Protecting The Consumer To Death
One of the many protective measures that have evolved from the housing downturn is the HVCC – Home Valuation Code of Conduct. It was developed to protect consumers purchasing or refinancing homes by eliminating fraud and inflated appraisals. An effort looked upon by some as little more than closing the barn door after the horses got out.
In a nutshell, mortgage brokers may no longer communicate with appraisers. The communication with appraisers is done strictly with the lender/bank though an “appraisal management company”. This new code may sound great in theory but the ramifications since May 1, 2009 have already started to be felt.
Gone are the days when mortgage brokers can choose an appraiser on the basis of experience, professionalism or quality of their work. Appraisals are now awarded to whoever will work for the cheapest and fastest.
Here’s how it works: A consumer goes to a bank to get a loan. The bank collects $390 for an appraisal. Yes, the price for an appraisal has now gone up because the bank pays an “appraisal management company” about half of the $390 and the appraiser gets the rest. The best, most qualified appraisers can’t afford to work at such a discount. The consumer has no idea that they’re appraiser is probably less experienced, working at a discount and has often been hired just because they’re the cheapest and the fastest appraiser on the list.
Wait, there’s more. If you’re a consumer in the process of getting a loan with “Bank A” and your mortgage broker finds a better program or you are turned down for a loan with “Bank A” your appraisal is owned by “Bank A” and not transferrable. You’ve just thrown 390 bucks into the wind. Another appraisal has to be ordered for your second lender.
This is affecting the consumers trying to refinance their homes, too. In the past mortgage brokers could contact an appraiser and get an estimate on whether a home would be close to the appraisal price before spending money on a full appraisal. Now, a consumer that would like to refinance will have to go through the appraisal process and pay for it regardless of the outcome of the appraisal.
What was meant to protect the home buyers and refinancing home owners is now hurting them by costing them more and dragging out the time to fund loans. It also means rate lock extensions or longer rate locks which results in higher interest rates.
There were and still are good, honest and reputable appraisers that didn’t rip anybody off during the housing boom. They’re now being punished and driven out of the business by a system full of flaws including lack of transparency. Instead of being rewarded for years of experience and professional conduct appraisers are being undermined by the Wal-Mart effect caused by HVCC.
In the end those who are affected the most are consumers who are shelling out more money for less service and the local, small business owners which include independent appraisers and mortgage brokers who are being micro-managed out of business.
It’s quite obvious that there were considerable problems with the way that appraisals were done during the boom but the way that the system is functioning right now just isn’t working.
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Tags: appraisal, appraisal management company, appraiser, bank, Bonita Springs, florida, home valuation code of conduct, hvcc, lender, Mortgage, refinance
This new law, intended to protect the consumer, has in a very short time proven to be a greater detriment to the public it was intended to protect. Well said!
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Isn’t that the truth. It took me two weeks to track down an appraiser and tell him to do his job because his paperwork wasn’t going through. It’s all a secret covert action to not interfere, but what happens when something goes wrong and a buyer has to be in a house in 12 days?
This whole plan needs reworked. Mulligan!
Well written but so irritating that we can’t just get it right and stop wasting peoples money and livelyhood:(
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Just pray the moratorium passes. It will be for 18 months, if not longer. I have already had two deals just about die because of HVCC.
I have been waiting WEEKS because of an appraiser who hasn’t submitted the appraisal and NO ONE CAN CONTACT HER TO FIND OUT WHERE IT IS OR EVEN WHO SHE IS!!! THIS IS RIDICULOUS! There’s NO accountability.
It’s a crying shame. I feel for you, the buyer who wants a home, the seller who wants to sell and anyone else that is a hostage to this transaction.
I received a notice that the AMC I try to work for has an appraisal order for me. I have approximately 1 minute to accept it or any of the other appraisers that it has been offered to can grab it first. I have no idea if it is a small house in the middle of the city, a huge mansion in the river bottoms, or a rural farmhouse on large acreage. I am being offered $250 to take it and if I don’t say yes right now, I will be out of what little work I can get now that the HVCC is in effect. Of course, if I do take it, I have 72 hours to research, drive to it, inspect and measure it, and put in the time it takes to write a legitimate and accurate appraisal with at least six comparables. I am not aware that the AMC has had this order for over a week. No one is allowed to talk to me. It is definitely possible that the AMC is blaming me for the “slow” turn around time to the lender or borrower. I wouldn’t know. I do know that if I don’t get my job done in the short time span I am given, I won’t be offered the chance to grovel like a dog at the dinner table for the scraps that are thrown to me and the other dozen dogs starving to death.
By contrast, I used to have over a dozen clients that I developed a respectful relationship over the past fifteen years. I prided myself on being able to offer a quality, well written and accurate appraisal. I watched the cheap and quick appraisers come and go, falling victim to their own greed and carelessness. My clients respected my opinion and my experience. Each and every appraisal that I ever wrote was as honest and accurate as was possible. I respected myself and as a result, did not allow anyone to influence my work to their benefit. Many tried. I was in for the long haul and not to sell my soul for the quick buck.
I still write to the best of my abilities. Only now, no one notices or cares and I get paid about half what I used to. I am as much a hostage to this fiasco as anyone.
Jaspar, thank you for your perspective on the situation.
ONE APPRAISERS SOLUTION TO PROFITING FROM HVCC
I will be the first to admit that I was clueless when it came to earning a living as an appraiser after HVCC kicked in last May. For this reason I closed my practice after 17 years.
I ran across an appraiser recently who solved the problem after watching a television program that discussed the Walmart business model. After watching the show he hired 2 newly licensed appraisers to inspect properties at $50 per inspection. He then hired typists in poverty stricken countries for less than $2 per day. Problem solved. He now generates 6-8 orders per day while billing only $150 per appraisal.
I had to ask one question: What about the analysis that’s involved with appraising? His answer was “What Analysis? You are still living in a pre HVCC world…lenders care about two things; fee and turn time. Nothing else matters”. Judging from his monthly income I can only assume that he is correct.
This should tell Congress everything they need to know about where HVCC is taking us and the direction the housing market will go in the coming years.
Amazing …
Well said Chris. I am a mortgage broker and just had a solid deal die due to an inept appraiser. For anyone wondering what the dispute process involves, it simply has the appraiser critique his/her own work. I just went back and forth 3 times with the AMC and the final word is that the appraisal stands because the appraiser says so. Hey, they have already been paid so why fix it. I see that we as broker’s are being squeezed out of business and that will be a sad day for the consumer. Consumer Protection??? BAH!!!
Thanks, Dave. We’re a little less volatile, we’ve absorbed inventory and have a little less terror involved in our appraisals. I think it made us better listing agents, since there was no room for error.