Special offer

Fannie Mae & Freddie Mac Appraisal Order Changes.

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

"

Back in March I wrote a blog New Proposed Appraisal Regulations ............ "Home Valuation Code of Conduct" giving every one a heads up on changes to the way Fannie Mae & Freddie Mac Appraisals will be done from tomorrow (May 1, 2009) forward.

Starting tomorrow, May 1, a new code of conduct, the "Home Valuation Code of Conduct" (HVCC) will go into affect for ALL appraisal on Fannie Mae and Freddie Mac Loans.  Anyone with a vested interest in the approval of a mortgage can not have any contact with Appraisers or have any say on who the appraisal will be assigned to.  Those that will be most affected by this change will be Loan Officers and Brokers, but in reality Realtors and Buyers will feel the impact of this change as well.

Right now if an Appraiser feels that a property is not going to appraise, because of preliminary work that he/she might have done before going out to actually appraise the property, he can give the Loan Officer or Broker a call and discus it with him to try to determine if it is even worth doing the appraisal.  Many times the amount that the property needs to appraise at and what the Appraiser initially feels that it will appraise, is pretty wide.  If this is the case, the Loan Officer or Broker has the opportunity to cancel the appraisal, and if they have a good relationship with the Appraiser, the Appraiser will not charge for the preliminary work, thus saving the Borrower money.  This is just one example, there are others, such as maybe being aware of a FSBO that has recently sold, that the Appraiser might not know about, but with this additional information it might enable the property to appraise.

We all have heard reports of Loan Officers, and Brokers, and yes even Realtors, who have teamed up with Appraisers in fraudulent activity. This change in the appraisal order process is suppose to try to deter that.  But in reality this is only going to affect those who are NOT involved in fraudulent activity.  Those who have committed fraud in the past will continue to find ways around the system.  Something that was said to me many years ago, long before I became a Loan Officer keeps on popping into my mind "locks and barriers only help to keep honest people honest, but will not deter the crooks from breaking in if they really want to".  If this new procedure is being implement to help honest Loan Officers and Brokers from being tempted into doing something wrong, then it might achieve that goal.  But if it is being implemented to stop the sleazy element of this business it will fall far short of what is needed to do that.

If I sound unhappy with this change is because I am.  I am tired of paying the price for those who do things wrong, and politicians who are trying to gain publicity by implementing meaningless changes that will do nothing to stop Con Artists.  This may sound good, but it is just a lot of fluff and smoke and mirrors in my opinion.

This change will NOT affect FHA at this time, and hopefully will not be adopted by FHA in the future.  FHA appraisals will continue to be order the same way that they have always been, as well VA appraisals.

For all the details on this new act go to "Home Valuation Code of Conduct".

NOTE:  It was brought to my attention by Benjamin Clark in one of his comments below that the link to the "Home Valuation Code of Conduct" website that I provide might not be working for everyone, and he provided a alternate one "efanniemae.com".  Hopefully this one will work for everyone.  Thank you Benjamin for providing this link.

 

******************************************************************************************************************

Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Posted by

George Souto
NMLS# 65149

C (860) 573-1308
CALL 7 Days/Wk
Fax (860) 760-6891

Email Me
About Me
My Blog

I am a Mortgage Loan Officer who can assist you with all your mortgage & refinancing needs in
CT, and RI

I can assist you with your Conventional,
FHA, CHFA, VA, USDA, & 203K loan programs.

I reside in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Haddam. E. Haddam, Higganum, Chester, Essex, Deep River.

Ā 

Comments (91)

George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

R. Kaplan, the reason why we have heard of them is because they were turned in.

May 01, 2009 09:08 AM
Linda Lipscomb
Linda Lipscomb RE/MAX Lexington Henderson County TN - Lexington, TN
731-695-1118, Lexington TN Homes

Three appraisers, three pretty wide range of opinions.  Who knows?? This certainly will not help anything.  Sending appraisers out of their market areas will only hinder the process more. 

Appraisers seem to be getting a lot of finger pointing and therefore have all become way, way conservative.  We are all pulling our hair out over this dilemma.

