Many of us in the business have been affected by the Home Valuation Code of Conduct (or HVCC) in one way or another. The primary way that we have lost business or had to endure some extreme complications is because of the use of Appraisal Management Companies (AMCs). But what most people don't realize is that the use of an AMC is not required for a loan to be HVCC compliant.
WHAT?! Am I saying that the Mortgage or Real Estate deal you lost because of an AMC did not need to die? ABSOLUTELY!
We have been hoodwinked and bamboozled into thinking that AMCs are a part of the HVCC. The code's biggest premise is that no one in the "loan production staff" can select or have contact with the appraiser. The term "loan production staff" is not defined in the HVCC, but it does consist of those who generate/originate loan volume or approve loans, or any of their subordinates. This would include but not limited to Loan Officers, Mortgage Brokers, Mortgage Processors, Underwriters, and/or their assistants. The only one who can order these would be a salary or hourly employed staff member, and value cannot be discussed.
The other big rule is that no lender can have more than 35% of their appraisals completed by 1 individual appraiser (not company) in a calender year. So you can have 3 appraisers that you know and trust do ALL your appraisals in a year and each will do less than 34% of all your loans. Of course, you will need to order them through the proper channels and make sure that you are HVCC compliant. But use an AMC and lose business? NO NEED!
Here is a link to a FannieMae HVCC FAQ sheet in pdf. I recommend you download this and flip through the document. Take notice of Q35:
https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvccfaqs.pdf
Why do lenders, especially the large lenders of the country, push for the use of AMCs?
One word, PROFITABILITY... Many of these lenders own a financial stake in the AMCs to whom they send all their appraisals. The actual appraiser who does the work many times gets a small slice of the pie, and the pie is bigger than it used to be because the middle needs to get paid too. This leads to poor work, less time dedicated to your file, no concern for the client, and no concern for losing future business from the lender because the business comes regardless of the quality of the work.
Even if the HVCC is abolished, do we really think that HUD and the Lenders are going to go back to the old way of doing things? Chances are they won't! HUD is already making this their policy for Reverse Mortgages, which is hurting more and more seniors looking for a way out of their individual financial crisis. The big lenders are making money anyway off the appraisals without taking any risk with these loans.
So is the issue with HVCC or the AMCs? And do you think that overturning the HVCC will change the rules we already have in place? I hope to read your thoughts on this.
I think that the new à la mode mortgage companies will be the small lenders. And in today's market you MUST be a lender to dictate any rules under FHA, or have your rules dictated by the lender you are using. These are lenders that comply with HVCC, but aren't bound to the AMC restrictions. This means that you Realtors can close more of your deals, Title Companies won't keep spending money on searches that never produce profits, and that Mortgage Brokers don't need to go to the unemployment line. The catch is trying to find the right company that can provide you with exactly what you need.
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