As a buyer or homeowner looking to refinance, you most likely wouldn't have given a second thought to the appraisal process. Typically a mortgage specialist would move the process along by selecting an appraiser to determine the value of your home. Some new rules implemented last May will now put an end to this with the goal of reducing appraisal fraud and undue pressure on appraisers. What many people don't consider, are the serious repercussions these new rules may have on homeowners and future buyers. Read on to gain a better understanding of the new Home Valuation Code of Conduct (HVCC) and how it may influence you.

What is the Home Valuation Code of Conduct?
The new rules of the HVCC forbid individual banks and mortgage brokers who sell conventional loans in the secondary market to Fannie Mae and Freddie Mac to select their own appraisers. Both Fannie Mae and Freddie Mac adopted the Home Valuation Code of Conduct May 1, 2009 after Andrew Cuomo, the New York State Attorney, filed a lawsuit against a few appraisal companies that allegedly gave in to lender pressure and supplied inflated appraisals to justify higher mortgages.

With the FBI reporting 80 percent of all documented mortgage fraud loss involving collaboration or collusion by industry insiders, the HVCC seems like a great idea; but many real estate industry experts argue otherwise.

A Seemingly Good Idea Gone Sour
Appraising the Unfamiliar
With the new appraisal rules in effect, mortgage brokers and lenders no longer have the ability to call upon the local expert appraiser to value the home of the consumer looking to refinance, sell or purchase. Instead, appraisal management companies must serve as the middle man and select appraisers from the company's large appraiser pool.

Because the appraisal management company selects appraisers at random from a pool of all licensed appraisers, there is a good chance the appraiser sent to value a home will be unfamiliar with the neighborhood, and sometimes even the city, thus yielding an inaccurate appraisal. A borrower could also end up with a fairly new appraiser with little to no experience, which may influence the validity of the appraisal. Work with Celtic Mortgage to gain a better understanding of what to expect throughout the appraisal process.

Low Ball Appraisals Spoiling Sales
When an inexperienced or unfamiliar appraiser is unable to pull accurate comparable home and neighborhood data, he/she is far more likely to produce an under-valued appraisal. When the appraisal is less than the selling price, many sellers snub home sale price negotiations and buyers refuse to pay the difference.

Consumer Covering Costs for Increased Price of Appraisals
Because of the new party added to the appraisal process, consumers and appraisers are stuck bearing any additional costs to cover the middle man's salary; meaning part of the appraisal fee goes to the appraisal management company, with the balance to the appraiser.

Those looking to refinance or sell their home may want to discuss any additional fees beforehand with a Celtic Mortgage mortgage specialist to avoid costly surprises down the road. Contact us at 225.752.2492 or visit us online at http://celtic-mortgage.com to learn more about the HVCC and if it will affect you in your efforts to refinance your mortgage, sell your home or purchase a new one.

Keeping You Informed...
Celtic Mortgage is dedicated to keeping you informed of the latest market trends and mortgage options. Visit Celtic Mortgage online at http://celtic-mortgage.com, or call us today at 225.752.2492, to obtain custom loan options designed to fit your needs and help you obtain your home ownership goals.