Fannie Mae Appraisal Cutting 12

fannie mae supermanHome appraisals are often the most stressful part of any home sale. You never know if your home is worth what you’re hoping to get for it. You never know if the appraiser is incompetent or even corrupt.

Fannie Mae is trying to make a change. From now on, lenders that sell loans to the GSE won’t be allowed to make changes to the appraisers’ valuations. This practice is known as “appraisal cutting” and is now banned.

The problem was, essentially, that banks were afraid of risk for several reasons and so tried to devalue the properties. Now, if a lender wants to change an appraisal, they have to go back and get the original appraiser to do it.

The lender can no longer revalue the property on a whim. The process will be much more rigid than it has been until now. Lenders can’t simply decide that they won’t take the risk on such a large loan. If the house is worth the money in the appraiser’s opinion, then that’s the end of the story.

So suddenly Fannie Mae is the public protector. They’ve taken on the Superman role, looking out for borrowers and keeping the “evil” banks out of our hair.

Seems like a sharp turn-around for Fannie Mae don’t you think? I’m not sure they don’t have a hidden agenda somewhere, but for now we’ll watch how this law plays out with banks.

Let me know what experiences you come across when doing appraisals. Together we should be able to find any holes in the plan, if they’re there.

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12 thoughts on “Fannie Mae Appraisal Cutting

  • Pat Lynch

    My problem is that they are taking money from the appraiser by sending all appraisals through a management company which in turn cuts the appraisers fee and rushes the appraisals. You need a little time to research when you do an appraisal and you don't need third parties,who have no idea of the appraisal process taking the fees away for doing nothing. With that system,you get new or incompetent appraisals and the system is once again flawed. Pay the appraiser and give him/her time to do a decent appraisal. Eliminate management companies who know nothing about the appraisal process. Why pay people who are connected to the problems.

  • Richard Murphy

    I think the whole thing is a Joke, The Buyer, the Seller, and the Banks are the only parties that have anything invested. Why do we allow a realtor that has nothing invested in any of the properties control the market?

    They inflate the price to allow for their commission so the real price is not true and they are the ones that sold the properties to the people that are in the homes they couldn't afford in the first place.

    In my town the Realtors are saying the market is good and stable, but 1 in 9 homes are empty and 973 homes are being auctioned this coming week, and 1,356 homes have missed 4 months payments. That is why I say it is a Joke because Realtors don't care if the property goes back to the bank because they still get the listing from the bank……..

  • Stevenlundin

    So tell me again why we are still being told that the Banks, NAR, Fannie and Freddie, Real Estate Brokerages and Mortgage Brokers are the only ones to turn to when looking to buy or sell OUR homes. Who died and made these entities GOD? I think they have clearly shown to the entire Country, what their actual agenda is: Make high profits at ANY COST. And what that usually means is: Rip the consumer off in every way possible. I say it's time to put these industries OUT OF BUSINESS………..Go back to the party to party sale transaction………with all the legal contracts available, and escrow and title companies competing for business, it is easy for a private seller to sell to a private buyer a house while at the same time completely insuring a legal transfer, without Banks and real Estate agents. Without Mortgage loan originators and corrupt Brokers. In the mid to late 1990's I saw a major change taking place in the real estate industry. It was becoming more and more bottom line oriented in line with every corporation in the country. This led to attitudinal changes by the actors in the industry. The cooperation between agents and brokerages was diminishing quickly and customer service was quickly becoming a thing of the past. Agents were beginning to act like………….dare I say…………….used car salesmen…………..and it has only gotten worse the past 10 years. I should know, after all I was a licensed agent in Ca. from 1994 – 2009, although I actually walked away from the industry in 2005. I saw what was happening and complained to everyone who would listen, (NOBODY) and finally just walked. It was either that or put my GOOD clients into BAD deals, like every other agent I knew. So when I say PUT THE WHOLE LOT OF THEM OUT OF BUSINESS, I know of what I speak. If a shop clerk notices a patron is shoplifting, the clerk immediately calls in security and advises them as such and ultimately the shoplifter is arrested. So why is it that when Big Banks and R.E. brokerages commit fraud, they get a reward? And from their VICTIMS no less? Now you know how a “LOBBY” really works. Buy a few members of congress or an entire (Democrat) party and you can literally get away with anything…………Just ask the banks……….they don't look like they are struggling to go out of business. But millions of their victims are losing their homes,and to add insult to injury, are being treated like they are the CROOKS. What a system, huh?

  • John

    Pat has some good comments. Let me add another wrench in the works. Banks who don't want to accept the appraisal can require another one. And guess who pays? The borrower, if course. So now the borrower is put in the spot of paying another $400-$500 so the bank can try and lower the vauation. And since the big banks make money by owning the appraisal managment companies, they make money by ordering appraisals – even when they don't close the loan.

  • Jeri

    Whoa! So now if Fannie Mae had bought a home that the appraiser had said was worth $X, and the market tumbles, there's no way to lower an appraisal? And what's the trash talk about Realtors(r)?? I happen to be a Realtor(r) who works in the short sale arena almost exclusively. Here are two of my experiences with Fannie Mae and their appraisals.

    In one case, I'd gotten an offer for $174,900, which would have paid off the mortgage in full. The appraiser (VA) came in and said the property was only worth $135 (!). So, I put it back on as a short sale, and Fannie Mae came back and said they needed to get $150 out of the property. The new buyer's appraisal (six months after the first) came in at $125, And, mind you, ONLY $128,954 was owed!!! I FINALLY got approval, but not until I put up a MAJOR stink about Fannie Mae's sanity in light of a smaller amount owed than the amount they wanted on the “short sale”, and the impossibility of getting the house to appraise for more than $125 in ANY case.

