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HVCC has been in effect one month now......how has it affected your business?

Well we made it through the first month of the new HVCC regulations! I have used some of my time to speak at Real Estate Sales Meetings about this new regulation and how the Agents can be proactive in this situation. Please see the handout below that I gave to each Agent. The meetings were very well received and they were glad they had the inside scoop on the HVCC.

In the last month I have had many homeowners calling or emailing me and asking whey their appraisals are coming in so low or why the appraisers are using all foreclosures for the comps, which I posted on Active Rain about earlier.

There were a few mortgage brokers calling me for "comp" checks prior to ordering the appraisal and of course I told them they need to get with the new HVCC regulations, plus it is against USPAP to provide a value in order to get an appraisal assignment!

FHA has not yet adopted the HVCC regulations but I think it is just a matter of time. They may be waiting to see how it is going for the conventional loans.

We have seen an increase in appraisal management orders and I really resent the fees they pay! I have asked them to raise my fees (still below my normal fees) and guess what....the orders stopped! There are a few companies out there that do pay decent fees and still make money by billing the lenders $25.00 to $50.00 over what the appraiser bills them.

The companies that are paying a paultry $150.00 to $250.00 for an appraisal with the new 1004MC form are getting what they are paying for in my opinion!

I talked to 2 appraisal management companies this week. The first said they select appraisers based upon proximity to the subject property and years of experience as an appraiser. Fees were not even a real consideration in the process.

The 2nd company who pays about 50% of the appraisers fees told me that they select appraisers based upon Turn around time (how fast they can get the job done) the proximity of the subject property to the appraiser's office and their fees. The lower their fees, the more work you will get! This is really scary to me! What kind of product are you going to get if you rush through it and get paid 1/2 your normal fee? I will let you answer that question.

We discussed the $30.00 extra fee they were paying for the completion of the 1004MC form and they told me that they talked to many appraisers and they said they were getting used to the new form and it is taking less than 30 extra minutes to complete an appraisal report.

Well I told them that they are paying for FORM fillers in this case. These forms are loaded with information and you need to really analyze these numbers carefully. You also need to now how to select the numbers that go on these forms. Junk in, Junk out as they say.

These numbers can be very misleading if you do not provide additional information addressing these numbers. Each neighborhood is different where we are and you cannot just pop the numbers on this form and be done with it....But the AMC's do not care about quality analysis. They do not even have a selection process based upon quality reporting! So you can make a bunch of errors (and trust me I have seen some of these reports in my review process) but as long as you have a fast turn time and low fees...you keep getting the orders!

There are more and more appraisals being ordered via Appraisal Management Companies (AMC's). These companies are getting rich and the appraisal reports, well lets just say they may be less than accurate.

Below is what I provided to the agents at my meetings to help them in this HVCC maize. I hope it is helpful for you and feel free to print this off for your next Sales Meeting.

HVCC - Be Prepared

•1. Leave package for Appraisers in Home - Comps, including interior information about homes that appraiser may not know about. Leave it at the house clearly marked since most homes are on lock box and you may never know when the appraiser will show up to the home. If the appraiser does call you DO NOT discuss values, just tell them you have left a package for them in the home that you would like for them to review.

•2. Special Stipulations for Lake, Mountain, River Property, etc: Focus on "Competency". The lender is NOW responsible for accurate appraisals, so they need to select an experienced, competent appraiser for these special properties. This stip. protects buyers and sellers. If you want to include 3 names of appraisers that you know have this experience include their name, company name and phone number. This will ensure that you are NOT trying to steer the lender other than to make sure they are using a competent appraiser for the property in question.

•3. Allow more time for Financing Contingency: Since appraisals are ordered by a third party and not the broker there may be a delay in getting the appraisal. Brokers can request rush deals from the AMC or Banks, but no guarantees.

•4. Be Prepared for Low Appraisals: Get the lenders procedure for rebutting low appraisals, but make sure that you have strong comp datato make your case. Comps cannot be older than 3 months ideally. You can provide pendings and listings but make sure they are not brand new or have been on the market for over 6 months. If the listing is brand new, the home has not been tested long enough on the market, too old and it become apparent that listing is overpriced and not very reliable as a comparable.

•5. Be careful with buyers shopping lenders: In most cases buyer will have to pay for a new appraisal, the first one will not be allowed to be used by the new lender.

•6. If in doubt about the home's value get an appraisal first: We can do a desk top, drive-by or full interior appraisal report so that your sellers have a good idea where they should price their home. Sellers need to know that things have changed and surprises will occur if they do not price their home to SELL. Otherwise I suggest you walk from that listing as it will not be worth your valuable time and efforts. Use appraisers to help you drive this point home to your sellers.

•7. The new law DOES ALLOW for Buyers, Sellers and Realtors to call appraisers directly to order appraisals when LOANS are not involved. So pre-listing, pre-purchase, estate, divorce, tax appraisals, etc., can be ordered directly from the appraiser.

