House committee weighs scrapping appraisal rules

The appraisal system imposed by Fannie Mae and Freddie Mac last May is under attack by the House Financial Services Committee and could be on its way out. The “Home Valuation Code of Conduct” could be terminated by the proposed Consumer Financial Protection Agency under a bipartisan amendment approved by the House committee. The amendment would require the new agency’s director to replace the code with a set of rules developed through regular administrative procedures and public comment periods used by all federal agencies. The valuation code was the product of a settlement among New York Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac, and the Federal Housing Finance Agency. Critics say the code created more problems than it solved and has encouraged lenders to use inexperienced appraisers who don’t know the areas where they are doing the work, which results in lowball valuations as well as higher fees. The legislation under which the code would be scrapped is likely to pass the full House, but may have a tough road in the Senate.

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