Your Lender and Appraiser, Their New Relationship

Investigating the Property to determine Value

A New Relationship on Conventional Appraisals

Lender-Appraiser relationships in the Arizona real estate markets.


The F.D.I.C. is the governing body that establishes many on the rules and regulation regarding the conventional or conforming loan guidelines. In their Rules and Regulations, they have a “Statement of Policy”. These policies have recently been updated all to a controversy. At the center of the controversy is the Home Valuation Code of Conduct. This code outlines appraisal-related practices that lenders must follow with respect to so-called conventional or conforming loans that they want to sell to Fannie Mae or Freddie Mac.

The practices are intended to reduce the incidence of appraisal fraud and prevent inappropriate pressure being placed on appraisers to inflate home valuations. The code, which became effective May 1, does not apply to FHA or VA loans.

Some exerts of the code are as follows;

An institution’s policies and procedures should ensure that it avoids inappropriate actions that would compromise the independence of the collateral valuation function,14 including:

Communicating a predetermined, expected, or qualifying estimate of value, or a loan amount or target loan-to-value ratio to an appraiser or person performing an evaluation.

Specifying a minimum value requirement for the property that is needed to approve the loan or as a condition of ordering the valuation.

Conditioning a person’s compensation on loan consummation.

Failing to compensate a person because a property is not valued at a certain amount.

Implying that current or future retention of a person’s services depends on the amount at which the appraiser or person performing an evaluation values a property.

A Borrower is well-advised to have a discussion with their loan officer, mortgage broker or real-estate agent before they apply for a loan. In a fast moving market, the sales price may out pace the appraisars comparable values. In the past, the appraiser “knew” what the contract price was and checked to see that the home value met the contract price. The Buyer can no longer rely on behind-the-scenes “assistance” to find out whether an appraisal is likely to return a high enough value for the proposed transaction. At that point in time, you have money and energy invested in a home that can’t appraise.
Other Must Read Stories:

  • Is there an Obligation To Disclose an Appraisal by the Buyer to the Seller?
  • Seller Disclosure to Buyer of Prior Appraisal on Home.
  • What Happens if the Property Doesn’t Appraise for the Purchase Price?
  • When Should I Order the Appraisal?
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