By Anessa V. Cohen
Back when the federal regulators started going nuts and changing regulation upon regulation until we were all thoroughly disgusted, the more sadistic ones decided to really kick it up a notch and change the way the appraisal system was utilized in mortgage processing. I have thought this type of chasing the mortgage industry was a financial form of McCarthyism, but then who asks me my opinion anyway?
Up until a few years ago, you would fill out an application for a mortgage with a lender. That lender would choose one of its approved appraisers, based on the location of an appraiser’s area of expertise, and request that an appraisal of the property be done and submitted to the bank.
Unfortunately, like everything else that had a disastrous effect on our economic meltdown, the misuse of the appraisal system by some unscrupulous few would now cause all kinds of new safeguards to be put into place to prevent the manipulation of the appraisal generation system.
I don’t think corruption is more rampant in either the mortgage industry or the appraisal industry than any other industries, but we seem to have been targeted during this economic meltdown as worse than the used-car salesman or the old traveling medicine man who used to sell miracle tonics across the Old West which turned out to be little more than colored water with a touch of alcohol.
Why we seem to be getting regulation upon regulation more than the securities guys on Wall Street that really created this mess is, I guess, just a case of being easier to pick on.
So, the regulators came up with a new appraisal system whereby appraisers will now be chosen randomly at the throw of the dice through a request directly to newly formed appraisal management companies. The big winners of this new regulation are all these new appraisal management companies popping up all over the place. The losers in this are (1) the appraisers who must sign up with these companies and hope that their number gets picked when the next appraisal is ordered or go out of business and (2) the borrowers who now have to cough up more money to pay these management companies in addition to the appraiser that is chosen. I guess according to the regulators who came up with the idea, that’s just too bad on them.
Are the appraisals generated by these appraisal management companies more accurate than the appraisals generated the old-fashioned way, before the new regulations? On the contrary, some alarming situations have come up with this new system, and I just wait to see how long it will be until the regulators realize this was a mistake and revert to the old system.
What has transpired with this appraisal management system is that appraisers are not being chosen based on their expertise of certain locations and experience, but rather appraiser names are more or less pulled from a hat or computer as the case may be, based on what counties they are licensed in and how cheap the management companies can get them to do these appraisals so they can pocket the rest. Many of these inexperienced appraisers are being sent to homes in areas where they have never been, needing maps and directions just to get to the house and using homes pulled from the computer rather than knowledge of differentials with location and layout values in various locations.
All of this has led to some really troubling concerns regarding how professional and accurate some of these appraisals really are when they are being done by individuals with no background in the particular neighborhood.
Although this has been a subject that many have been complaining about for a while, I read with great interest a front-page story that the New York Times published this week in its Sunday edition, speaking at length of the complaints surfacing more and more in the industry because of the guidelines that the regulators designed which really have caused more problems than they have solved. I look forward to seeing if the rumblings get louder and as a result some of these real issues finally get resolved.
Anessa Cohen lives in Cedarhurst and is a licensed real-estate broker and a licensed N.Y.S. mortgage broker with over 20 years of experience, offering full-service residential and commercial real-estate services (Anessa V Cohen Realty) and mortgaging services (First Meridian Mortgage) in the Five Towns and throughout the tri-state area. She can be reached at 516-569-5007 or via her website, www.AVCrealty.com. Readers are encouraged to send questions or comments to anessa.cohen@AVCrealty.com.