Appraisal Process Changing Now - - - Effective May 1, 2009

Mortgage and Lending with Larry Bettag - Cherry Creek Mortgage

This is a re-write of a blog that I did a in February...but D-day is here and it's important for the public to know how Fannie and Freddie are changing the way that appraisals are handled.

The Home Valuation Code of Conduct (HVCC) beginning May 1, 2009 on all conventional loans.  Complying with the HVCC is going to be challenging for all parties involved because a vital component of the communication between borrower, realtor, and appraiser has been removed.  Filling that communication gap will certainly prove to be the largest obstacle that we'll need to bridge in this whole process.  As far as appraisers go, it is our desire to continue to use appraisers who've done quality work for us in the past without burdening their compensation through the use of an appraisal management firm

Andrew Coumo threatened action against Fannie Mae and Freddie Mac making claims that Fannie Mae and Freddie Mac failed in providing proper oversight with appraisals.  It's argued that Fannie Mae dropped the ball as there was not a proper degree of separation when ordering appraisals.  Needless to say, a new rule is being implemented to change the way that appraisals are ordered. 

TIMEOUT COMMENTARY:  Coumo has decided to punish 98% of the consumers because 2% of the consumers were really hurt by bad appraisals, straw borrowers and the lot.  Don't get me wrong, the mortgage industry didn't act harshly enough or quickly enough when fraud was perpetrated.  However, 98% of the consumers will be hurt by this new Fannie Mae rule.  Why?????  More to come...see below.

THE ACTION?  What is the result?  The result is that no one, and I mean NO ONE in production will be allowed to order an appraisal, influence anything on an appraisal, or even at the minimum talk to an appraiser regarding any file that has been originated by anyone in production. 

TIMEOUT COMMENTARY, PART II:  Here's what really kills the consumer.  A client contacts me and says I'm thinking about refinancing.  I think my house is worth about $300,000.  I have a mortgage of $240,000 and I'd like to take out another $20,000 to pay down some bills.  "Larry, do you think that this is possible?"  Normally, I'd call whatever appraisal company and say, Hey Kevin, the property at 123 south main street is considering refinancing.  The client believes that his property is about $300,000 in value.  Do you think the client is right on or is he smoking crack?"  You'll notice that I'm not influencing the appraiser, but rather, INQUIRING. 

Andrew Coumo believe that it is an undue influence....and apparently Fannie agree.  He thinks that the conversation should go a little more along these lines:

"Larry, I'm thinking about refinancing, blah, blah, blah (same story as above).  I NOW SAY...listen, I'm clueless, Fannie Mae has changed it's guidelines.  It'll cost you $350 for you to find out what your house is worth....I know it sucks, but it hey, that's your government at work for you....YOU IN????"

Now, of course, I'll use my good looks, charm and tact to make it less of a bombshell response than that, but hey, that's the way it'll be after May 1, 2009.  Now it's now like ex-Illinois Governor Rod now have to pay to play.  No free peaks.  I wasn't influencing...I wanted good facts to take back to the client.  Rat bastards!  Sorry, but it really rags my goo. But alas....I digress again.

The new rule??????  Someone independent of production needs to order the appraisal.  So what does that mean exactly?  I can hire a national appraisal firm to go ahead and be in charge of ordering the appraisal.  Here's the problem with this one.  They have appraisers on staff of whom we've blacklisted because of unethical practices. got it.  You fire Larry Bettag from ordering an appraisal from an appraiser with integrity in order to ensure that some jamoke from some national company picks an appraiser in my backyard that may or may not be ethical (I'm sure that some of the appraisers are kissing butt so that a lot of the business goes directly to them).  Yeah...that's real fair.  Or what about the dude who has had 3 fines and 2 suspensions in the last 3 years and who really sucks at appraising, but is on this national appraisal list.  Hello???????????  What about the appraiser who schmoozes the national appraisal ordering entity so that he is ensured a minimum amount of referalls.  A couple of beers = a couple of referrals. 

Another option??????  Our company hires one or two people to work out of the corporate office who's sole duty will be to be the only interface between the appraiser and the mortgage company.  Now that I've received the appraisal, I see that they forgot the comp on 246 North Main Street.  Can I call the appraisal company to discuss this??????  Abso-frigging-lutely not!!!!  Not one bit.  Plus, now the cost of doing a loan is higher for the consumer as the mortgage company now budgets extra staff for appraisal ordering.  Yeah's great for the consumer.

I'm sorry Mr. Consumer, but because our industry did a bad job policing itself, 98% of the consumers will now be hosed.  What's the rule on creating rules??????  Rules are made for those who don't want to follow rules or get along and do the right thing.  Thanks Mr. Jerk fraud loan need to be in prison for fraud, but now I can't serve my clients as well because of the jerk moves that you've done.  Soooooooooo stupid.

But wait...they forgot the other comp that a realtor wanted me to provide.  Sorry Mrs. Realtor, no can do.  I can't communicate with the appraiser, nor can you.  Pretty rough huh?

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Brian Schulman
Coldwell Banker Residential Brokerage, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552

Larry, this just one more example of activist government and the law of unintended consequences.

May 04, 2009 01:34 AM #1
Heather the Realtor Orlando, Lake Mary
LemonTree Realty - Orlando, FL
First Time Home Buyers, Bank Owned Homes

I agree not looking forward to this at all. The few bad apples made it bad for everyone. I used to have my lender call up and order rush appraisals and her girl would go out on weekends so we can could deals together not anymore.

May 04, 2009 01:35 AM #2
Stephen Kappre
KW Hometown - Mantua, NJ
Helping You Home

I agree with the refinance scenario you proposed. I have access to the MLS so I can "cheat" and get an idea looking at comps. Maybe you can leverage a realtor relationship you have to do the same. In the past I called my favorite appraiser to get his input. Now I'm a little scared to! :)

May 04, 2009 02:07 AM #3
Matt Listro
National Credit Fixers - Matt Listro - Vernon, CT
Your Credit Repair Expert

Hi Larry: Here is one example of how this change is adversely affecting the consumer.  In my area, appraisals are 300-375.  One of my mortgage broker friends tells me that they had to order their first appraisal from a specific AMC (Appraisal management Company) per their Lender.  The cost for that appraisal --> you guessed it - $450.  So much for trying to promote competition and save the consumer money.


May 05, 2009 01:55 AM #4
Benjamin Smith
Apex Appraisals & Consulting - Powder Springs, GA
Atlanta Area Appraiser

Matt, meanwhile the appraisal management company has found the cheapest appraisers in the town (actually, probably from three towns over) and pushed them down to about $200 so they can pocket $250 for themselves. Let that one sit in your head for a minute while you start to consider the quality of some of these appraisals you will be getting.

Larry, Don't avoid that appraiser you prefer to use, they may become your best amunition. See what they would charge for a desktop appraisal. It may be easier to get your clients to pay $50-100 for a desktop appraisal to "test the waters", especially in areas where AVMs are unreliable. It will also provide you with recent comps to use for a value reconsideration later on. Most lenders and appraisal management companies do have a process for reconsideration of value already in place, although not as simple as picking up the phone and asking for a higher value. You will have to provide comparable sales that are either more similar or more recent than the ones used in the appraisal and submit them through the proper channels.

May 06, 2009 10:40 AM #5
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