Fannie Mae to Prohibit 'Appraisal Cutting'

September 2, 2010

Source: American Banker, Kate Berry and Marc Hochstein

Fannie Mae is banning a common practice known as "appraisal cutting," starting next week.

When lenders selling loans to the firm challenge a valuation, the underwriter will have to contact the appraiser directly; if the lender is unable to settle the dispute, its only option will be to order a second appraisal.

Lenders will be unable to simply cut the value of the appraisal or shop around for the best appraisal.

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