HVCC Killing business and thrashing consumers

Real Estate Broker/Owner with Northstone Real Estate Inc. 1505

In recent weeks since implementation of HVCC (home value code of conduct) we have experienced more fallout of mortgage business than in the preeceeding 22 months.  All of the failed transactions are the result of late delivery of appraisals, low values that are not reflective of market values, refusal by appraisers to review or make adjustments based on available comparable data and lack of portability of appraisals.

Part of HVCC is the requirement that lenders use an AMC (Appraisal Management Company) to administer the appraisal process.  The AMC takes a cut of the appraisal fee theeby reducing the compensation of the appraiser.  Since the lenders are required to use the amc the appraiser has no choice in the matter. 


NAMB conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.


Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.


AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.


HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo's investigation.


No Portability! Consumers are "trapped" with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.



Lack of Portability



Lenders are not allowing borrowers to transfer appraisals, regardless of the reason.



Forces the borrower to pay for another appraisal and wait for a new appraiser to be assigned and complete it, increasing the total cost and time needed for obtaining a home. Delays in turnaround times also cause the borrower to miss rate lock deadlines and possibly face penalties charged by the lender.



In a poll conducted by NAMB, 75.8% of respondents said that 0% of their appraisals are portable since the enactment of the HVCC.


Lack of Quality



AMCs are assigning appraisers from a different municipality, county, or even state to appraise the target house, therefore unfamiliar with the neighborhood and unable to produce an accurate appraisal.




Because of this, the HVCC is forcing appraisers to be in direct violation of the Uniform Standards of Professional Appraisal Practice (USPAP) for jurisdictional competence.



Because AMCs pay appraisers such low fees, those assigned appraisers willing to do the work are often inexperienced and fail to adequately appraise the home.


Increased Cost of Appraisals



The minimum increase we have seen in direct consumer cost is $150 per appraisal. That, coupled with the drastically increased appraisal turnaround times that impose extended lock periods at an average expense of $561.95 per loan, is now costing consumers an estimated additional $711.95 per transaction.



$150.00 - minimum increase per appraisal
$561.95 - average loan amount of $224,778 at .25% for extended lock period
$711.95 - average total increase per transaction
x 3,870,552* - 2007 HMDA report of residential real estate loans originated
$2,755,639,496 - $2.8BILLION in increased fees to consumers!


Articles Illustrating the Effects of the HVCC



The Appraisal Bubble - The Center for Public Integrity



The Cure is Worse than the Disease - AppraisalPress



Appraisals Roil Real Estate Deals - The Wall Street Journal




Feel free to forward these articles and/or reference them in your conversations.


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Dan Tabit
Northstone Real Estate Inc. - Sammamish, WA

Brian, Change isn't always good, but its always different.  Often different that we expect or intend.  I write the HVCC off to the law of unintended consequences, because to consider that what we are experiencing would be otherwise would make me unhappy.


Oct 10, 2009 01:18 PM #1
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