The National Association of Mortgage Brokers (NAMB) has filed suit against the Federal Housing Finance Agency (FHFA) to block implementation of a new GSE appraisal rule, claiming it could put brokers out of business and allow appraisal management firms to profit at the expense of independent appraisers and consumers.
The new Home Valuation Code of Conduct,which goes into effect May 1, prohibits loan officers and mortgage brokers from directly ordering appraisals. NAMB claims the code has a "bias toward mortgage lenders" and that major banks are already requiring brokers to order appraisals through their affiliated appraisal management companies.
The trade groups said the new code of conduct is a result of an investigation led by New York Attorney General Andrew Cuomo into the relationship between an appraisal management company (AMC) and the now defunct Washington Mutual, which sold mortgages to Fannie Mae and Freddie Mac.
"Although the WaMu lawsuit ostensibly related to how WaMu's relationship with its AMC generated fraudulent appraisals and contributed to WaMu's financial demise, the resulting agreements focused on mortgage brokers, which had nothing to do with the claims alleged in the WaMu lawsuit," NAMB said.
The new appraisal code stems from a GSE/FHFA settlement with the New York AG. The valuation code's "abolition on broker-ordered appraisals will force mortgage brokers and customers to rely on lenders and their affiliates for home value appraisals, disrupting the established business practices of mortgage brokers, decreasing the efficiency of the marketplace and increasing the costs to consumers," NAMB said.