Bill targets appraisal-management companies

by J. Craig Anderson The Arizona Republic Apr. 11, 2010 12:00 AM

Arizona real-estate appraisers are seeking new state regulations that would force a group of real-estate firms known as appraisal-management companies to meet higher standards of conduct and disclose their fees to consumers.

Appraisers support Senate Bill 1351, which requires background checks on appraisal-management company owners, forces companies to reveal hidden fees to consumers, and makes them comply with rules for lenders and appraisers.

Appraisal-management companies rose to prominence in May 2009, when federally sponsored loan guarantors Fannie Mae and Freddie Mac agreed to new rules that require their use when obtaining an appraisal for a new or refinanced home loan.

The management firms act as intermediaries, assigning appraisers on behalf of a lender or a mortgage broker. Under the old system, banks and brokers hired appraisers directly, but many critics had accused brokers, real-estate agents and others of asserting undue influence over the appraised value of many homes for sale.

Sue Miller, president of the Coalition of Arizona Appraisers and co-owner of Phoenix appraisal company Miller-Pipher Inc., said the rules implemented in May 2009 have done some good for appraisers and consumers.

But while the new code has made some appraisals more objective, she said, in other cases the management firms have tried to influence appraisals in the same manner as the groups they were appointed to replace.

Miller said the rules hand over large responsibility to appraisal-management companies without including them in regulations to keep appraisals honest and objective.

Many real-estate sellers, appraisers, agents and brokers have criticized the code, which forbids direct contact between brokers and appraisers, effectively requiring the use of appraisal-management companies. Critics say those management firms have become too powerful.

The Senate has passed SB 1351. The House is expected to take it up in the next two weeks.

Bill targets appraisal-management companies