Mortgage brokers and appraisers predicted headaches and worse with the advent of the new appraisal rules that hit the mortgage business on May 1, and now they say that’s just what they’ve found – with a few extra aggravations thrown in.

Appraisers say it’s just as they feared: They’re making less for each job and consumers are paying more under the new Home Valuation Code of Conduct for an inferior appraisal.

Meanwhile, brokers can’t easily make good on locked-in interest rates because new rules gum up the application process, said David Black, president of First New England Mortgage in Newton.

Also, brokers now often struggle to transfer appraisals between lenders, leaving them unable to easily transfer the application to a more favorable lender.

“We could keep banks honest,” he said. “If we can’t get our job done, we’ll disappear.”

Blame It On The Feds

The National Association of Mortgage Brokers, which tried to prevent the rules from taking effect, is now urging brokers to direct their uproar toward The Federal Housing Finance Agency and other organizations.

But that fight truly began last year, when FHFA announced that Fannie Mae and Freddie Mac would not back mortgages in which brokers had contact with appraisers, and issued the new code to prevent that.

Previously, brokers ordered the appraisal before submitting the loan application to the lender – and often, critics say, those brokers would pressure appraisers to come back with higher valuations. Now, the broker orders the appraisal through the lender, who in turn orders the service through an appraisal management company, which then puts the job out to the appraiser.

When mortgage brokers ordered the appraisals, they could take those numbers to a variety of lenders, ideally shopping around for the best terms on behalf of the borrower. Now the appraisal comes through the lender, and critics say if consumers want to shop around, they’ll have to order a new appraisal for each lender they try out.

“There’s a real competitive issue here,” said Stephen Sousa, executive vice president of the Massachusetts Board of Real Estate Appraisers.

The lender who ordered the first appraisal has to certify it in order to pass it along to another lender, Sousa said, and it’s doubtful lenders will want to shoulder the liability – with no potential reward – that comes with certifying an appraisal for a loan they’re not going to make. On top of that, other lenders don’t want to accept the other guy’s appraisal anyway, and will request another – at hundreds of dollars cost to the consumer.

“That was one competitive advantage [for brokers]: We could take the loan to a new lender,” Black said. “Now we can’t do that.”

Another in the list of complaints: The new code prevents brokers from successfully locking in borrowers at lower rates, says Richard Shapiro, principal of Asset Mortgage Group in Natick.

Because the appraisal is completely out of the mortgage brokers’ hands and another layer of management is inserted in the process, everything just takes longer and 30-day lock-ins are likely to expire before the application is complete. Longer lock-ins are possible, but are more expensive to the consumer.

Appraisers are also complaining appraisal management companies take a chunk out of their fees as payment for arranging the assignment. Many appraisers were upset that their work was being shuttled through appraisal management companies because the new system broke professional ties they’d established with brokers, who would refer them to jobs in their area. Now management companies just cast around for whoever will do the job cheaply and quickly, they say.

Sousa said his organization sent out a survey on the new code that – so far – has 55 percent of appraisers saying the number of assignments they’ve received has declined, and 39 percent said their assignments have decreased more than 10 percent since HVCC kicked in on May 1.

Also, more than 90 percent of the 113 respondents say management companies are pressuring them to get the appraisals done far too quickly. So quickly they say, that the appraisal itself is shoddily done.

What is the future of these regulations? The HVCC is a set of guidelines laid out by Fannie and Freddie, not legislation; David Bunton, president of the Appraisal Institute, speculates the HVCC is merely “placeholder” rules that will be swept away in the spate of new regulations coming out of Washington.

Others aren’t as optimistic.

“The longer it’s in place, the more it becomes entrenched,” Sousa said.

Lenders are spending time and money to engineer the new processes, and would kick up a fuss if someone suggested change. Chris Kelley, sales manager at First New England Mortgage, noted that the mortgage brokers’ Washington lobby can’t match the powerful banking machine in place.

“It’s like a kindergarten student up against a Ph.D,” he said.

Shapiro theorized that they’d need a politician or well-connected lobbyist to get fired up on their behalf: “I’m just hoping that the right big shot gets their loan all screwed up because of this and says, ‘Why are we even doing it?’”