California has become the sixth state to regulate appraisal management companies after Gov. Arnold Schwarzenegger signed into law legislation establishing compliance standards for the firms and requiring them to register with the Office of Real Estate Appraisers.
The Appraisal Institute, an industry group representing appraisers, issued a press release lauding California’s law, saying it will protect consumers and appraisers while providing "positive effects" to the state’s real estate market.
Arkansas, Louisiana, Nevada, New Mexico and Utah passed similar bills earlier this year, the group said, and as many as 20 other states are expected to consider such legislation when lawmakers reconvene in January.
New rules for appraisals adopted May 1 by Fannie Mae and Freddie Mac have led to an increased use of appraisal management companies, which critics say often don’t give appraisers adequate time to complete their work, and assign them to neighborhoods where they lack experience.
The appraisal rules, called the Home Valuation Code of Conduct, were adopted after New York Attorney General Andrew Cuomo launched an investigation of mortgage origination and securitization practices during the housing boom.
The rules were designed to protect appraisers from coercion by lenders, but critics say they’ve derailed many home sales — often because inexperienced appraisers have allegedly used distressed properties as comparable sales without making the necessary adjustments.
Some appraisers say the rules aren’t perfect, but that market conditions are often to blame when a valuation doesn’t support a proposed sale price. …CONTINUED