In an effort to help prevent more foreclosures, the Federal Housing Finance Agency (FHFA), the overseer of the government-controlled Freddie Mac and Fannie Mae recently announced that a new Home Valuation Code of Conduct will take affect this coming May. The new plan was created to ensure the correctness of home appraisals of mortgages from both companies and to curb mortgage fraud. According to policy makers, overvalued homes have been one of the leading causes of foreclosures.
Foreclosures may happen when homeowners go to honest mortgage companies and find out that the original appraisal from a previous company would be much more than the actual home value. Thus, they would find themselves owing more mortgage than what the property is worth.
For homeowners who are victims of foreclosures and are seeking for refinancing, high appraisals would automatically eliminate the option of selling or refinancing since they have less equity than they originally thought.
Incomes of loan officers and brokers depend on the number of approved mortgage loans. Sometimes, these lenders exert pressure on appraisers to hype the appraisal, ensuring that the collateral is much more than the loan, and thus reducing the bank’s risk.
Extreme cases of pressure on appraisers show that lenders may threaten to hurt families or deprive appraisers of clients. In 2007, a survey by October Research showed 90 percent of appraisers felt pressured by loan originators. Last year, over 250 appraisers lost their licenses due to inaccurate and inflated appraisals.
However, the National Association of Mortgage Brokers has expressed dissatisfaction with the FHFA plan, saying that existing regulations should instead be strictly enforced.
Still, records show that only 15 states have laws holding loan originators accountable for pressuring home appraisers. The Appraisal Institute reports that these laws are seldom enforced.
The new regulations are expected to have a positive effect on the housing market and would help alleviate the country’s foreclosure problems.
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Resolving Foreclosures. Why not have Goverenment give a check to each mort-
gagee for the unpaid indebtness of their Loan made under C.R.A. The check would be
” Restricted ” to paying the institition holding the mortgage. The bank or the institution
would have 30 to 50 years to repay the goverenment at interest equal the diccount rate.
Seems that this would solve several problems.
#1 The dreams of ex-president Carter, Barney Franks, Chris Dodd and the congress-
woman from California would be acheived.
# 2 Banks get the cash they need to make new loans.
# 3 The government gets paid in full over time.
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