I’ve received a few emails as of late about my my thoughts on HVCC (Home Valuation Code of Conduct) and why I hadn’t written or documented HVCC the way we did HR3915. The truth is that it slipped by me until I got up to speed on the ramifications of HVCC today, even though Paul covered it previously, here. I even remember reading his post, but for some reason the implications didn’t hit until the last day or so. While HVCC serves to do some great things for consumers and the industry, in its current form its negative aspects overshadow the good it does for agents, brokers, consumers, and appraisers.
On Wednesday, the 30th, the feedback period for HVCC is over, so now is the time to express how you feel about the flaws in HVCC. Since HVCC is a bill or legislation going through the Senate and House, it has gotten little to no coverage, whereas if it was a bill, I believe there would be a much larger discussion taking place online and off. Although I am acutely aware that a petition with less then 36 hours to gain momentum is not unlike throwing a life preserver to somebody who’s already 20 feet under water, I still ask in your support in signing the petition. Even though the feedback period is ending, this doesn’t mean that all ears will be closed.
HVCC Basics:
- Disables Brokers from choosing appraisers or having ANY contact with appraisers as these tasks are delegated to lenders. This creates a bias that shifts power to large institutions.
- Requires independent appraisers to join AMC’s (Appraisal Management Companies) where they are forced to pay 40% or more of their income to the AMC, ending the existence of independent appraisers.
- Since appraisals are not in the Broker’s name but the Lender’s, if you or your client needs to change lenders, a new appraisal is required.
- If consumers want to shop their loan, they must pay for a new appraisal, they cannot have appraisal reassigned. This creates a disincentive to shop for the best deal, which is never good for consumers.
UPDATE: Alamode Petition
Alamode CEO, Dave Biggers sent out this email this Morning:
Thank you for submitting your letter to Fannie, Freddie, OFHEO and Attorney General Cuomo yesterday. We understand you may have received a “bounce back” e-mail from one or more of them indicating your electronic submission wasn’t received. Trust me, they got the message.
Yesterday over 16,000 appraisers, mortgage brokers, agents and even lenders (178 of them) logged in and sent their opposition to the HVCC. Apparently the volume caused the servers at Fannie, Freddie and OFHEO to start shutting down. To their credit, Fannie Mae called us proactively and we believe we’ve worked out a compromise that’s easier on their servers, but we haven’t been able to reach technical contacts at OFHEO and Freddie.
We’ve queued all the mail however and will resend as soon as all three have their servers in order and are able to accept the messages and/or posts.
We were surprised that their mail servers coughed up so quickly. We had a little over 10,000 people sign up in the first six hours, and 10,000 messages each should be nothing to these guys. We handle millions of messages a day on our mail servers, with no impact at all. If someone sent us 10,000 messages over six hours, it wouldn’t even register as a blip on our volume monitoring tools.
Regardless, we’re also taking the “official” method and sending paper copies to all the entities. Right now, at more than 17,000 signers, that means over 68,000 pages to print (some span two pages). Last night we printed 55,000 of them and will keep up with the volume as it goes today.
Again, thanks to everyone for all the support. I’m confident we’ll emerge with a set of rules we can live with, rather than die by.
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21 responses so far ↓
1 Russ Martin // Apr 29, 2008 at 9:04 am
Ironically, this was born out of appraisal fraud at Wachovia. In other words, a federally chartered bank gets caught with their pants down, so they pass restrictions on small mortgage brokers. You have to love having a strong lobby to protect you…
2 Gina Gardner // Apr 29, 2008 at 9:15 am
This seems like this hurts brokers a lot more than banks but only because banks are already meeting some of these requirements. For example at Countrywide you can’t pick your appraiser. And while it’s a real pain when you want someone you know is capable of appraising a very high end or unusual property and the system gives your appraisal to some hack instead I can understand why they do it. You can’t afford even the appearance of or potential for impropriety. Having been the victim of an appraiser whose interests were too closely tied to the Realtor who sold me property I can’t say I have a problem with severing that connection.
However, not being able to reassign an appraisal doesn’t serve any purpose that I can see. If the first lender has no choice or influence re: the appraiser than any subsequent lender wouldn’t either. The only reason to refuse a reassigned appraisal is if the appraiser is on the second lender’s blacklist and that shouldn’t be anyone’s call but the lender’s.
Forcing the appraisers to join some organization (like being forced to join a union and pay dues) and fork over that much of their income seems very unfair and will probably drive up the cost of the appraisals. I should think the appraisers would already be up in arms against this — seems like restraint of trade. And anything that increases prices creates a disincentive for borrowers to refinance which is of course bad for all of us. This legislation needs more work before it is ready for prime-time (or sub-prime time:))
3 Trace Richardson // Apr 29, 2008 at 9:46 am
Most appraisers I’ve spoken with have no clue this exists…… the very appraisers that will give 40% or more of their income to unregulated AMC’s have no clue that their profession may change drastically forever….. The key is that since this is an settlement it has received little to no coverage since it is is not a bill working its way through Congress….otherwise, I think there would be a much more vocal voice opposing the bad parts of this measure.
