Effective on Wednesday, September 1, the appraisal issues that face home buyers and sellers will magically disappear …. if you believe in Fannie Mae.
The organization has now placed a ban on the common practice of “appraisal cutting” for loans that are being sold to Fannie Mae. Appraisal cutting is a process where the lender’s underwriters will devalue an appraisal due to a wide collection of variables including auto-valuation methods, underwriter concerns, and other issues.
Essentially, the lenders are “practicing” appraisal without a license. The buyer (or seller) paid an independent licensed third-party appraiser to create a value for the home — and then the underwriter will “adjust” it to fit their needs.
But, we don’t have to worry about that anymore because the lenders are no longer able to do that. Right. Well, not really.
Fannie Mae to outlaw lender's ability to appraisal cut on loans it will buy beginning September 1. (Agata Urbaniak/sxc)
If the lender has an issue with the appraisal they are now being forced to go back to the appraiser that completed it and work out their disagreements. If that doesn’t work, the only other option is to order a second appraisal and guess who gets to pay for that? Yep, that’s right, the buyer (or seller) is forking over another $300 – 450.
Don’t get me wrong. The appraiser is the one that should be determining the home’s value, not an underwriter in Dallas that has no concept of the central Ohio market. And that is a good thing. The fact that they are “required” to work through the appraiser is a good thing.
But this isn’t the “solution” to the appraisal issue as Fannie Mae would have you believe.
