New rules for Appraisers

New rules for appraisers

New rules are finally in place for appraisers - at least for those appraising homes that will be financed by mortgages to be purchased by Fannie Mae and Freddie Mac. A replacement for the Home Valuation Code of Conduct for appraisers has been in the works for a long time. Recently, the new Home Valuation Code of Conduct was implemented.

The new rules, now effective, establish standards for solicitation, selection, compensation, and practitioner independence when it comes to home appraisals. The goal is to ensure appraisers' work is conducted autonomously, without pressure from lenders and real estate agents to manipulate property valuations. Appraisers must be licensed or certified by the state in which the property to be appraised is located.

A seller is not allowed to obtain or use a second appraisal in connection with a mortgage financing transaction unless there is reason to believe the original appraisal is "flawed or tainted." Sellers must provide the borrower with a copy of the appraisal report on the subject property at no additional cost and at least three days prior to the closing of the mortgage. However, the borrower can be required to reimburse the seller for the cost of the appraisal. The seller cannot accept any appraisal report completed by an appraiser selected, retained, or compensated by any other third party, including mortgage brokers and real estate agents.

There must be separation of a seller's sales/mortgage production functions and appraisal functions. In other words, an employee of the seller in sales or mortgage production shall have no involvement in the appraisal.

Thank you to Ryan Nelson from Academy Mortgage for passing this along to  me.