Fannie Mae and Freddie Mac have proposed new rules for appraisals, effective May 1, 2009, called the “Home Value Code of Conduct.” They are applicable to “conventional” or “conforming” loans intended for resale to those agencies.

Among the provisions is a requirement that only lenders may order appraisals, and not mortgage brokers. This hotly disputed provision is based on the fear that mortgage brokers only go to appraisers who provide inflated appraisals. Unlike lenders, who would still earn some profit through fees and interest on a lower loan, a mortgage broker might lose an entire commission if a loan is denied because the appraisal is not high enough.

The Federal Trade Commission disagreed with this argument of those agencies, unsuccessfully writing that all parties to a loan have similar incentives for high appraisals. Moreover, the Federal Reserve recently released its own, different appraisal guidelines called the “Interagency Appraisal Evaluation Guidelines.”

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