When I started this Los Angeles real estate blog nearly two years ago, family members and friends asked: What is a blog?  According to Wikipedia:  a blog is a type of website, usually maintained by an individual with regular entries of commentary, descriptions of events, or other material such as graphics or video.

I am a real estate agent located Northeast of Los Angeles; this blog concerns the surrounding Los Angeles communities and the real estate market.  On May 1, Fannie Mae will implement the Home Valuation Code of Conduct,  aka “The Code”.  This new set of rules will change the way lenders, appraisers, consumers, Realtors, all of us interact when it comes to appraisers.
 
I recently received this information from Floyd Walters from BWA Mortgage. "Here are a few of the "facts" about the Code: 

Fact #1:  As of May 1st, any loan destined for Fannie Mae or Freddie Mac will have to have an appraisal that meets the guidelines set out by The Code.  FHA loans do not have to meet this criterion.
 
Fact #2:  As of May 1st, if a lender disagrees with the value given by an appraiser, the lender cannot simply order a new appraisal.  This is considered "value shopping" and is prohibited by The Code.  A detailed (and in my opinion) onerous process to challenge the value must be followed.
 
Fact #3:  As of May 1st, a lender may not provide an appraiser with an estimate of value of a property nor may a lender ask an appraiser in advance for a range of value on a home.  They may, on a purchase, provide the appraiser with a copy of the purchase agreement. 



Fact #4:  The appraiser's interaction with loan officers, processors, and other support staff will be virtually non-existent.  The primary reason for this is to prevent coercion and undue influence on the appraiser."

The implementation of the code will be a big problem with refinances, especially when the appraiser is not from the general area. It is not unusual to have an appraiser from another county.  It is common for appraisers to contact Realtors with questions about comparable properties and values.  Now, that Realtors have the buffer between the appraiser and ourselves, I wonder how many of us will continue to provide them with our expertise.   Remember it is the real estate agent which has been inside most of the homes used as comparables, the appraiser is basing his value on driving by the comparables.  I am curious if appraisers are happy with The Code. 

The Los Angeles real estate market did not go belly up because of appraisals... the market tanked because lenders made loans to people who could not afford to pay them back. Lenders allowed homeowners to suck all of the equity out of their home.  You might even say that lenders encouraged homeowners to pull equity out of their homes.  Just like credit card companies enticed us with 0 interest rates, balance transfers..... Just last year I was receving over a half dozen credit card offers a week.