New California Law Bans Appraisal Commissions
These news snippets below are from a Daily Real Estate News digest that I receive. Looks like California is getting serious about putting the skids to some of the practices that led to the crazy real estate price inflation in their state. Namely, over valued appraisals and under qualified buyers purchasing those over valued homes.
I’m not sure exactly how they’ll enforce the appraisal issue. If an appraiser continuously misses the sales price on transactions, lenders just won’t use him anymore. That’s where the pressure to “make the price” comes from.
The second item, making lenders consider the long-term ability of a borrower to pay, not just their ability to pa ythe “teaser rate” payment, is a good solid step toward weeding out unqualified borrowers.
Texas has for the most part sat out much of this real estate madness, so I don’t think we’ll be seeing a rush for new laws.
California last week passed three laws affecting real estate transactions, and Gov. Arnold Schwarzenegger signed them.
It is now against the law for licensed appraisers to engage in any appraisal activity that is connected to the purchase, sale, transfer, financing or development of property if their compensation is impacted by the final price generated by the appraisal.
A second law applies federal lending guidelines to state-chartered lenders requiring them to clearly disclose the risks and evaluate borrowers’ ability to pay based on the long-term cost of the mortgage, not just the introductory rate. In California state-regulated lenders provide the majority of subprime mortgages.
A third bill increases the amount of affordable housing in California by raising the total debt that the California Housing Finance Agency can carry by $2 billion. CalHFA issues bonds to finance housing for low and moderate-income families.
Source: The Associated Press, Don Thompson (10/05/2007) and San Jose Business Journal (10/03/2007)