    In the second case, the appraisal came in at $$225K. The bank approved the short sale, but the mortgage insurance company didn't, so the deal fell and the owners took the property off the market and the bank is trying to work out a modification (after they'd denied one the first time around!). It was encumbered with a first mortgage at $283,000.

    There's enough blame to go around, but something has GOT to give in terms of streamlining and standardizing the short sale process. Sorry, but HAFAs not doing it! The amount of an appraisal is only as good as the appraiser, and values ARE going down when the only comps they have are foreclosures or REO properties. What do you expect?! Getting banks to BELIEVE their appraisers and what the market will actually bear, with too much inventory and too few buyers who can qualify is the REAL challenge!

  • Cory Boatright

    Jeri – I agree with you. The biggest challenges aren't with loss mitigators as much as they are with the Senior Investor that owns the loan. And you will not see a “standardized methodology” for doing short sales become successful. The reason is: short sales are different each time. It isn't “one size fits all” and you have to look at the “true value” of the property to determine if it's even WORTH short selling. Unfortunately Senior investors look at portfolios to make overall decision not individual houses. So therein lies the challenge of why they tell us “We need X” out of property. When in fact, X may be a number that barely has relevance. Thanks for commenting bro.

  • Cory Boatright

    Steve – Welcome to a government that is scratching their proverbial heads wondering how to fix this economy. And I agree with you. No. I don't think banks deserve much pity at all. They got rich living on double digital interest rates and selling off loans on the open market for years! And don't even get me started on how many “cracker jack” real estate brokers sold people houses for 125% of value KNOWING they were probably never going to make more than 3 payments max and be in foreclosure in a year. It's corrupt and it's ugly. People that bought houses depended on “trusted advisors” that bent them over in the end. Now don't get me wrong. Yes. I know a lot of those same homeowners bought houses they KNEW they couldn't afford, but a huge majority of them had NO CLUE what they were signing when they closed. Investors and Realtors that understand how to do short sales are actually stimulating this economy more than our government right now. It's sad, but true. I'm still thankful that I live in the United States of America where my freedom to do business freely is still a blessing even in the midst of all our challenges. God will see us through. Thanks for commenting Steven!

  • Cory Boatright

    Pat – Again it's an attempt at “standardizing the process” of doing short sales. It's a joke and it will not work successfully long term. You didn't even mention the fact that APPRAISERS are NOT HANDYMAN/ CONTRACTORS… so if you really want to know value you have to get the facts and get time to put them together. Thanks again for commenting. Keep it up!

  • Leo

    It just amazes me that the banking industry controls all that we do. One day they are regulated and the next they are not. They are the cause for the state of our countries problems and the borrowers and tax payers are the ones who will be paying for all these games that they have been playing. I love it when some people blame the Realtors but there is a pipe line to the process. Greenspan is to blame for de-regulating the banking industry. What was his punishment????? I was a mortgage specialist back in 1980 and we know what the interest rates were then but every i had to be dotted and t crossed.

    When did we let go of the control? I am a Realtor and got into it in 2006 and cleaning up the mess that others have caused. Who will assume the responsibility? RIGHT……NO ONE……

    Good Appraisors do their job correctly but what happened in 2005 was the cause and effect of bad decisions made by the GODS ABOVE WHO CONTROL…

    Everyone likes to point fingers to get the blame off of themselves—-look in the mirrow for a change.

  • Shannon Lopez

    Richard, most realtors do not inflate the price to allow for their commission. Inflating the price just makes the home more difficult to sell. The reason some markets look stable is because investor flips compensate the difference in the overall sale totals. Also, one thing I am seeing is REO's are listed high – banks set the price and they are greedy. Short sales are more reflective of what people are willing to pay, but buyers get impatient waiting for the short sale approval and just pay the higher priced REO's and investor flips.

    IMO the market is superficially stable and being manipulated mostly by banks and an ignorant congress. I think that when April hits next year and people find out that they can't write off much, more businesses go under, more job loss, and on and on, we will see the prices forced to drop again. Banks are not lending much these days and what pumped up the market for a while was that tax credit.

    Realtors say the market is stable based on the overall numbers. Realtors saying the market is good – not in my circles. Nope, everyone in the industry -realtors, title, escrow, appraisors, bpo agents, we are all feeling how bad it is.

  • Shannon L

    A couple more things Richard. realtors, at least myself and many that I associate with, really have a heart to help the homeowners. We help negotiate with the banks on the owner's behalf, a pain in the butt process, usually. We market their property for them. We defend them against the banks that want to take their house and screw them some more in the process.

    Now, saying we don't care if it sells or not – that is a load of crap! We put many hours into each listing. We develop a relationship with these clients and our hearts go out to them. If the bank takes the property, we have just put tons of work into getting it sold, negotiating, being available at almost all hours, spent our own hard earned money to help the client. The bank gives the listing to another agent – not usually the short sale agent. That REO agent puts out their hard earned money rekeying, trash out, property preservation, getting it ready for market, plus their time always checking on the property, getting contractor bids when necessary, paying for utilities to be consistently on, free bpo's every month, then the bank comes back and moves it to another agent or puts it up for auction, screwing the realtor again.

    I'm not sure you really understand any of what is going on. Stop blasting the realtors, and start paying attention to who really created this mess and who is really continuing this mess. Banks and politicians mostly are to blame.