Proposal to ban use of appraisals arranged by brokers

In a memo distributed to lenders Fannie Mae has proposed ban on use of appraisals arranged by brokers and by a lender's employees.

What this means is that Fannie Mae will not authorize its lending partners to use any appraiser who is an employee of a wholly owned subsidiary. The restrictions will be applicable for mortgage loans which are acquired after Sept. 1. This memo also has reference to setting up of an appraisal clearinghouse to be used for assigning appraisers to any project.

This step is in response to investigations by NY's AG Andrew Cuomo in November last year when Cuomo filed lawsuit against parent company of country's largest appraisal management companies, First American. In the lawsuit they were charged with relaxing their norms under pressure from WaMu, who was a major client & used those specific appraisers who were providing property valuations acceptable by Washington Mutual.

In the original suit Washington Mutual was not included but AG demanded that the 2 GSEs (Freddie Mac & Fannie Mae) appoint independent examiners for reviewing mortgage loans (as well as the underlying appraisals) that they had purchased with emphasis on the ones purchased from Washington Mutual.