Mary Thompson

www.marytappraisals.com

Posted by Mary Thompson Lake Lanier Appraiser in Georgia on 05/30/2009 09:43 AM

Comments (14)

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14 Comments on HVCC has been in effect one month now......how has it affected your business?

MAY

Nice post and thank you for the information. As a mountain realtor the only time I have had appraisal problems is wwhen an appraiser non mountain does the job

HVCC enforcement has slowed down refinances considerably in our area. Appraisers seem to be ultra conservative to make the banks happy. Lenders are terrified they won't be originating loans with secondary marketing standards, and each lender has their own twist on the procedure to comply with investor requirements. I have read blog articles (other sites) on the reason this policy went into place and it's too bad the offenders have created a lending enviornment that is now being managed by fear. The lenders and appraisers should communicate better industry wide. Appraisers hide behind USPAP, the lender underwriters are always complaining that "appraisers don't understand risk." Why can't the two get on the same page?

You asked how has it affected my business. I now have to put in a longer time for the financing commitment because it's taking so long for appraisals to get done.

The last one had an appraiser from 70 miles away. He had to come back twice and the appraisal management company paid him $75 each time. I can't imagine a round trip of 140 miles for a $75 fee.

#1 is an old tool we used years ago and just talked about on Thursday about starting again, as this month has been a disaster after disaster......from appraisals coming back after 22 days from ordering to an appraisal which appraised the home with a sale price at the loan amount instead of the sales amount. We are still waiting on that one to be revised. We got the appraisal back 10 days ago and still no answer on the revision. Pretty darn scary times........... Ya gotta love government intervention........

MAY

Hello All, great comment, sure wish more Realtors would chime in as you are proving my point and I want to get this situation noticed.

Julie: I have to address your USPAP comment. We do not hide behind it, we must ABIDE by it or we lose our license, plain and simple. Just as Realtors have their code of conduct, rules and regulations they must abide by, we must do the same.

As for lenders/underwriters complaining about appraisers not understanding risk, well it is the underwriters sole reason for being to understand that risk and underwrite loans accordingly. It is the appraisers job to property and accurately value property so that underwriters can make sound lending decisions. We do not concern ourselves with understanding risks, we concern ourself with not misleading the lender. If the appraisers do not do their job or do it in such as way as to mislead or misinform the lender then they are in violation of USPAP and their license should be suspended first and if it continues it should be revoked.

The problem is that each lender as you stated has their own set of rules and guidelines in addition to what USPAP requires of us. As an appraiser it gets very frustrating when the underwriters try to follow the book on procedures without regard to real world situations.

Many times we get requests for comps that does not exist, ie: 3 more comps that are all within 1 mile of the subject, that all have the same bed and bathroom count, that all are within very close proximity in square footage etc.

My comment back to them every time is....If these comps existed....I would have provided them...WHY NOT? There is no reason not to do our jobs, we have no vested interest in the prooperties so why not value them properly? Now that there is no lender pressure (the one good thing that came out of HVCC) there is absolutely no reason for appraisers not to do their job appropriately.....UNLESS....

As Richard and Tim noted, those appraisers that are working for 1/2 their fees for appraisal management companies, the quality and time frames are negatively affected it is proven over and over again. But the AMC's don't get it they just want to make money!

Yes the few bad apples have made it very difficult for all concerned.

Keep me posted on how this is affecting you and I will make noise about it!

Thanks!

Mary

www.marytappraisals.com

Hey Mary,

I have picked up a few AMCs and starting to realize that all the horror stories from what I have heard about them are actually true and some are nearly impossible to work with. I have found a few that will pay my fee when I ask for it, but it seems like such a hassle to request a higher fee on every single appraisal.

There are a few things in legislation now that may change some of this but I won't count my chickens before they hatch. It seems the most common themes are registering and regulating the AMCs and separating the appraiser's fee from the AMC's fee on the HUD1. This is not what the AMCs want, especially when many of them have rules that prohibit us from disclosing to the customer the agreed fee split, so the customer isn't even aware that half of their money is going into the pocket of a middleman only responsible for ordering the appraisal.

For the most part, I have changed my marketing focus to lenders that use in house ordering or order through appraisalport, and every chance I get, I recommend this to lenders as an alternative to using AMCs. I have also been offering desktop appraisals much more for brokers that want to "test the waters" before moving forward and dealing with the AMCs. And as I get approved with more lenders that use appraisalport, I am offering this list of lenders to realtors, so they can forward it to buyers. For those unfamiliar with this portal system, the best part is that while ordering is still blind, the lender is still in control of the appraisal roster and can remove the appraiser from the roster when issues of quality occur. And since fees are negotiated between the appraiser and the lender via this portal system, they attract competent and quality driven appraisers that will not work with AMCs.

