The FAMB appreciates the opportunity to present its viewpoint during this public comment period.  While this Association is generally supportive of a Home Valuation Code of Conduct, we are strongly opposed to the provision, which prohibits a mortgage broker from ordering appraisals in connection with a customer's loan application.  Having such a provision included in the Code, effectively singles out mortgage brokers, and implies that mortgage brokers are solely responsible for the lack of appropriate appraisal standards.

While mortgage brokers are unique in the sense that most are small business owners, we are, nevertheless, providing the same loan origination function as the mortgage department of any bank, credit union or direct lender regardless of size.  In fact, for the past ten years, mortgage brokers consistently originate the majority of residential mortgages in the US.  Consumers consider mortgage brokers a viable and competitive alternative to traditional, depository type lenders.  This is typically the case due to distribution efficiencies between wholesale and retail channels, and the personal level of service provided by mortgage brokers over larger competitors.

Eliminating, or at least reducing "fraud" of any type is of utmost importance in any reform initiative.  However, prohibiting mortgage brokers and real estate professionals from appropriate and lawful participation in the home valuation process, places the consumer at greater risk.

The U.S. Department of Housing and Urban Development (HUD), in its' publication HUD 1676-H, introduces the consumer to some of the many aspects of buying and financing a home.  HUD summarizes the steps involved and states; "at each of these steps you often have the opportunity to negotiate the terms, conditions and costs to your advantage."

The relationship that a mortgage broker has with its various wholesale lenders affords the consumer multiple choices of loan programs and solutions, which include the portability of the appraisal obtained by the broker on behalf of the consumer.  On the other hand, when a consumer applies with a direct lender, the appraisal is owned by the lender and NOT portable to another lender should the consumers' original lender deny the loan.  Additionally, the consumer looses the ability to simply switch lenders without the financial penalty of purchasing another appraisal.  This is clearly inconsistent with HUD's objective to empower the consumer to negotiate the best terms to their advantage.

The current Uniform Standards of Professional Appraisal Practice ("USPAP") guidelines prohibit appraisals from being readdressed from one Lender/Client to another.  The proposed Code actually creates a disincentive for consumers to shop because of the additional cost involved (appraisal fee) for each application submitted to a different lender.

The FAMB is generally supportive of the concept of a Home Valuation Code of Conduct. 

However, these agreements, and Code, as they are written, are overreaching and will further exacerbate the current decline in the sale of new and existing homes.  It's important that these agreements address the problems created by the use of in-house and lender-affiliated appraisal companies.

FAMB also believes that it's essential for mortgage and real estate professionals to have lawful and appropriate contact with appraisers to ensure quality and independence.  Property appraisals are all subject to the same legal requirements and professional standards regardless of the business entity that orders it for a legitimate purpose.  Ultimately, it's incumbent upon the appraiser himself or herself to follow ethical business practices that include fairness and accuracy in the preparation of appraisal reports, and NOT be influenced or pressured to achieve a pre-determined value.

FAMB agrees with the observations made in the comment letter issued by the National Association of Mortgage Brokers (NAMB) that there are more suitable alternatives to the changes proposed in the Home Valuation Code of Conduct:

1. Establishing a peer review system.  Peer review systems have proven very effect in other professions, such as accountancy.
2. Require lenders to conduct independent appraisal reviews.  This system is already in use for certain types of mortgage transactions.  The FHA and VA loan programs have this review mechanism built into their guidelines.
3. Provide regulators with the resources necessary to conduct comprehensive audits and review.  Regulators often have the authority to conduct audits and take action, but do not due to limited resources.

The FAMB has long supported regulatory initiatives that seek to raise the standard of knowledge, competency and accountability for ALL retail mortgage originators.  However, the policy changes offered in the Code and corresponding agreements, specifically the prohibition on mortgage broker ordered appraisals, is highly objectionable and should be removed. 

In conclusion, mortgage brokers originate the majority of all home loans in this country and are mostly small business owners - the heart of free enterprise in the United States.  Mortgage brokers will not be able to compete in a market burdened with regulatory requirements that drive consumers toward their direct competitors.

There is little to no evidence showing appraisers have been pressured or influenced to inflate property values, nor is there evidence to show that appraisers have been committing large-scale fraud.  Disparities between current property values and their initial appraisals at the time of purchase are the result an over-supply of homes for sale, with record levels of foreclosure as a contributing factor.  This is an economic problem and not an appraisal problem.  Accordingly, the FAMB asks that Fannie Mae and Freddie Mac reconsider the provision of the Code and corresponding agreements, by removing the prohibition on mortgage broker ordered appraisals.

The FAMB appreciates the opportunity to comment and voice our concerns with the Home Valuation Code of Conduct and the corresponding agreements between Attorney General Cuomo, OFHEO and the GSE's.

If you have any questions, please contact Frank Cicione, Executive Director of the Florida Association of Mortgage Brokers, at 800-

Respectfully Submitted,

Ritch Workman

President

Florida Association of Mortgage Brokers