Raegene Joyce knows an appraisal can make or break a deal.

On short-term disability while undergoing chemotherapy, the Indianapolis resident hoped to refinance her modest three-bedroom, 1,700-square-foot Pike Township ranch home at a lower interest rate. She planned to use the savings to help pay medical bills and says she was elated in April when a Zionsville branch of mortgage broker American Bank Mortgage Group told her comparable homes in the neighborhood were selling at or above the $128,000 she and her husband hoped to refinance.

The couple filled out paperwork and forked over a $450 appraisal fee. But Joyce says they were shocked when they saw the required appraiser's report — her home and others like it were valued around $115,000, not $128,000, making qualifying for refinancing unlikely. James Torrence, ABMG's Zionsville branch manager, says his office provides estimates, not guaranteed values. "If that estimated value doesn't come back on appraisal, that's not something we can control," he says.

Joyce's reality check may become more common with sweeping mortgage industry changes effective May 1 that seek to ensure more accurate appraisals. New York Attorney General Andrew Cuomo launched a November 2007 investigation into the Federal Home Loan Mortgage Corp. and Federal National Mortgage Association (Freddie Mac and Fannie Mae), alleging the companies approved and purchased mortgages with artificially inflated appraisal values. The two government-backed entities buy about half of all mortgages. The investigation ended after Freddie Mac and Fannie Mae agreed to apply the Home Valuation Code of Conduct to every mortgage they purchase, effectively changing lending and appraisal practices nationwide.

In a recent nationwide poll, less than 11 percent of Angie's List members said they were familiar with the guidelines. Before the new rules, mortgage brokers could hire appraisers willing to meet predetermined values. The HVCC prohibits contact between brokers and appraisers. Brokers now must use third-party appraisal management firms. Banks and lending institutions can continue to retain in-house appraisal departments, but must prevent contact between the loan originators and the appraisers.

Indianapolis appraiser Bill Seward of highly rated Seward Real Estate Services says broker pressure was common, even weeks prior to the May 1 change. "I'd still get e-mails from brokers saying 'Here's an address, I need [a value of] $200,000, the first appraiser who can get me that number gets the work,'" Seward says.

The new rules make sense, says Mark Rattermann, an appraisal educator with Education REsource in Indianapolis. "When you have people paid on commission selecting the appraiser they want, it's always a bad idea," he says. "The HVCC eliminates the situation where it's the fox watching the henhouse."

Tom Hedderich of highly rated Indianapolis broker The Mortgage Network Inc. says the rules, though well intended, eliminate his ability to hire trusted appraisers familiar with local housing values. He contends that brokers who may have influenced appraisers are out of business due to various new market regulations and conditions. "The only people left are pretty good operators," Hedderich says.

Realtor Kristie Smith of Carmel says it's too soon to tell how the new rules will affect the industry, but requiring a third-party appraisal brings changes all consumers should expect. "There's now a middleman that needs to make a profit," she says. "That adds another layer of time, effort and money to the process."