The Value of a good Appraiser

There are changes coming to the lending world regarding appraiser / broker relationships. Starting in May, there could be new rules that state that only the lender that receives a loan application may order the appraisal and the broker is to have no say or contact with the appraiser.

No one wants this. Not the Lenders, not the Brokers, not the Appraiser's and most importantly not the BORROWERS!! Essentially this will eliminate a fair market. The new rule would mean that if we submit your loan to Wells Fargo, they would order an appraisal and make you pay for it. If we then submitted the loan to MetLife, they would order an appraisal and make you pay for it. Just to shop the loan around and get the best rate, could cost a fortune in appraisal fees. This is unfair to the borrowers and hurts their right to get the best rate.

Also, if they don't allow us Brokers to talk to the appraisers, you are putting entire files at risk. How can we know what a property is going to appraise at? What if I think a property is worth 1 million dollars but the appraiser comes in at 900,000? That difference could change the loan, if not cancel it completely.

I understand there was a lot of fraud that went on in the past, but most of that was perpetrated by the LENDERS ordering the appraisals. Even in the easy days, a few years ago, when a Broker submitted a loan with an appraisal, it would get reviewed by the lender. But a lender who ordered an appraisal directly didn't get it reviewed. There are people sitting in jail right now that abused the lender / appraiser relationship to push values and get loans off of inflated values. So let's not pretend like it was just us Brokers who did all the damage and should never talk to the appraiser because of the possibility of fraud.

The relationship between me and my appraisers is very special and is meant to help our borrowers. I'm working on a deal right now that needs the appraiser and myself to work together and be on the same page. This is not just a value issue. I, as just the loan broker, rely on what the appraiser sees and their expertise in area / location and condition to know what the value of the home is. If this relationship is taken away, it won't be the Brokers or the Appraisers who suffer, it will be the Buyers and Borrowers. You'd be shocked to know the amount of bad appraisers there are out there. If you are unlucky enough to get one hired by the lender, you could be out money, a loan or a home. I've been doing this a long time and I've worked with a lot of appraisers. I only TRUST two of them. I'll use others and some are good and some aren't so good but my appraisers are great and we've been able to help many borrowers.

When you hear of any new rules that will limit the interaction between Brokers and Appraisers, please vote or speak against it. You're home and loan may be at risk. Regulation is fine and probably needed now more than ever. But don't cut off one of the most important aspects of the Real Estate and Mortgage business.

Rate Drop??

Above is a 5 day snapshot of treasury yields. This used to be a good barometer of where the rates would go. 5 days ago was when the Fed said they where going to buy up assets over the next few months. The yield tanked and everyone called to see about this huge rate drop they heard about. As you can see, the yield when right back up and the low rates lasted no more than 24 hours.

Today, the same thing happened only later in the day. I can see rates being lower tomorrow and then going back up. I think gradually rates will come down slightly, but not overnight. The yield has been creeping up over the past few weeks but rates have stayed in the 5% range. Now that the yield is going down, I don't see why there would be a massive rate cut, since there wasn't one on the way up.

The main lesson to be learned is, what I've been preaching to so many, to get your loan in and let's get it going through processing. We can set a goal and when the rates hit that goal we are able to lock. Lenders are swamped and overloaded. From a time frame standpoint it's very hard to get loans closed in 30 days. If we can get the loan in, get it underwritten and then be ready to move when the rates do, we'll be much more successful than to wait until the rates get to where we want and then start the process.

As you can see, a rate might only be available for a moment or two.