Home Appraisal Process Update – January 2015
New Program By Fannie Mae Likely To Slow The Home Appraisal Process And Increase Costs To Home Buyers
Changes To The Home Appraisal Process From Fannie Mae
Beginning January 26, 2015, Fannie Mae is unveiling a new program that will likely slow the home appraisal process and increase costs to home buyers.
At first blush, the new program appears practical. But upon a more critical examination, it may just be creating more work for appraisers and lead to higher costs and slower appraisal processing. Although Fannie Mae doesn’t acknowledge this possibility, many appraisers suggest it will.
In A Nutshell
The program proposed by Fannie Mae provides home mortgage lenders access to a new database Fannie owns. The proprietary database is designed to provide mortgage lenders up to 20 alternative comparable homes similar to those used by an appraiser.
The Fannie Mae data is intended to identify potential errors in an appraiser’s work and therefore help lenders decide on loan approval. If errors are indicated based on Fannie Mae’s data, the lender can present the “new data” to the appraiser who did the work. Then the appraiser must explain and support of the “comparable” homes used in the appraisal report.
Why Is That Bad?
Start with delays to closings and higher costs. Appraisers say if they have to go back and justify why they chose the comps for their valuation during the home appraisal rather than those selected by Fannie’s computers it will take them more time and add costs. Those extra steps, if required, will likely add days and even weeks, to closing times.
That means countless buyers and sellers and buyers who had scheduled specific dates for moving may abruptly find themselves unable to close on their home purchase or sale. This could also cost them more if they need to change the moving company’s schedules.
Another issue raised by the appraisal industry is that Fannie Mae won’t give appraisers access to the “black box” databases it uses. They won’t know of any potential issues until a lender contacts them.
And There’s More
To make matters worse, Fannie Mae’s database uses census tract groupings not neighborhoods. As most people know, real estate is always a “local” market. Because census tracts don’t address that fact, the database will mix dissimilar home neighborhoods in a census tract. Appraisers suggest that will bias home values down.
This may “influence” home appraisers to choose the lower priced homes for their appraisals.
Will the new Fannie Mae program have a adverse impact the home appraisal process, slow it down and raise costs. That question will be answered in the near future. However, if the responses we have received from the mortgage lenders we know have any importance – It Will!
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