Daily Real Estate News  |  March 6, 2008New Appraisal Rules for Freddie, Fannie
Fannie Mae and Freddie Mac have reached an agreement with New York Attorney General Andrew Cuomo that requires them to have independent appraisals of home values.

Under the agreement, home appraisals have to come from assessors who don’t have formal ties with a lender or mortgage broker.

Lenders wishing to sell their mortgages to the nation's two largest sources of home finance must make sure that they don’t rely on in-house appraisers and don’t own an appraisal firm itself, according to the agreement drafted by Fannie Mae.

This agreement brings to an end a large portion of an investigation by New York State into how Wall Street bundled and sold millions of dollars of questionable home loans.

The agreement has three tenets and applies to lenders nationwide:

• Under the newly created Home Valuation Protection, mortgage brokers are prohibited from selecting appraisers. Lenders can’t use staff appraisers or appraisal companies owned or managed by their companies. The code also entitles the borrower to one copy of an appraisal report, free of charge, within 3 days of the closing of the loan.

• Beginning Jan. 1, 2009, Fannie and Freddie will no longer purchase mortgages from lenders that use internal appraisers. Lenders will be required to represent and warrant that the appraisal report was obtained in a manner consistent with the New Home Valuation Protection Code.

• A clearinghouse of appraiser information will be created, with a separate board of directors, to monitor complaints from appraisers and consumers. All lenders will be required to provide post-purchase copies of appraisal documents to the clearinghouse. Lenders will establish a telephone hotline and e-mail address to receive complaints from appraisers and users of appraisal services on the improper influence or attempted improper influence of appraisers.

How New FHA, GSE Loan Limits Impact You:

Last week, President Bush signed into law a $152 billion economic stimulus bill that includes temporary increases in loan limits for the government sponsored enterprises (GSEs) — Fannie Mae and Freddie Mac — and the Federal Housing Administration until Dec. 31. But what does this mean for you?

"The importance of immediately implementing the new limits cannot be overstated," said NAR President Richard Gaylord last week in a public statement. "Mortgage markets throughout the country need liquidity. Our research indicates that the increased FHA loan limits will help an additional 138,000 Americans achieve the dream of homeownership and will allow nearly 200,000 homeowners to refinance and potentially keep their homes.”

The FHA limit will increase to as much as $729,750 in high cost areas (to 125 percent of local median home prices). The GSE limit will jump to $729,750 for loans; currently Fannie Mae and Freddie Mac loans are capped at $417,000.

Eligible loans from FHA include mortgages that were issued for credit approval on or before Dec. 31, 2008. GSE loans that are eligible include loans that originated after July 1, 2007 to Dec. 31, 2008.

The U.S. Department of Housing and Urban Development is required to publish the new mortgage limits by March 14; the limits will be effective for FHA immediately upon publication.