HVCC~

Friday, May 1st, 2009 began the implementation of new rules and guidelines in regards to appraisals.  The new rule is called the Home Valuation Code of Conduct.  In the past, when I wanted to order an appraisal, I would call my appraiser, and set up an order for them to go out and do the appraisal.  I would give them an idea of value (for refinances) and the purchase price (for a purchase).  These new rules sever the relationship between the appraisal, and the loan officer/mortgage broker.  With all conventional, conforming loans, appraisals are now to be ordered through the lenders.  At the time of the order, borrowers need to pay for the appraisal.  The order goes to one of the appraisers in the 'Appraisal Management Company,' and the appraiser sets up an appointment with the borrower/realtor.  I have no contact with the appraiser until the appraisal comes back.  Here is some more information on it:

The HVCC requirements have established a uniform set of appraisal guidelines to govern all loans sold to Fannie Mae and Freddie Mac (i.e., all conventional loans).  The Code does not apply to FHA, VA, or USDA loans.

• All appraisals will be ordered by the Lender via their approved Appraisal Management Companies (AMC's) and will be prepared in the name of the Lender

• Borrowers are required to provide credit card information during the application process and appraisal fee will be charged to the Borrower
• Brokers and Loan Officers are NOT permitted to pay for the appraisal
• Brokers and Loan Officers are NOT permitted to have any contact with the appraisers (all communications are facilitated through the Lender or AMC)

What does this mean to you?

1. Paying for appraisals up front
2. If an appraisal is ordered for one lender, and the loan has to go to a different lender, more than likely a new appraisal will have to be ordered from the new lender (more $$$$)
3. Appraisers are going to be working very hard to meet the management companies time lines, and appraisals may be rushed through an appraisal.

I have lots of opinions on this bill.  The intention was good.  There was a lot of bad influence that brokers/loan officers put on their appraisers to increase values.  But, in reality, the majority of appraisals were done in a very legitimate way, and were good appraisals.  No one really knows how this is going to affect things.  Appraisers are probably going to be making less money (an added third party), and work harder.  This could really hurt values as well.  Some of the management companies are even owned by the banks that are ordering them.  There are rumors of appraisers being pressured to be more conservative.  Also, because this new system is really untried, there will probably be delays, and many issues.  Some of the lenders already doing the HVCC are having issues with hooking up orders with appraisals, and so far, it appears that communication is very difficult. 

I pick my appraisers based on good appraisals, that take into account many different resources, and take their time doing a great appraisal.  I fear that my clients may not receive good appraisals, and will make things much more difficult for them.

My opinion is that this is going to hurt the mortgage world, make things more expensive, and make it more difficult in these trying times.  I have a pretty good feeling that this will not be around too long, or at least in its current form.  If anyone has any questions, please let me know.  We are all trying to learn each lenders' system, and there will be some pains along the way.