Home Appraisal Reform: WSJ vs NYT

Two new articles — in the NYT and the WSJ — look at the home appraisal business:

Both article somewhat acknowledge the role appraisers played in facilitating the outsized run up in prices. Yet clearly, there are significant differences.

The Times wrote “A profession that should have been a brake on the spiral in home prices instead became a big contributor.” My view is even stronger, as I have called the appraisal industry corrupt, and the appraisers as prime enablers of the entire boom/bust/collapse cycle. They were one of the many “But Fors” — but for their failure to adequately perform their duties, much of what went wrong would not have occurred.

Surprisingly, the Journal seems unconvinced, beginning the piece with a more exonerating sentence “After being blamed for helping to inflate home values during the housing boom, the appraisal business is again coming under fire.”

Of the two, the Journal seems a bit more friendly to the NAR argument that Appraisers need to be local, and therefore somewhat less independent. This would generate more fees and business activity for RE Agents/Mortgage Brokers.

Part of the distinction seems to be the inherent anti-regulatory outlook of the Journal:

“The debate over appraisals is inflamed by a natural tension: Real-estate agents and mortgage brokers, who need to complete transactions to collect their fees, are unhappy when an appraiser nixes the sale price. But it also suggests that there may be unintended consequences to an attempt by New York Attorney General Andrew Cuomo to reform the appraisal business.”

That is a fair statement — yet somehow, the unintended consequences of allowing appraisers to run wild from 2002-07 gets overlooked. Such is the Journal’s approach focusing on whether lenders are “squeezing appraisers too hard.”

The Times piece takes a more sympathetic look at the new appraiser regs:

“On May 1, a sweeping change took effect that was meant to reduce the conflicts of interest in home appraisals while safeguarding the independence of the people who do them. Brokers and real estate agents can no longer order appraisals. Lenders now control the entire process.

The Home Valuation Code of Conduct is setting off a bitter battle. Mortgage brokers, lenders, real estate agents, regulators and appraisers are all arguing over whether an effort to fix one problem has created many new ones.”

Both pieces are worth reading in their entirety.

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Previously:
Fraud in Real Estate, Mortgages & Homebuilders (August 17th, 2008)
http://www.ritholtz.com/blog/2008/08/fraud-in-real-estate-mortgages-homebuilders/

Nonfeasance in Financial Oversight (August 18th, 2008)
http://www.ritholtz.com/blog/2008/08/nonfeasance-in-financial-oversight/

NAR, NAMB Fighting Appraisal Reform (June 24th, 2009)
http://www.ritholtz.com/blog/2009/06/nar-namb-fighting-appraisal-reform/

Sources:
In Appraisal Shift, Lenders Gain Power and Critics
DAVID STREITFELD
NYT, August 18, 2009
http://www.nytimes.com/2009/08/19/business/19appraise.html

Reappraising Home Appraisers
JAMES R. HAGERTY
WSJ, AUGUST 18, 2009
http://online.wsj.com/article/SB10001424052970203496804574348712795471006.html

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