Regardless of appraisers, brokers, or agents, where are the consumer advocates? You have to pay for a new $300 to $500 appraisal if your broker isn’t living up to your expectations? Are you KIDDING ME? If your circumstances change and you need to change lenders for a different program, you have to buy a new appraisal?! Not only the cost that is involved, but the time is important as well…. many consumers have to take time off of work to meet the appraiser and doing anything twice without good reason makes no sense.
HOW MANY CONSUMERS WILL STAY IN A PROGRAM OR LOAN THEY DON’T WANT FOR FEAR OF BEING STUCK WITH THEIR LENDER BECAUSE THEY DON’T WANT TO CHANGE LENDERS OR PAY FOR ANOTHER APPRAISAL AND EXTEND THE TIME INVOLVED IN THE LOAN PROCESS? Why the shift in leverage towards mortgage companies / lenders? What type of consumer oriented “code” does such a thing?
4 Russ Martin // Apr 29, 2008 at 10:03 am
My problem with this is that quality of work is going to suffer. These companies are like deaing with the DMV or some other government beauracracy because there is no competition. Need an appraisal updated by end of day? Good luck dealing with the appraisal management companies.
I almost had a $1.2 million dollar deal blow up over a crappy appraisal from a second mortgage lender that wanted to use their own appraiser instead of my guy who did it for the first mortgage. I wouldn’t have cared had they not sent some hick from west po’dunk to appraise a $1.2 million multi family investment property in the middle of downtown Chicago 50 miles away! His value came in too low because he picked the wrong comps. Only after threatening the blow up all their bank branches and pointing out the how bad the appraisal was done was I able to get it fixed and the deal closed.
All these new laws and regulations are doing nothing to protect consumers. If banks would simply start evaluating each file on its merits and go back to common sense underwriting instead of trying to automate and outsource everything to India and fit every loan into a rigidly defined box based on a nebulous FICO score, they wouldn’t be in this situation now.
Banks have gotten so efficient that they are inefficient.
5 Trace Richardson // Apr 29, 2008 at 10:40 am
I have updated the thread to show the Alamode petition and Dave Bigger’s email regarding overwhelming Fannie Mae and Freddie Mac’s servers…..
Even with apparently large numbers of the industry speaking up, I’m still not even seeing any coverage of this in the news or in the blogosphere…. amazing….it’s like it doesn’t exist, I’m thankful that Alamode has stepped up big time. Cheers to them.
6 Diane Cipa // Apr 29, 2008 at 12:59 pm
read Radical….stuff’s happening all the time.
7 Paul // Apr 29, 2008 at 1:02 pm
Trace, one important note about these changes is that it doesn’t affect FHA or VA.
8 Rick Grant // Apr 30, 2008 at 3:26 pm
For those of you interested in wading through a bit of legalese, TAVMA has sent a 28-page comment letter that really spells out why the code will create more problems than it solves.
Find it on the TAVMA website here:
http://www.tavma.org/images/tavma_comment_hvcc.pdf
Rick.
9 Jeffrey Sherman // Apr 30, 2008 at 4:53 pm
Is there any appraisal organization, or possibly A La MOde, who could show a few PSA’s on TV, showing what an appraisal is, and how this plan will harm everyone but the big banking boys? The Instutute is a waste, having ‘gone to bed’ with The Banking Industry, NAR, and peddling their own AVM software. They have sent most small appraisers down the river.
10 Trace Richardson // Apr 30, 2008 at 5:15 pm
Thanks Rick, I’ve included the doc here: http://brokerscience.com/hvcc/tavma-weighs-in-on-home-value-code-of-conduct/
11 Gina Gardner // May 2, 2008 at 8:52 am
Trace, I do some blogging and articles for consumer-oriented mortgage lending sites. I’m going to get this info out there to people who aren’t industry insiders. Thanks for cluing me in.
12 Scott Austin // May 2, 2008 at 12:53 pm
There are good articles on AppraisalScoop.com.
Mr. Cuomo doesn’t want us to remember that he was on the board of AMCO - Appraisal Mangagement Co. His plan would drive the ordering of residential appraisals through AMCs.
I agree it will do nothing to protect the appraisers from unethical pressure or the public from bad appraisals.
Making undue influence on appraisers illegal would help. But then that would not be very lucrative for friends of AMCs.
13 len // May 27, 2008 at 10:12 am
Why on earth would you introduce a third party(amc) into the equation that is not regulated, does not have to have a state license, does not have to have continuing ed., and that will take 40-60% of the income from the very people who are state regulated, state licensed, and required to update their education. Makes no sense.
