National appraisal firms said to roadblock home mortgages
By Marilyn Bowden
In a market where home values are in flux, getting an appraisal that all parties will accept is problematic — and Realtors say the tendency among larger lenders to hire national appraisal management companies, which act as third-party brokers, rather than independent local appraisers only makes matters worse.
While regional and community banks are more likely to use trusted local appraisers, they say, that hasn't cleared the way for most people to get a mortgage.
The trouble with appraisal management companies is that many of the appraisers they contract are not local and not familiar with the area, said Claudine Claus, president & CEO of Home Financing Center, one of the largest independent, privately-owned mortgage lenders in South Florida.
Price and quality also come into play, she said. "The management company is earning a fee, and therefore the appraisers they contract are getting paid less. So they tend to be in a hurry or not very experienced."
Earlier this year, she said, the Federal Reserve replaced the much-maligned Home Valuation Code of Conduct with new rules, as required by the Dodd-Frank financial regulatory reform bill. Now, among other changes, appraisal management companies are required to be licensed.
"Fannie Mae has been looking at a lot of technology to try to get more information flowing into their system from the appraisal side," Ms. Claus said.
While Home Financing Center has always kept tight control over its appraisal procedures, she said, "we've heard that most banks are still operating as they always have. A few smaller lenders who were using appraisal management companies no longer are, but many still are.
"We find that Realtors are eager to do business with us when they learn we don't use these companies."
One of the more frustrating aspects for a Realtor when larger institutional banks use appraisal management companies is that there's no dialogue among the appraiser, the loan originator and the Realtor, said Lani Kahn Drody, principal of Lowell International Realty, which serves many foreign clients.
"The management companies market themselves as covering very large areas," she said, "but that is not an advantage. Even coming from Palm Beach to Miami-Dade, they might not have a good understanding of the area."
Problems arise in neighborhoods with a lot of foreclosures, said Jodi Macken, a principal of Macken Realty. "What has made it tough is that in the past, foreclosure sales would be kicked to the curb, but now they are your comparables. A lot of foreclosures have sold and gone off the market, but there are a lot more on the way."
On the other hand, Ms. Drody said, smaller lenders such as mortgage brokers or regional and community bankers tend to use a panel of local appraisers with a richer resume.
"They are more knowledgeable about the market," she said, "and they seem to have more control of the process. There's dialogue where the Realtor can provide comparables to assist them in the appraisal process. We've found that they appreciate the help.
"Smaller banks are also looking at a long-term total relationship with the buyer, and they take that into consideration when making lending decisions."
When it comes to distressed properties at the lower end of the market, Ms. Macken said, "appraisers have certainly been on board in trying to get values in and done in a timely way. But on the higher end it's extremely difficult."
Sophisticated clients now want to get independent appraisals done by a recommended local appraiser "to be sure the value is there," she said.
"If we feel there's a problem, we as brokers have to fight for a new appraiser and regain confidence of the client. So it is very challenging. But a good mortgage broker will fight to help you when the appraiser is not good."
Even with an acceptable appraisal, however, getting a mortgage loan is still problematic.
"The appraisal is just one hurdle in the mortgage process," Ms. Drody said.
Ms. Macken, who specializes in celebrity clients, said even they are often not able to get a loan approved.
"Banks are the problem, not appraisers," she said. "When it comes to lending, the banks are impossible."
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