Mortgage Rates Affected by Appraisal Industry Changes

Posted by  on Sep 04, 2009

It's a thankless task, and you can't buy or sell a home without it. It's your home appraisal, the document that can determine the amount of home equity you can tap and the kind of refinance rates for which you can qualify. Changes sweeping across the home appraisal industry have impacted your ability to get the best mortgage rates.

Recent reports in both the New York Times and the Wall Street Journal outline the history of a new code of ethics required of all home appraisers. As home sales and real estate prices both skyrocketed during the late 1990s and early 2000s, home appraisers felt pressure from property brokers to deliver ever-higher home values. When real estate values crashed, mortgage lenders took appraisers to task for caving in too easily to the demands of the market.

Mortgage Lenders Now Manage the Appraisal Process
With new rules in place, the business of appraising homes has changed dramatically. Whether writing new business or refinancing home loans already on the books, the Home Valuation Code of Conduct (HVCC) controls the appraisal process. To avoid potential conflicts of interest, banks must engage home appraisers through third-party management services, in which they can hold no more than a twenty percent ownership stake. Regulators monitor complaints from all parties.

Not everyone is happy with the new rules, however. Critics of the system blame margin-squeezing management companies (which take up to 40% right off the top of the appraiser's fee) and slumping real estate markets for an exodus of experienced appraisers from the industry. Fewer and less-experienced appraisers working in a market can mean longer wait times to close sales and home refinance deals. Brokers also report challenges working with out-of-town appraisers sent by central management offices, unaware of neighborhood-specific benefits and challenges.

How Home Appraisal Changes Impact Your Home Refinance
According to experienced mortgage brokers and real estate agents, the biggest change that prospective home refinance customers will notice is the amount of time it takes to close a deal. A lender offering the lowest mortgage rates may be working exclusively with an appraisal management team that has fallen weeks behind. By the time the appraiser files the proper paperwork, the market could have pushed those rates north. Therefore, in addition to shopping rates online, be prepared to learn about your prospective lender's appraisal process and expected closing time. A lender using local appraisers with fast turnaround time is more likely to deliver on today's mortgage rates.


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