It's been over 100 days since the HVCC law came into effect, and I'm throwing in the towel on this one.  What a disaster.  The HVCC law "protects" borrowers and lenders by preventing mortgage pros from speaking directly with appraisers, and thus not allowing them to "influence" the values.  The practical consequences of this law has caused lenders to feel less confident in the appraisal, than ever before.

In practice, this HVCC law has helped create a third party appraisal referral industry.  This industry is collecting as much as 40% of the appraisal fee.  Because so little remains for the appraiser, many of the experienced appraisal professionals cannot stay in the industry.  What remains are inexperienced and green appraisers who do what they can to arrive at a value, and travel as far and wide as possible to stay busy enough to survive.  Lenders are now forced to charge borrowers additional fees for appraisal reviews that can undercut values, and kill the loans from moving forward.  Many lenders are even requesting second appraisals, at the borrowers expense, to feel confident about the reported values.

In the end, borrowers are stuck paying more for the appraisal, and many lose out on purchasing a home because of the inaccuracy of appraisal work being seen.  There has also been a tremendous amount of "poor assigning" done by these third party agencies, where they have assigned appraisers, who are not local to the area, assessing values where they are completely unfamiliar with the geography.  These third party agencies have no real competition, and can bank on other peoples work, so what do they care?

I had to face just this type of scenario with a recent client, where an appraiser from 110 miles away was assigned to an appraisal of residential property.  His value was off by about $10,000 from where the market was, and after 2 appraisals, and 6 weeks of going back and forth, the proper assessment was accepted.  The purchase escrow did close successfully, but the real estate office was upset with me because I could not guarantee the appraisal would come in at value, and felt like it took way too long to close.  My response is simple and true, don't blame the mortgage professional, blame Washington.

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