Adios to the Home Valuation Code of Conduct?
Posted by Rachel LaMar, J.D. | Visited 188 times, 1 so far today | Currently 2 Comments »
Did all the complaining work? It appears that the controversial Home Valuation Code of Conduct (HVCC)–an appraisal system that was the brainchild of Fannie Mae and Freddie Mac and caused much aggravation amongst Realtors, home buyers and sellers, mortgage brokers and appraisers–may be thrown out the window.
The House Financial Services Committee approved a bipartisan amendment last week that would terminate the Code and replace it with a new set of rules and creation of a new Consumer Financial Protection Agency. The new rules would apparently not be as confining upon appraisers, a problem that caused many property appraisals to come in exceedingly low, which in turn caused many home purchase deals to fall out of escrow.
The purpose of HVCC was to give independence to home appraisers. It created a slew of appraisal management companies, used by many lenders, who would in turn pay the appraisers a fee to work an appraisal. Oftentimes these fees were low and less than appraisers normally made.
Many appraisers were obtained from out of the area, which unfortunately meant that they were often unfamiliar with the neighborhoods in which they were working, AND they sometimes lacked experience (as established, experienced appraisers would not work for such reduced wages).
Furthermore, these management companies would then charge all or a portion of the appraisal fee to the home purchaser, making a nice profit in the end. These factors caused many escrows to be delayed, and others even fell through because the value did not match comparably sold properties.
Over the last several months the National Association of Realtors, the National Association of Home Builders and the the National Association of Mortgage Brokers have been standing behind member complaints to push for changes to the HVCC. It seems to be finally working. If the new rules come into play the housing market should be able to continue on the road to recovery.
Just goes to show you how DOING SOMETHING makes a difference!
Dear Rachel…
(a) HVCC was not “cooked up” by Fannie or Freddie; it is an agreement cooked-up between them and NY State Attorney General Coumo, who forced it on them, by threatened them with exposing their poor business practices with a huge lawsuit.
(b) IF HVCC gets thrown out, the Big Banks, who own the AMCs and are making EXTRA PROFITS out of appraiser’s fees, have no reason to go back to dealing with mortgage brokers and appraisers direct.
They would rather keep the extra profits.
In other words, don’t expect any big changes unless someone twists the Banks’ arms.
Since they are “too big to fail”.. you and I will be the ones who fail.
— Riick — 20 year RE Appraiser
Hi Rick,
Thank you for your perspective. It definitely is interesting to hear from a veteran appraiser who sheds light on a different side of the problem.
While I DO understand the details behind the creation of HVCC I chose to not go into detail and instead present a simple “layman’s” overview of the problems that have been created since it’s inception.
Many agents are extremely frustrated by the changes that they have seen with the appraisal process since HVCC came into play. Your words indicate that maybe the new proposed solution is not going to help either, but we need to do SOMETHING to try and fix the problem: buyers are losing properties because of bad appraisals, and there are MANY appraisers from out of local areas who do not understand area valuation. What usually happens in these situations is the bank will have the SAME appraiser go back out there to “correct” his results…this usually (as you can imagine) does not help, or sometimes simply takes too long and creates problems for the buyers.
NAR sent out surveys to members regarding the problems with these situations and has been actively involved in trying to overturn the HVCC. I would LOVE to hear your suggestions as to a possible solution that could benefit all parties involved.
Thank you for your perspective.