Predatory lending is now even easier and banks are taking full advantage!

Real Estate Broker/Owner with Respect Realty LLC 200311024


Banks in your back pocket

On May 1, 2009, the government put in to place the HVCC appraisal law which stands for HomeValuation Code of Conduct, which was supposed to help to keep agents and mortgage brokers from being able to talk to appraisers and keep them from swaying the value they put on a home.

But, within that law, there were some things put in by (I’m guessing) some very smart bankers. Now I believe they are being very predatory, almost even more than they were two years ago.

No ,I don’t own a tin foil hat, but they are starting to look comfortable. You see, one of the lines in the new HVCC law was that once the appraisal is ordered it can’t be transferred to a new lender and another appraisal would have to be ordered.

What good does this do forthe consumer? It keeps their mortgage broker from shopping for a better loan with a lower rate. Because even if they found a better loan, that mortgage broker and buyer would have to start the whole process over again and pay for another appraisal and ask for an extension that the seller, more than likely, won’t accept.

So, now that the buyer is stuck with a loan that isn’t the best loan for them and there is nothing they can do. They sit and wait for their close with the irinterest rate lock date slowly getting closer and closer.

I’ve looked at my company’s books over the past month and a half and what I discovered was of the loans that were required to use HVCC approved appraisers only one of them closed on time. All the others closed anywhere from 22-47 days later than their scheduled closed date.

Now, here is where the fun begins…

In talking to every one of the agents in those deals, every one of those buyers lost their interest rate locks during those 22-47 days and now were stuck paying anywhere from 3/8 to acomplete percentage higher than they would have if they had closed on time. That, to me, is the meaning of predatory lending. The worst part is they could have possibly saved even more if their mortgage broker could have found a better loan during the time of inspection and close. But because of the HVCC law, they were unable to do that without adding additional cost and time to the close.

So, is your bank taking advantage of your clients by using the HVCC law and other underwriting delays to make buyers lose their lock?



Re-Blogged 7 times:

Re-Blogged By Re-Blogged At
  1. Sol Skolnick 06/25/2009 02:41 AM
  2. Steve Moore 06/25/2009 02:43 AM
  3. Doug Jones 06/25/2009 03:49 AM
  4. Gabe Sanders 06/25/2009 04:06 AM
  5. Jason Burkholder 06/25/2009 04:28 AM
  6. Bo Kociuba & Buster Elliott 06/26/2009 01:41 AM
  7. Andy Rogers 06/26/2009 10:40 AM
  8. Dee Gilbert 06/26/2009 04:54 PM
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Dan Hartman
Province Mortgage Associates - NMLS #2861 - Providence, RI

I couldn't agree more with what is being said here. Isn't consumer protection amazing when it costs consumers more?


Jun 25, 2009 05:18 AM #43
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Just like I posted yesterday, if it smells like Limburger it's probably your bank!  Very good investigative work there Todd and thanks for that info.  I am also having problems with appraisals and the turn around time is just not correct.  Not to mention the last 2 appraisals cost $400 a pop.  Cha-ching.  That's full boat for an appraiser.  Make the buyer pay another $400 as an example and it might make them think about not walking.  It's larceny.

Jun 25, 2009 05:33 AM #44
Edward Bachman
Your Kingwood TX Realtor

Not only are the buyers being predisposed to failure, the fallout too often makes the Realtor look like the culprit.  It has caused a lot of pain and mistrust in our profession at a time that people are already looking at us carefully.

Jun 25, 2009 05:38 AM #45
Wayne L. Brown
Franklin Advantage Inc. - Alpine, CA


If you want to cure this problem as our writer has identified a major issue here in our industry, please read the following email that I got from the San Diego Chapter of the National Mortgage Brokers Association AND follow thier suggestions.  If everyone spreads the word and does as it says, it will get some notice.  Hats off to the writer!

New contact information for Fannie Mae

To:      All Mortgage Brokers, Real Estate Agents, Appraisers, Lenders, Home Builders, Title Agents, and Consumers
From:  Marc Savitt, CRMS, President- National Association of Mortgage Brokers
After more than a year of exhaustive negotiations with Fannie Mae, Freddie Mac, James Lockhart, Director of FHFA (GSE Regulator), and NY Attorney General Andrew Cuomo, NAMB believes the time has come for your individual voice to be heard.
In order for this "Call to Action" to be effective, we ask that you fully participate, encourage others to join the action and continue calling and emailing everyday, until advised to stop by NAMB. This will NOT be a one day action!
We have received hundreds of e-mails through the e-mail address outlining specific cases where the HVCC has created delays and additional costs to consumers. NAMB has categorized and compiled a report of the examples received, which was sent to FHFA Director James Lockhart. Please use your own examples in your conversations with legislators, regulators, or their staff. Also, please visit the NAMB HVCC Resource Center for additional information and documents on the HVCC.
Who will you be contacting?
NY Attorney General Andrew Cuomo's Office: (212) 416-8000, Internet Complaint
Federal Housing Finance Agency (FHFA): (866) 796-5595,
Fannie Mae: (800) 732-6643  Internet Complaint (new HVCC-specific form)
Freddie Mac: (703) 903-2000, Internet Complaint
Senators, Representatives and Governors: Click here for contact information.
Also, please contact your local TV and Newspaper outlets.
Below are talking points and background information to assist in your conversations. Please remember we are all professionals and should conduct ourselves accordingly in any communication with the above parties. For the most successful and influential calls, it is important to concisely quantify how the HVCC is affecting your consumer and your business.