Mary, When an underwriter asks for more suitable comps that are all within 1 mile of the subject, etc..., what they really are saying is "tell me why are there no like property sales within one mile of the subject with the same bed and bathroom count, square footage (and so on ). I have been sitting on the secondary marketing desk for 25 years watching underwriters turn down files or ask for more information when the use of comparables could have been justified in the narrative section of the report. And then I hear the appraiser gets mad because they are asked for more information. Sometimes the file will get approved anyway based on other compensating factors if the neighborhood activity does not exhibit strong suport of value - as long as the underwriter feels the appraiser sufficiently supported their conclusion of market value. The underwriter just wants you to say why you did not use those other comps that were closer. In our office, my underwriter has acess to MLS records and she can see the comps that were not used. It's better to over explain comp choices. If we can't sell the loan we own it, and our investors are even pickier than we are. What ever the appraisal report says, the lender must also use a AVM to "rate" the value before the loan is sold to fannie or freddie. The AVM gives a confidence score that goes in the prospectus for mortgage backed securities. There is more information than ever in loan level MBS data, and the government is looking for trends leading to fraud. No wonder everyone is on best behavior. If you double the amount of information in your narrative you will reduce lender requests for additional information. The underwriters don't read USPAP rules and have not done your job. You must educate the lender about the property and neighborhood in this market.

Julie

JUN

Julie

I thank you for the information, all good. But I want to tell you that I am one of the VERBOSE appraisers out there. I add quite a bit of extra explanations when the "guidelines" are exceeded with regard to comps, etc. I have never heard the reason for the extra comps as you have explained it from underwriters/lenders. They just ask for more comps period.

But here is my problem...I can't tell you how many times I have to tell them to READ my comments, because they ask me to explain certain things and I say, I DID in my narrative. The reply I get back, can you just re explain it in an addendum to the underwriter! This is frustrating to say the least when I already explained it very clearly in the report.

Some appraisal management companies want the extra addendums out of the report, too much paper or pages and their automated delivery systems do not recognise these extra pages. So we have to squeeze what we can on page # 2 or 3 of the report.

You are right, the underwriters do not read USPAP and they do not understand sometimes that their requests may violate USPAP, when they want us to squeeze in comps just because they are closer to the subject, yet the comps are NOT comparable.

I have had some say just put them in the report and give them less weight as the lender wants closer comps! That is just scary to me. I refuse to do this. If they pressure me to add more comps just to get them closer to the subject, I state in the report that this was a request of the Lender and these comps would not be selected by the appraiser as they are NOT comparable. YOu may ask why would I succumb to this pressure, because they tell me my report will not be paid for if I do not comply to additional requests! Hopefully HCVV will take care of this issue!

So underwriters first need to read the entire report and I do agree appraisers must make sure to explain themselves, no question some do not explain themselves at all..Then maybe we will come to an understanding!

Thanks again for your perspective and input here Julie!

Hey Benjamin

Great information. I use Appraisal Port and love it, but I really like your idea about giving people that list of lenders to use on that list.

Also do you use Wintotal Alamode software? www.alamode.com They have their Mercury Network to do the same thing as appraisal port, so appraisers, buyers, sellers, Realtors, lenders go to this website, you can pick your appraisers in a fee panel and you can even pick just one appraiser as your appraiser fee panel and the orders will go to those you select and the appraisers fees are not slashed.

Great news about the pending legislation, I sure hope they pass. When people see how much the
AMC's gouge lenders and slash appraiser fees there will be an outrage. We need to keep bringing this to the forefront so that something is done about this injustice!

Thanks again for you input!

Mary

Mary - re: your comment two above this...I can't tell you how many times I copy and paste comments that were already in my report when asked for explanation. AND THEN I get a call asking where I added the additional information. Ummmm... on the addendum page (which I had already directed them to in the first place). Sometimes, I don't think they read any of the addendum statements whatsoever.

JUN

Sara

I knew I was not the only one that goes thru this very aggravating situation. Thanks for chiming in Sara!

Mary

JUN

I don't know how an appraiser can complete a 1004MC in less than 30 minutes unless they are making it up as they go along.

I just did one on a cooperative unit is Oakland Gardens, NY which took me about an hour and a half (in a market I'm very familiar with). For those who don't know what I'm talking about, to complete a form 1004MC for a cooperative appraisal you have to research closed sales and listings of comparable units for three time periods (most recent quarter, prior quarter, and a six month period prior to that quarter) for both the subject developement AND as the subject market, plus analyze absorption rates, housing supply, days on market, foreclosure data, etc. and draw conclusions about that data.

Jesse: I hear you big time. One AMC pays a whopping 30.00 extra for this form. They say appraisers tell them it takes about 30 Minutes to complete. Well they are filling in a form and NOT analyzing the numbers!! What good is the form if you Do not analyze the facts! More misleaing reports for lenders to rely on. I feel for Banks and consumers.

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