelli.

Are appraisal regulations creating new problems? Are appraisal regulations creating new problems?

"The whole point is to create a firewall," said North Carolina's deputy commissioner of banks, Mark Pearce.

Pearce says the policy, called the Home Valuation Code of Conduct, is supposed to prevent cozy relationships between lenders and appraisers that lead to inflated home prices.

But it can costs customers more, while appraisers who work for the companies get paid less per job.

"I have signed up with many (appraisal mortgage companies) and put down my full fee, and they don't want to hire me because they want 40 to 60 percent for simply pushing paper," Cozzarelli said.

WRAL News contacted numerous appraisal management companies, as well as the Mortgage Bankers Association. None wanted to comment.

Other concerns also exist. Some appraisers believe the new rules will create new problems on the housing market. That's why the North Carolina Commissioner of Banks and the North Carolina Appraisal Board are asking lawmakers for changes.

"Appraisal management companies are completely unregulated," Pearce said.

He wants to see laws with more oversight, because, he says, those cozy relationships can still exist and unscrupulous brokers can re-emerge.

"Right now, today, if we got a broker out of the industry, they could turn around and start an appraisal management company," Pearce said.

Senate Bill 829 and House Bill 716, currently in committee, would require appraisal management companies to register with the North Carolina Appraisal Board and give the board the authority to suspend, revoke or deny a registration to any company violating state laws.

As for Fannie Mae and Freddie Mac's new rules, many appraisers, like Cozzarelli, say that they are still new and that with time, they believe there will be a solution that works for everyone.

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  • simracer68 Jun 26, 2009

    And if you don't think AMC (appraisal management companies) aren't a powerful lobby, ask an NC legislator why the proposed AMC Regulation Bill had several key things deleted before it got to where it is today. Like the mandate that AMC's *NOT* require appraisers to sign hold harmless and indemnification clause-containing contracts prior to "being accepted" to work for them...for half to 40% of their normal fee (this was under "Prohibited Acts" in the intitial AMC regulation draft bill, but has since been removed. Yeah, the HVCC has "fixed" everything alright...Appraiser's liability insurance will not cover anything that happens to an appraiser when a hold harmless and indemnification clause has been signed for the client. Would a doctor do any work on a patient who basically made them nullify their malpractice insurance prior to the procedure?

  • DontLikeTheSocialistObama Jun 26, 2009

    This change wasn't pushed through to guarantee quality appraisals.

    It was pushed through to benefit the large appraisal companies by eliminating their competition. By forcing the independent appraisers to either go out of business or work for the large appraisal companies.

    More "change" (Socialism) that you can count on from our Socialist President Obama.

  • hihuwatlu Jun 26, 2009

    I agree! If we let the companies go bankrupt after lending more than a property is worth, why would they want the appraisers to inflate the home values? The problem came from the brokers who made the loans and then sold them. Require more disclosure when lenders sale loans to others so buyers know what they are getting. Then, let everyone take responsibility for their own actions!

  • bluecharger Jun 26, 2009

    they haven't learned a thing.....not the mortgage companies, their partners-in-crime the real estate companies, nor anyone else who gets greased during a home sale.....just like the automakers, shoulda let'em all go bankrupt if that's where their practices led them