The Appraisal Institute and other organizations representing appraisers have objected to new restrictions on appraisal fees in a letter to Department of Housing and Urban Development (HUD) Secretary Shaun Donovan.
In its letter, the Appraisal Institute asked HUD to rescind Mortgagee Letter 97-46 immediately and to correct a reporting discrepancy related to appraisal management company (AMC) fees. According to the groups, the policy has the unintended result of allowing homebuyers to be misinformed as to the costs of appraisal services in a mortgage transaction.
"More residential mortgage lenders are relying on AMCs to provide appraisal services and with the restrictions HUD has placed on appraisal and management fees, the home buying consumer ends up paying more in fees and getting less in service," said Jim Amorin, president of the Appraisal Institute.
The HUD regulation restricts total management fees to no more than the customary fee for an appraisal in the market area.
HUD’s rule has driven many competent and experienced appraisers away from FHA and other mortgage programs, according to the groups.
The rule changes in appraisal requirements arose from an agreement between Fannie Mae and Freddie Mac and the New York Attorney General called the Home Valuation Code of Conduct.