14 Bexo // Jun 9, 2008 at 10:29 am
Gina, you can’t choose your appraiser at Countrywide because Countrywide owns the appraisal management company you use and forces appraisers who work with them to take the huge cut in fees. Countrywide is at the very root of the problem.
15 Mark Ramirez // Jun 25, 2008 at 7:32 am
If anyone reads this, please send me an email and state the main elements of the HVCC legislation. Explain how it hurts the appraisal business. Thanks. (chessluv1@juno.com)
16 Rick Grant // Jun 25, 2008 at 10:03 am
Mark,
For a good overview, you should read the original Code here: http://www.oag.state.ny.us/press/2008/mar/Code Final 3-2.pdf
And the introduction to the TAVMA comment letter here: http://www.tavma.org/index.php?option=com_content&task=view&id=141&Itemid=23
I don’t have time to do all the work for you, so in the TAVMA letter you’ll find 6 reasons the Code will fail to improve things and only make them worse and 6 ways it could be fixed to make it workable. TAVMA, in case you don’t know, is a trade group servicing Vendor Management Companies (VMCs). Some people don’t like them, so feel free to solicit other opinions elsewhere by following this link: http://www.tavma.org/index.php?option=com_content&task=view&id=141&Itemid=23
Good luck.
Rick.
Note: Per his request, I have also mailed a copy of this to him at the address in his post.
17 kelly // Jun 30, 2008 at 1:38 pm
Sorry everyone but youd should be carefull waht you ask for, appraisers have been crying for somethig like this for years (no lender presure) and as far as readdressing appraisals this has never been alowed (see FDIC & USPAP).
18 Mark Ramirez // Jul 1, 2008 at 12:40 pm
I was wondering if there was a vote on the Dole amendment to the HVCC legislation. Does anyone know? (chessluv1@juno.com)
19 Luis // Jul 9, 2008 at 7:13 am
Senators want hud statements to reflect what the appraiser is paid & what the AMC steals from Appraisers. If you realy want to have independant appraisers then you can’t have AMC taking 50% of their fees. If AMC after being paid by lenders can rotate appraisal orders to the next appraiser based on experiance, turnaround time, quality of work based on independent professional appraisal reviewers and not by fees charged. Then AMC could protect appraisers independance from realtor, mortgage broker and lender pressures to come up with any particular value that is not supported in the market.
When congress passes the HVCC or Home Valuation Code of Conduct, the industry will after all the appraiser training of the past years go a long way to protect consumers from lenders real estate fraud and misrepresentations. You have to protect appraisers from being placed by lenders on “silent blacklists” or do not use lists without any due process of law to defend themselves from mad lenders and mortgage brokers false and sometimes fraudulent allegations. Remember Appraisers only report market conditions, they do not kill their deals.
20 David Johnson // Jul 16, 2008 at 3:45 pm
As an appraiser of almost 20 years I can assure you that in my neck of the woods appraisers are up in arms. While I know the institute gets a bad rap on certain things, I think most people would be impressed at the letter sent by the Institute in opposition of HVCC. I don’t have the link but it is on the website.
AMC are THE cause of this situation. I have dealt with mortgage brokers and banker for my entire career and can honestly say that I have more corporate bankers ask me to “overlook” things or push values than I do mortgage brokers.
In my opinion, the real bad guys are the underwriters who more times than not give mortgage brokers encouragement to push bad deals so they can get paid.
I say to clean up the underwriters and get some people who know a little something about what they are underwriting and the bulk of the problem will go away.
No need to respond to me - I just wanted someone to know that not all appraisers feel the mortgage brokers are the bad guys.
21 Jeff // Jul 21, 2008 at 8:18 am
The whole concept that AMC’s / VMC’s are going to prevent appraiser fraud and increase quality is ridiculous.
1. They claim to “review appraisals” for accuracy…..In my state it is against the law for a person who does not hold a current state license to do appraisal review. I have been called with some of the dumbest questions by AMC’s where they did not understand what the report asked for.
2. How can someone 750 (or more) miles away review my appraisal and determine if the information is sufficient, accurate, or the estimate of value is reasonable which is what some claim to do.
AMC’s have 3 requirements - how cheap will an appraiser do an appraisal?…How fast can he turn it around?…..Will the underwritter accept the estimate of value? Anyone of these 3 can be reason to remove an appraiser from the panel. Don’t think if a lender complains about an appraisal the AMC’s won’t bury that one and order another to keep the cash cow milking so to speak.
Over the past 4 months I have had AMC’s ask me for comp checks before completeing the appraisal. One asked me to charge the home owner $100.00 above my customary fee and send it to them (but let the owner believe that it was all for the appraisal). When I wouldn’t do it they just assigned it to someone else (this was an FHA assignment)
Appraisers are taking the blame for everything, as perhaps many should, but AMC’s will do nothing but cause good reputable appraisers to get out of the practice because they can’t make a living at the dicounted prices leaving the appraisal profession to the very crooks they are trying to protect against.
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