Banks may be the real culprits behind low-ball appraisals
Who knew? We've been blaming blockhead appraisers for all those scuttled home sales when it was the banks who were really mucking it up.
Seriously, new rules to be rolled out by Fannie Mae on Sept. 1 offer a window into a strange world that has left more than a few would-be buyers and sellers fuming.
Kenneth Harney lays it all out pretty well here.
Basically, the rules bar banks and other lenders from changing appraisers' numbers.
It is aimed at addressing a scenario that has become all too common since Sept. 2008. Buyer and seller agree on price and buyer lines up a mortgage, only to have the whole deal implode when the appraisal comes up tens of thousands short of the agreed upon price.
Sure, in some cases the appraisals may have simply punctured an inflated sales price. But in others, lenders are simply trying to protect their you know what, automatically knocking down the appraisal numbers to prevent any possible challenge, Harney explains.
Apparently banks now face big penalties if they are found passing on mortgages based on inflated prices to Fannie Mae or Freddie Mac. So if some computer assessing program comes up with a lower number based on an erroneous comp, the bank lowers the appraisal to match it, Harney notes.
No more. Banks will now be required to first discuss the issue with the appraiser, and, if that is still not satisfactory, order a second appraisal.
It's all kind of ironic given the ink spilled by the National Association of Realtors blasting those dastardly appraisers for holding back the real estate recovery. And, to be fair, Fannie Mae's new rules also attempt to address long-standing complaints by the real estate industry of slave-wage appraisers shipped in from other states who wind up churning out low-ball estimates.
It all sounds a bit familiar, doesn't it? Recall that the big complaint after the collapse of the real estate market was that banks back in the bubble years pressured appraisers to boost their estimates so mortgages could be inked and sales closed.
Apparently, the banks are back at it, bullying the appraisers once again, only this time it's to get lower numbers, not higher ones.
