The Attorney General of New York (Andrew Cuomo) started quite an uproar with an investigation into the appraisal process and the mortgage industry. Fannie Mae & Freddie Mac quickly moved to appease him & subsequently agreed to huge changes to the way appraisals are handled.
The resulting settlement agreement, the Home Valuation Code of Conduct or HVCC makes the following changes:
- All appraisals must be ordered through a third party, called an Appraisal Management Company (AMC). A broker can no longer order an appraisal from a specific local appraiser that is an established professional, well versed in their local market....The order goes to an AMC & they choose the appraiser, usually an appraiser that is not nearly as qualified, but is willing to work for a reduced fee (The AMC keeps a good part of the appraisal fee).
- The mortgage broker/loan officer & realtor is banned from any communication with the appraiser. Until now many problems/potential pitfalls were able to be avoided by good communication with the appraisers...not anymore
These new changes will seriuosly hurt the mortgage industry. There will be no accountability for appraisers & the consumer will have no control in ensuring that a true valuation is done on a property.
Currently VA appraisals are ordered this way & I can say that the wort appraisal experiences I've had to date have been with VA appraisals. The appraiser knows that they will continue to receive orders directly from the third party system & feels no responsibility to convey a positive experience to all parties involved.
HVCC applies to all conventional, single-family loans originated on or after May 1, 2009. Thankfully this doesn't apply to FHA loans, currently the majority of loans originated today.
We'll see how this new way of doing business...There is a large movement working to get this repealed which I'm strongly supporting.
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