May 01, 2009 09:48 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Linda, I have a lot of hair to pull out, but I am doing my best to keep all of it ........ LOL

May 01, 2009 09:54 AM
Bo Kociuba
McGraw Realtors - Mustang, OK
Realtor - Mustang, Yukon & OKC Metro 405-812-1572

George...government intervention never brought anything good...this is not their business so they don't care and there is never any common sense in any of the additional laws...well, I always say that they control the controllable...the ones who obey the law and have integrity always pay the price for the few who choose greed and corruption...very unfortunate...

With smiles,

Bo

May 01, 2009 12:12 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Bo, I appreciate your view point on this.

May 01, 2009 12:16 PM
Gail Robinson
William Raveis Real Estate - Southport, CT
CRS, GRI, e-PRO Fairfield County, CT

There seems to be a misunderstanding about HVCC that real estate agents can't have contact with the appraiser.  There is nothing in the code that says we can't have contact with the appraiser.  It is more important than ever for us to have contact with the appraiser so that we can provide support for the value of the home by handing them MLS printouts of comparable sales and providng them with the geographic boundaries for a pool of 50+ comparable properties that have sold in the past 12 months.  The appraiser may not be familiar with your market area and you want to give your listing the best chance to be appraised well.  In the end, the appraiser is going to make his own decisions, but if you don't do the legwork, some important comparables could be overlooked and the wrong geographic area could be chosen for the pool of properties for the 1004MC form.

May 01, 2009 02:25 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Gail, there are a couple of section in this code that are confusing. In one breath it says that anyone who is going to benefit from the sales financially can't have any contact with the Appraiser, but on the other hand the Listing Realtor has to have contact with the Realtor, because that is who is going to let him in to do the appraisal.  Another section says that the Appraiser is not to be given the desired amount for the property to appraise at, but it then allows for the Sales Contract to still be provided with the Appraisal Order.

So you are right, but these are mixed messages.  One thing that is clear is that Loan Officers and Brokers can not have any contact with the Appraiser on a Fannie or Freddie backed loan.

Good idea to provide them with the comp's until they put a stop to it.  The Appraiser doesn't have to take them or use them, but at least he/she will know they exist.

May 01, 2009 02:50 PM
Anonymous
Laura

While I'm in agreement with the majority sentiment found throughout the community, there is one question I have that does not appear to have been addressed in any great detail.

Several commenters have mentioned starting your AMC, mostly it seems in a joking fashion. However I'm wondering if there isn't a real opportunity here to do exactly that. We all know the challenge of getting on the AMC lists these days, so what better way to keep working with our own lenders?

The problem is I'm not exactly sure what the steps would be to form an AMC. Any advice, or could you point me in the right direction?

Thanks!

May 01, 2009 03:19 PM
#79
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Laura, I don't have any suggestions on how to go about that, but maybe others will read your comment and offer suggestions.

May 01, 2009 04:11 PM
Marc Blasi
Palm Beach Gardens, FL

Hi George-

Something certainly needed to be done - but I don't think this is going to work for the same reasons you mentioned.

The scammers will still find a way to get things done and the legit people will be the ones who pay the price!

May 02, 2009 04:00 AM
Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!

George- I am sick and tired of politicians pretending to care, not having a clue of real life, they all live in their cozy DC cliques with a huge disconnect. Then they try to throw us a bone to make it look like they are doing something- which is nothing to fix the problem.

You said it well when you said, the crooks will always be crooks and find a way to make their scams work. Over regulation only hurts honest business people and consumers. They need to get a life! Katerina

May 02, 2009 04:41 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Marc, I think we will all agree that there was and still might be a problem, but throwing every one under the bus is not the answer.  I believe the answer to the problem is more within identifying who is abusing the system and putting them out of business.  All this new code does, as many have stated, is make it tougher on those that were not the problem, and those that were and are the problem will continue to operate business as usual.

Katerine, I share many of your feelings about the political system.  Much of what they do is for appearance, and very little with substance.

May 02, 2009 07:56 AM
Gene & Kim Quinney
Northwest Equity Home Sales - Tacoma, WA

I wasn't "joking at all about starting your own managing company if you're an appraiser. I know one that has. Not sure how but nonetheless...

