NAFCU home valuation recommendations adopted

Dec. 29, 2008 – Three of NAFCU’s recommendations regarding Fannie Mae’s proposed home valuation protection code have been adopted and now credit unions are allowed to use other lenders to appraise single-family mortgages originated on or after May 1, 2009, and sold to Fannie Mae.

The code is based on an agreement among Fannie Mae, the Office of Federal Housing Enterprise Oversight and the New York attorney general’s office, but it would apply to loans nationally, including those originated by credit unions.

Under Fannie’s original code proposal, credit unions or their authorized third parties would have been required to select appraisers themselves and not use reports completed by appraisers selected by any other party. In underwriting, they would have been barred from using appraisal reports prepared internally or by an affiliate; also, appraisers would have had to be wholly independent from the loan production staff and loan process.

The modified proposal released last week allows credit unions to use other lenders for single-family mortgage appraisals, provided that the credit union: (1) obtains written assurances that the lender-appraiser in question follows the code in connection with the loan being originated; and (2) determines that such appraisal conforms to its requirements for appraisals and is otherwise acceptable.

Fannie also adopted two other recommendations from NAFCU in its modified proposal:

NAFCU had expressed concern that Fannie’s proposal to require persons responsible in the selection, retention or recommendation of, or communication with any appraiser to be wholly independent from the loan production staff and process would be too costly for small institutions such as credit unions. The code now states, “If absolute lines of independence cannot be achieved as a result of the originator’s small size and limited staff, the lender must be able to clearly demonstrate that it has prudent safeguards to isolate its collateral evaluation process from influence or interference from its loan production process.”

Also, the modified code supports NAFCU’s desire that lenders not be required to establish a telephone hotline and an e-mail address to receive complaints. However, lenders will be required to provide information related to the availability of a hotline that will be administered by the newly created Independent Valuation Protection Institute.