New housing regulations could cost consumers more

Banks are tightening their grip to help ease the housing crisis, and the mortgage giants that own more than half of all mortgages have new rules that could cost consumers more.

Posted 10:00 p.m. Jun 25, 2009 — Updated 11:21 p.m. Jun 25, 2009

RALEIGH, N.C. — The national mortgage crisis is hitting appraisers, like David Cozzarelli, of Apex, in ways they never imagined.

"What it did, effective May 1, is about 40 percent of my business went away," Cozzarelli said.

That's when new rules adopted by mortgage giants Fannie Mae and Freddie Mac went into effect, tightening regulations that steer lenders toward real estate appraisal management companies, instead of independent appraisers like Cozzarelli.

"The whole point is to create a firewall," said North Carolina's deputy commissioner of banks, Mark Pearce.

Pearce says the policy, called the Home Valuation Code of Conduct, is supposed to prevent cozy relationships between lenders and appraisers that lead to inflated home prices.

But it can costs customers more, while appraisers who work for the companies get paid less per job.

"I have signed up with many (appraisal mortgage companies) and put down my full fee, and they don't want to hire me because they want 40 to 60 percent for simply pushing paper," Cozzarelli said.

WRAL News contacted numerous appraisal management companies, as well as the Mortgage Bankers Association. None wanted to comment.

Other concerns also exist. Some appraisers believe the new rules will create new problems on the housing market. That's why the North Carolina Commissioner of Banks and the North Carolina Appraisal Board are asking lawmakers for changes.

"Appraisal management companies are completely unregulated," Pearce said.

He wants to see laws with more oversight, because, he says, those cozy relationships can still exist and unscrupulous brokers can re-emerge.

"Right now, today, if we got a broker out of the industry, they could turn around and start an appraisal management company," Pearce said.

Senate Bill 829 and House Bill 716, currently in committee, would require appraisal management companies to register with the North Carolina Appraisal Board and give the board the authority to suspend, revoke or deny a registration to any company violating state laws.

As for Fannie Mae and Freddie Mac's new rules, many appraisers, like Cozzarelli, say that they are still new and that with time, they believe there will be a solution that works for everyone.

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