As published in Scotsman Guide's Residential Edition, July 2008.
This is perhaps the most-transformative time for real estate appraisers in two decades, according to Appraisal Institute President-Elect Jim Amorin, who says that some of the changes -- actual or planned -- will also affect mortgage brokers. With rumors of appraisal changes having circulated for months now, Amorin addresses the ideal relationship between appraisers and mortgage brokers.
Recent proposals call for prohibiting brokers from ordering appraisals. What's the institute's stance on that? Many appraisers have spent years developing good business relationships with honest and ethical mortgage brokers. To remove those folks from the process would take away a potentially large source of appraisers' business. If you're talking about professional and ethical mortgage brokers, then there would be no reason to exclude those folks from the ordering process.
How do you suggest making sure that brokers are honest and ethical? We think one way to do that would be to make sure that there are either civil or criminal penalties against people who put undue pressure on appraisers.
I'm not talking about a mortgage broker ordering an appraisal and having questions about the appraisal. That's a typical, everyday part of what happens, and that's not really pressure.
What I'm talking about is making sure that once we submit that appraisal to mortgage brokers, they don't say, "If you don't raise that value, you're not going to get any more work from us."
What suggestions do you have for brokers working with appraisers? The best thing mortgage brokers can do is provide all the necessary information -- including the current property address and contact information for the borrower -- and be clear about what type of appraisal they're looking for: a full appraisal or a drive-by appraisal. After that, they should stand back and let appraisers do their jobs without any undue influence.
If brokers are barred from the appraisal-ordering process, what other effects will there be? Lenders will either do the appraisal-ordering themselves, or they'll hire appraisal-management companies to do it for them. In our experience, appraisal-management companies focus on two things, neither of which is necessarily good for the consumer. They focus on who can do the appraisal fastest and [who can do it] cheapest. Ultimately, the outcome will be lower-quality appraisals.
Noting the Real Estate Settlement Procedures Act reform and other alterations to mortgage policy, what's the Appraisal Institute's primary concern? Making sure our members can develop credible appraisals. If we can develop a meaningful process where mortgage brokers can be involved, then many of our members are going to be very happy. They have great relationships with mortgage brokers who help ensure unbiased, neutral and pressure-free appraisals.
Darrick Meneken is an associate editor at Scotsman Guide. Reach him at (800) 297-6061 or firstname.lastname@example.org.