We all remember last May when the new appraisal system imposed by Fannie Mae and Freddie Mac sent shock waves through the real estate market. Well, the Washington Post recently reported that the new “Home Valuation Code of Conduct” could already be on its way out. The code could be terminated by the proposed Consumer Financial Protection Agency under a bipartisan amendment approved by the House Financial Services Committee.
The amendment would require the new agency’s director to replace the code with a set of rules developed through regular administrative procedures and public comment periods used by all federal agencies.
As we have seen in the local Boston real estate market, the current code created far more problems than it solved. We have seen the use of inexperienced appraisers by banks increase significantly. We have seen appraisers who normally work an hour or two outside of the city try to value properties in locations such as Beacon Hill and the Back Bay. It is now common for appraisers to attempt to value properties in high-rise complexes who have, prior to the appraisal, never set foot in the building let alone comparable properties. Banks have been forced to require multiple appraisals in many cases, forcing postponed and canceled closings. Oh yeah, and fees are through the roof.
By no means am I saying that there shouldn’t be regulation; I am just saying it makes sense to have experienced, local people on the ground who know the neighborhoods and can accurately value the specific property under consideration.
Right now it looks like the legislation to scrap the current code will pass the full House, but it may have a tough time passing on the Senate floor.