Having recently initiated the refinance process, I’ve taken some interest in opinions from those in the industry.

When talking to the loan officer at Wachovia, I had to ask the requisite question: “Which direction do you see rates going?”  Not one to look a gift horse in the mouth (the refi rate would be 4.625% vs. my current 6.66%), I wasn’t going to let his response become a deal breaker, but I thought I’d ask anyway.

The answer didn’t surprise me.  He kind of hemm’d and haw’d around, and I saved him the misery of coming up with a response that wouldn’t put him in a bind, and just gracefully switched topics.

I knew that whatever answer he gave me could get him in trouble.  If he says rates will fall and they do, I’d be mad that I didn’t wait for a better rate.  If he says they go up, and they actually drop, he’s still in a bind.

If he really knew the answer, he wouldn’t be a loan officer.

Then came the appraisal.  The guy shows up with his tape measure, pen, pad and a camera.  Naturally, I had to ask him how business was going.  It was a rhetorical question, really.

Business was picking up, especially for third-party, independent appraisers.

Apparently, and this will come as little shock, banks were using their in-house appraisers to determine the value of the home, which ended up getting inflated by 100-300%.

Starting on May 1, loans sold to Fannie Mae and Freddie Mac will require an appraisal chosen by the two big banks.  In essence, the lender will be able to chose the appraiser, and in the in-house lender is chosen, the banks loan origination department will have no oversight for the process.

Unfortunately, the rules will only apply to Fannie and Freddie.  However, due to the trickle down effect of the loan trade, the effects will be spread far and wide regardless.

Since a large number of loans are bought by or guaranteed by Fannie or Freddie, the entire industry will have to play by the same rules if they want to play.

The Corner Office Comments

It’s a start.  This is a move that one would think would be inherent to the system to begin with, however, as we’ve found with our government, common sense does not reign supreme.

In talking to the appraiser who evaluated my home, it seems that the while the practices are still the same, the principles just got a lot tighter.

No more benefit of the doubt (not that I was looking for one).

Finance, Real Estate appraisal, Fannie Mae, Freddie Mac, loans, mortgages, refinance