From the New York Post article: "HOUSE CLEANING - FRANK TO RIP UP OBAMA MORTGAGE PLAN, GO FURTHER" -
In the run-up to creating the subprime nightmare, the unregulated assessment process used the Broker Price Opinions (BPO), which uses comparable sales but has built-in biases. Among those, appraisals tend to be high because brokers don't earn a commission if a mortgage is unfunded because of a low assessment.
Also, the Automated Value Model (AVM), which relies on comparable sales, uses a computer algorithm to come up with a final assessment.
"Appraisal independence is of great importance to all homebuyers and homeowners who own or want to own a home. I have therefore fought to improve appraisal independence for many years and I am continuing to do so. Next week, the Housing Subcommittee will hold a hearing to address mortgage modifications, and I expect that home valuations will be discussed," said Rep. Paul Kanjorski (D-PA), a ranking member on the Finance Committee.
According to mortgage industry sources, the Obama administration is planning to rely on these two models to rescue homeowners from foreclosure.
According to RealtyTrac, foreclosure filings in the US climbed 30 percent in February.
"Going forward, reforming the appraisal process to prevent inflated pricing will be critical to ensure we don't repeat the mistakes of the past," said Rep. Carolyn B. Maloney.
"These two models were instrumental in creating the housing bubble," says James Amorin, president of the Appraisal Institute.
Source Tip: http://www.ICAPweb.com