Talking Points:
1)         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.
2)         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.
3)         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.
4)         HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo's investigation.
5)         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.
I.     Lack of Portability
A.  Lenders are not allowing borrowers to transfer appraisals, regardless of the reason.
B.   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.
C.   In a poll conducted by NAMB, 75.8% of respondents said that 0% of their appraisals are portable since the enactment of the HVCC.
II.    Lack of Quality
A.  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.
i.    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.
B.   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.
III.   Increased Cost of Appraisals
A.  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.
B.   $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!
IV.   Articles Illustrating the Effects of the HVCC
A.  The Appraisal Bubble - The Center for Public Integrity
B.   The Cure is Worse than the Disease - Appraisal Press
C.   Appraisals Roil Real Estate Deals - The Wall Street Journal
i.    Feel free to forward these articles and/or reference them in your conversations.


Contact SDNC

phone.  858-523-9990 X 203

Jun 25, 2009 05:41 AM #46
Michael Loeb
TGC Financial - Port St Lucie, FL


I've been wearing my tinfoil hat for a while now.  Welcome to the club my friend.

This is just one stepping stone to doing away with mortgage brokers altogether.  Independent brokers have seen their sources dry up as lenders have run from offering broker channels like their heads were on fire.  They offered the products, we sold the products, but WE were the problem.   That's like blaming car dealers for selling new cars that were later found to have design and production defects...

Without commission paid brokers your loans and closings will be in the hands of hourly paid LO's and processors that get paid no matter if you close or if you don't.  Who has more incentive to get the clients to the closing table and on time?  Who will care if your lock expires?  

The mtg broker should be atop the endangered species list.




Jun 25, 2009 06:04 AM #47
Kerry Jenkins
Prime Properties - Crestline, CA

Was Cuomo in the back pocket of banks when he forced this upon us?  This is just a backdoor way of getting banks further entrenched into our industry...Not good, and yes this law is evil and hurts consumers all around.

Jun 25, 2009 06:21 AM #48
Loree Nichols
Charles Rutenberg Realty, Inc - Tampa, FL

I don't think the appraisers should get a copy of the contract then either :-)

Jun 25, 2009 06:46 AM #49
Mark Warner
RealEspace - Plano, TX

Great post, Todd, and one sure to generate a lot of response.  As someone in the lending industry for over 30 years, what I see is the federal government getting in the way of the free market economy-an economy which in the past has made the appropriate adjustments to balance inequities in the market.

Instead of becoming a help in curbing fraud and abusive appraisal practices, it becomes a hindrance to consumers by increasing the costs of doing business.  And it's a cost that, unfortunately, will likely be passed through to that consumer.

It is not increased regulation that will solve this problem, but greater transparency throughout the mortgage loan process.   Allowing consumers to see all of the costs associated with their loan-including the YSP-will ultimately result in them making better choices up front for themselves and their family.   Mortgage lenders who embrace absolute transparency will be those to whom consumers will turn, and those lending professionals who elect not to do so will be unable to make a profit and will eventually withdraw from the marketplace.  

Jun 25, 2009 08:43 AM #50
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Interesting information Todd. I am sure NAR will have a thing or two to say about this.

Jun 25, 2009 09:26 AM #51
Paula Burt

Todd, THANK YOU for this post!  It is most riveting!

I got as far as Comment #12, clicked on the link for the video, watched it, and went immediately to send an email to everyone in my address book and everyone in my business database.

I then posted my own blog with a copy of the email letter I sent out.

Click here to read my letter on my blog:   HVCC (CALL TO ACTION LETTER TO SOI & DATABASE).   Feel free to use it, everyone!!!

I have also sent letters to all the legislators I could think of and had time to do. 


Now, I need to go back up to Comment #13 and continue reading.

Jun 25, 2009 09:48 AM #52
Michael Barrow
Keller Williams Realty - San Diego Metro - San Diego, CA
Realtor, San Diego CA Real Estate

These new HVCC rules are ridiculous!  The government sticks their noses in to try to clean up the problem and as usual creates an even bigger bureaucratic mess!  HVCC has gotta go!

Jun 25, 2009 11:17 AM #53
Joetta Fort
The DiGiorgio Group - Arvada, CO
Independent Broker, Homes Denver to Boulder

Why are we so surprised at this when the current congress doesn't even read the bills they pass, and makes a joke of the requirement to?

