For homeowners already battered by the foreclosure crisis, recent changes in appraisal rules are just another slap in the face.
The new federal Home Valuation Code of Conduct requires appraisers to be hired by middlemen rather than local loan agents, with the hope of improving accuracy.
But this is a classic case of the cure being worse than the disease. Those middlemen, or appraisal management companies, are often using inexperienced appraisers who lack local knowledge.
The result? Appraisals that are unfairly low. One industry group estimates that since the rule took effect in May, the average appraisal has come in $13,000 below the sale price agreed upon by the buyer and seller. When that happens, buyers can't get loans, and deals collapse.
This hurts both sellers and buyers. In addition to making loans harder to obtain, it can add hundreds of dollars to the cost in the form of higher fees charged by the management companies, additional appraisals and extended loan locks as sales take longer to close.
This comes at the worst possible time. There are signs of life most everywhere in the housing market. The appraisal problem could curb that trend.
Republican Rep. Gary Miller of Southern California is calling for an 18-month moratorium on the new policy. But we're with industry groups that want the government agencies involved, including Fannie Mae and Freddie Mac, to simply abandon the rule.
The real estate recovery is too important to ending this recession - and in any case, there's no benefit to a rule that increases costs without increasing accuracy.
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