The Federal Reserve has passed an interim rule (read more here) that effectively eliminates the controversial HVCC (Home Valuation Code of Conduct). Many originators and industry professionals agree that appraisal independence is needed but not on how to achieve that end. Without the HVCC will much really change? What are your thoughts?
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11 Comments
HVCC assumed that ALL relationships between appraiser and lender were suspect at best. It was the result of Fannie and Freddie caving to Coumo. The result has been overly conservative appraisals, often of poorer quality and done by AMCs that have no oversight. USPAP has its own set of rules and regulations that appraisers must abide by with sanctions to the appraiser. Since HVCC, we have seen the cost of the appraisal increase while the appraiser sees less money for having to do more work. An appraiser often must perform many more appraisals per week in order to maintain his or hers previous income. I have seen an increase in mistakes and bad estimates of value done by appraisers that have limited knowledge of the area in which the appraisal has been ordered.
In summary, the HVCC is slower, the cost to the client is higher, the quality of the appraisal is lower and the values given are too conservative.
HVCC can not be history quick enough. This is just another example of knee jerk legislation/rule making that has not helped the consumer, just hurt them. Not only has it hurt consumers, it hurt the industry, appraisers, originatiors, real estate professionals, etc.
Good luck NY. If you vote the perpetrator of HVCC in as your govenor, you can expect more of the same politically motivated grandstanding!
HVCC is bad law a political knee-jerk that has hurt homeowners, appraisers and brokers. By mandating AMC’s It has driven countless compentent appraisers who will or cannot work for the reduced fees offered by the AMC’s for their work. According to a source from HUD in its origional form it was probably illegal since HUD forbids upcharing for services rendered, such as appraisals. HVCC regulations by exempting Lenders, as with NMLS licensing, has once again shown that there are two weights and two measures in the mortgage industry and politics are more important than true consumer protection and servicing.
ADIOS HVCC and not fast enough! HVCC has made it more difficult for me, a loan originator, to determine what value a “lending institution” will use on a particular property because there is no discussion until after the appraisal is complete and we all know there is no explanation and STILL no discussion – PERIOD. I agree with Jerry Hanley (see above) if Cuomo is responsible for this stereo-typical, knee-jerk reaction by yet another “womb to the tomb” politician, you New Yorkers will get what you deserve if you vote him into office!
The HVCC system in Texas is a joke I did a ranch for a R.M. I emailed the AMC that I needed a farm and ranch appraiser so they send a residential appr. It was a nightmare the client was desperate to close due to mortgage and other debts he lost out on many thousands of dollars…no recourse. I did another with BofA as the lender and used their AMC(LSI) and BofA did not believe the value and would not do the R M. Help!
It would really help us out to eliminate the HVCC by saving us time and Seniors money on useless appraisals when the value comes in less than what we need when paying off a existing mortgage.
According to the people at FHA they so far have taken the position that the new rules won’t replace ML 09-28, therefore Appraisal Independence will remain in effect regardless of what the Fed determines in their policies.
That said, it is our position that many of the problems with AMCs stem from a lack of history in this business and/or the fee structure AMCs use for paying their appraisers. At Landmark we dont use discount appraisers. The result is a higher quality of work. No appraisal management process is 100% perfect whether its done by the broker, lender or AMC. We can all run into bumps here and there. But if you’re using an AMC that bases their business on paying appraisers $175 – $250 then you probably have the wrong AMC solution. You get what you pay for or in this case – You get what your AMC pays for.
I agree with all the comments above about all the wrongs with the HVCC. I’m finding it terribly frustrating not being able to communicate with appraiser. The single most important part of putting a reverse mortgage together is the appraisal and we’re not allowed to work with our vendor. Working through a “middle company” is insane. I’d like to see any other industry (Boeing, GM, Microsoft) be forced to go through a management company to buy there single most important component where they had no control of price, quality, who manufactures the component or outcome of that component. It is a huge disadvantage to the loan officers and clients. Since the “big banks” own these managements companies and they have a new money mandatory money machine that they are here to stay. I hope I’m wrong. Again, a few bad apples and we’re stuck with a handicap the rest of our working days.
What does HVCC have to do with HECMs? Erik Richard got it right. The HUD rule is not impacted by the elimination of HVCC. If you thought HECM appraisals will be changing, be prepared for a huge disappointment.
You are right Critic. The elimination of the HVCC will not change much. Quality AMCs and procedures to insure appraiser independence are key.
If I could have just one wish, it would be that the “Comp Search” returns.
These were the best pre-appraisal value “ball-parking” measure ever, and they accomplished two highly useful purposes. 1) They gave us evidence to help rein in unrealistic borrower expectations of value. 2) They tipped originators off to any underwriting difficulties in finding comparable sales.
In the meantime, we are using AMCs that will perform a “Desk Review” to achieve the same end, but this now involves a fee for a service that was formerly free of charge. The fee itself is not that bad, but it is a barrier to a quick estimate of value and the potential principal limit to a prospect unless the prospect agrees to pay the fee or you have a good relationship with a knowledgeable and cooperative realtor who will pull MLS sales for you.