Fannie and Freddie have finally announced (I’m sure to no one’s surprise) the acceptance of OFHEO’s Home Valuation Code of Conduct which bans communication between a loan originator/mortgage broker and the appraiser for conventional 1-4 single-unit family homes.   Appraisals must be ordered through a third party clearing-house of sorts.   I picture this being similar to ordering a VA appraisal, which is not a pleasant process.  

Here’s an example from the Home Valuation Code of Conduct of what will no longer be allowed:

• requesting that an appraiser provide an estimated…valuation in an appraisal report prior to the completion of the appraisal report or requesting that an appraiser provide estimated values any any time….
• providing to an appraiser an…estimated…value for a subject property or a proposed or target amount to be loaned to the borrower, except for a copy of purchase and sale agreement.
• ordering…a second appraisal…in connection with a mortgage financing transaction unless there is reasonable basis to believe the initial appraisal was flawed….

Lack of competition is generally bad for the consumer.  And I see this slowing the process down and possible increasing costs…where is the incentive to be effecient or competitive?  Who will pay the third party clearing house?

This is technincally effective on May 1, 2009; however, lenders are all ready implementing the new code.   This is still very new and we’ll have to see in the weeks ahead how this all works out.