George, I've read through your blog post here and if you don't mind I have to point out that there was plenty of oversight throughout the industry. This whole notion about a lack of oversight is absurd. Many people sounded the alarm (including President Bush) about the Potential fallout of Fannie Mae and Freddie Mac but congress along with the pinheads in control of the two GSE's shot those warnings down. 

The last thing we need in my opinion is more government interference in the free market. What we need is for the feds to crack down on corruption and or fraud using our existing laws NOT make new ones. For the life of me I can not understand why some people (not directed to anyone specifically) think more laws will make crooks more honest. I can not remember the exact number but the feds have prosecuted and or charged thousands of bankers, mortgage reps, hedge fund managers etc in the past 10 or 20 years. No oversight? I don't think so...

 

May 12, 2009 01:12 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Gene, I agree with you that we don't need more laws and more agencies.  What we need is to utilize what we have, but someone always comes along with what they think is a better widget and thinks that is the answer.  But I do think that they could have done a better job with what we have.

May 12, 2009 02:17 PM
Karen Cooper
Karen Cooper | Sr Mortgage Loan Originator ! NMLS # 223305 | First Federal Bank of Florida, Ocala, FL - The Villages, FL
Helping Homeowners w/Home Loans in 27 US States

George - A lot of us are curious to see how the whole HVCC pans out. From one neighborhood to the next, there can be huge variances. How is an out of area appraiser going to know this, and how many out of area appraisers will Appraisal Management Companies send out?

May 14, 2009 12:13 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Karen, we have an Appraiser list, and even though I will not be able to pick the Appraiser that I would like to use in that area on Conventional Mortgages, the person in our office that will do the assigning will try to only assign to those Appraiser that we know are familiar to the area.  The thing I don't like is that neither I or the Appraiser can communicate with each other and there are many times that is necessary especially on Refi's.

May 14, 2009 01:22 PM
Jamie Pitts
Keller Williams Realty - Lanier Partners - Gainesville, GA

Thanks for the article, George.   It is a good argument against a bad extension of Fannie Mae's power over the mortgage process.  I can see both sides of this sitiuation.  I am an appraiser and I've lost a lot of business because of houses that wouldn't appraise for the refinance value needed, but I'm also an agent and I've seen sales die because of poorly done appraisals.

Just for clarification, the HVCC is not legislation.  It was written by the office of New York Attorney General Andrew M. Cuomo, and was adopted by Fannie Mae and Freddie Mac under threats of further investigations into their involvement in allowing fraudulent mortgages.  It was adopted by the Office of Federal Housing Enterprise Oversight (OFHEO), which was later folded into the Federal Housing Finance Agency (FHFA), but was NOT sponsored nor legislated nor voted on by Congress.  Although the intentions may have been good, the HVCC was not written by appraisers, and has at least a part that conflicts with USPAP, the Uniform Standards of Professional Appraisal Practice, which has the effect of law since it has been adopted by states in governing appraisal licenses.   

Attorney General Cuomo is the son of former New York Governor Mario Cuomo, a former secretary of Housing and Urban Development in the Clinton Cabinet, and frequent sometimes candidate for Governor or Senator for New York.  In my opinion, his political aspirations may have something to do with his pushing through a national mandate from a state office.  Appraisers have always argued for independence from coercion by unscrupulous parties in a mortgage, but HVCC goes too far in forbidding all communication, good and bad.  A good appraisal always takes into consideration all aspects and opinions of the value of a property.  We've lost some of our most valuable information with this poorly thought out and researched doctrine.

May 14, 2009 04:10 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Jamie, excellent comment and thank you for the clarification and history on this.  I agree with you conclusion, and I know that the Appraisers that I regularly sent business to are not happy about this either.

May 15, 2009 12:06 AM
Anonymous
jesse

Does the new May 1st appraisal change have any effect on FHA loans?  I am getting mixed answeres on this subject

Jun 14, 2009 12:11 PM
#90
Anonymous
Laura Fowler

FHA did not adopt the HVCC, but some lenders are asking for it across the board regardless. 

I also work with loan officers who are trying to push everything through as FHA, so they can use their own appriasers and re-assign the appraisal to a new lender, if need be. 

We are well into June now and I still see no benefit to this

Laura

Jun 15, 2009 12:29 AM
#91