In a news clip posted on the Appraisal Institute website, it was announced that Freddic Mac has issued new guidelines that prohibit its lenders from using BPOs to value properties for mortgage purposes.
This move, while thought to be only symbolic, does demonstrate that government agencies are placing a great deal of value on the services and opinions provided by Certified Appraisers.
Note, an appraiser is not permitted to provide a BPO in the State of Pennsylvania. In PA, only agents/brokers can provide BPOs. However, agents/brokers are not permitted to provide appraisals in PA.
Freddie Says “No” to BPOs
On March 31, Freddie Mac revised its Seller/Servicer Guide to strictly prohibit its lenders from using broker price opinions to value properties for mortgage purchases. Though Freddie had refrained from using BPOs as a matter of policy, the changes made to section 44.7 of its Selling Guide leave no room for loopholes.
The revised Selling Guide states that to be acceptable for a transaction, each mortgage file must contain one of the following reports:
Also clearly stated in the revised language of Freddie’s Selling Guide is the requirement that the Seller may not use tax-assessed valuations or BPOs to determine value.
“Freddie Mac is to be applauded for clarifying their policy on BPOs,” said Bill Garber, Director of Government and External Relations of the Appraisal Institute. “This action should serve as a model for government agencies and bank regulators to follow, as it promotes independent and sound collateral valuation practices. While the action is mostly symbolic, we believe the provision has a broader impact and should be viewed as an important cog in helping rebuild confidence investor confidence in the real estate market.”
The Seller/Servicer guide (Section 44.7) can be accessed at www.freddiemac.com/singlefamily/# under “Forms and The Guide à Allregs.”