Home Sellers - Meet Your New Stumbling Block HVCC

In an effort not to beat a dead horse this will be short, sweet (?) and to the point.

The head of the FHFA, James B. Lockhart, also the former Director of OFHEO, initiated the Home Valuation Code of Conduct to (paraphrased) "help curtail fraud between loan officers and appraisers".

How will it hurt the home owner/buyer? Two immediate impacts:

1. It currently costs about $350 for a Fannie Mae appraisal including the new MC1004 form which is a new $50 requirement. (Costs are estimates and I am not an appraiser but these are the average prices in the Atlanta area - check with your own appraiser) but Appraisal Management Companies (AMCs) charge as much as $450 or more for the same service and pay the appraiser as little as $175 - so let me ask you this, Mr. Lockhardt, would you do your same job for 1/2 the amount you have been being paid under duress and do it well?

2. Process time. Even though the AMCs may tell you there will be no delays our experience demonstrates appraisal turn times go from about 3 days to as much as 2 weeks. Why should anyone hurry if they are working for half price (the appraisers), getting paid for work they are not providing (the AMCs) and nobody has to answer directly to the borrower?

You see right now the frustrated borrowers and real estate agents have one point of contact - the loan officer - who has absolutely no control over the situation. Underwriting times are already backed up for as much as 30 days after the package has been received. Add 2 weeks of waiting for an appraisal and you're looking at as much as 6 weeks for a closing.

Another kick in the teeth to customers is the loss of free "pencil searches". For many years we (loan officers) have been able to order pencil searches on prospective properties or refinances. There has never been a cost to the borrower and we have used this to save home owners and buyers from ordering an appraisal on a deal that was in no way going to work. Forget about that - now they'll just have to wait until the appraisal comes back. So at $450 and two weeks waiting that neat little financing addendum the Georgia Association of Realtors added to their contract last year just became a joke.

If I were a buyer, agent, seller, home owner, appraiser or loan officer I would be livid about what this ridiculous requirement is doing to the American home buyer/owner/seller. Forget your commission - this is bad for your clients.

Senator contact lookup http://www.opencongress.org/person/senators

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Contact your Representative and Senator TODAY:

I am writing to you to register my opposition to the Home Valuation Code of Conduct which is mandatory on May 1, 2009 for all Fannie Mae and Freddie Mac Loans. Further I implore you to demand the reversal of this regulation. I oppose this regulation by the Federal Housing Finance Agency on the basis of the facts that:

1. Appraisal costs will immediately increase as much as 35% (from $350 to $450)
   
2. Appraisal turn times will increase as much as 400% (from 3 days to 12 days) increasing the time to close a simple, straight forward FNMA or FHLMC home purchase loan to as much as 45 days or longer.
   
3. Loss of service communication such as "Pencil Searches" or free pre-evaluation cost estimates will be lost
4. The appraisers will be paid approximately 50% of their current fee to do exactly the same work (they will be paid $175 by the Appraisal Management Companies for the same appraisal services for which they are now receiving $350)
5. The playing field is not leveled - either force every loan officer to use the same HVCC methods including those who are employed by Federally Chartered banks and lenders or eliminate the regulation

My professional experience in the real estate industry permits me to fully comprehend the impact and the opportunity for abuse of this new FHFA ruling. Please demand the reversal of this decision and an investigation into how this rule has been implemented without your approval. The only entity set to benefit from this change is the Appraisal Management Company industry. Home owners, home buyers and home sellers will be the losers as will the nation through a further slowing of the economy as driven by home sales, new home sales and home refinances.

Sincerely,