Jun 25, 2009 11:17 AM #54
John Palmisano
Keller Williams Properties Weston, FL - Weston, FL

Todd, it sounds like the fox is watching the chicken coup.

Jun 25, 2009 12:42 PM #55
Thom Kraley
NewCastle Home Loans, LLC - Chicago, IL


A lender/bank does not benefit if a buyer/borrower loses their lock.  In fact it is the opposite.  A locked loan is in most cases committed for delivery into the secondary market at a set price.  This locked loan commitment carries interest rate risk until it is delivered.  A lender in this case "hedges" against interest rate risk by using a variety of securities.  Think of it as insurance against rising rates that the LENDER pays for regardless of whether or not the loan is closed. 

This comment does not address loan "brokers" who lock with lenders/banks.  If you work with brokers that intentionally blow locks with one lender (with the intention of locking in with another) to increase their income, you should send them to a doctor to have his/her head examined.  State and Federal regulators may also want to pay this person a visit. 

Jun 25, 2009 01:17 PM #56
Mike McCann - Nebraska Farm Land Broker
Mike McCann - Broker, Farmland Broker-Auctioneer Serving Rural Nebraska - Kearney, NE
Farm Land For Sale 308-627-3700 or 800-241-3940

Many of you get e-mails from NAR but maybe some of you do is one from earlier today. We should wish them good luck.  Mike

To:      All REALTORS®

From: Charles McMillan, 2009 NAR President

Re:     Appraisals

Dear Fellow REALTOR®,

During the past two months, we have heard from many of you regarding problems with appraisals that are causing deals to be delayed or canceled altogether. I assure you that we on the NAR Leadership Team are experiencing the same problems in our businesses. In fact, VP & Liaison to Committees Steve Brown recently shared his experiences in Ohio on the Voices of Real Estate blog.

Let me update you on what NAR is doing to resolve these problems quickly.

On Monday, June 29th, I will be in New York to meet with the Deputy Attorney General and his staff who worked directly on the Home Valuation Code of Conduct. I plan to share our concerns, as well as your stories, and ask for their assistance in resolving any problems related to the HVCC.

On Tuesday, June 30th, I will travel to Washington, D.C., to meet with the Director of the Federal Housing Finance Agency to discuss ways we can work with Fannie Mae, Freddie Mac and lenders to ensure that appraisals are accurate.

We will keep you posted on the outcome of these meetings. In the meantime, I encourage you to check out the following resources on for more information on the HVCC and how appraisal problems are impacting the real estate market:

Economists Podcast


Appraisal Blog

On behalf of the entire Leadership Team and staff, I thank all of you who have shared your experiences and concerns with us. With your continued participation, I believe we will overcome this challenge in much the same way as we have conquered others - "United Toward Tomorrow."


Charles McMillan Signature

Charles McMillan
2009 NAR President

Above e-mail as received by Mike McCann on 6-25-09

Jun 25, 2009 02:34 PM #57
Marte Cliff

All I can think after reading the posts for the last couple of days is that I'm glad I'm no longer in the business of selling real estate. The banks are evil, and our lawmakers are so dumb that they play right into their hands.

Wouldn't it be fun if the million plus real estate agents in the U.S. could join with all the mortgage brokers and refuse to do any loans except for private money for about 30 to 60 days? That would put the banks' tails in a kink!

How about if you refused to show or sell any of their REO properties?

I know, your buyers want them, but still... Watching them scream would be satisfying.

Since that can't happen, perhaps everyone should begin writing, emailing, faxing, and calling their Congressmen. Voting out everyone who voted for any of the nonsense that's going on right now would also be a good idea.

Wishing good luck to all of you who are dealing with the banks right now...

Marte Cliff, Copywriter

Jun 25, 2009 05:34 PM #58
Rita Zarcone
Howard Hanna Real Estate Services - Hampden Township, PA
SRES, Realtor, CSP

Don't put all the blame on the banks throughout the country.  It started with those in Government that created this situation in their push for "all to own homes" (a la the Franks, the Dodds, etc.). Then they try to rectify it by making the appraisers "independent" of the transaction, pulling down market values and they have bogged down the entire process.  Many banks also outsource their loans and they are caught in the middle of locking rates and then getting dragged out because an out of control appraiser is "trying to cover their butt" and not really performing their job responsibly.

Jun 26, 2009 01:04 AM #59
Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

Thank you everyone for the comments, but make sure to do something more important... CONTACT YOUR STATE REPS! This needs to be taken care of and the only way to do that is put it back to the way it was. I'm not blaming banks, I'm more blaming the government for taking what they banks were probably trying to say and taking it way to far! (Then the banks for taking advantage of the situation.)

Jun 26, 2009 01:22 AM #60
Stuart Dobson - Thornton, CO

The banks never cease to amaze me with the way they treat customers.  Unfortunately we (the government) bailed out the banks but left the same mangement teams in place that got them there in the first place.  Now the same bankers are just playing with new money...

Jun 26, 2009 03:54 AM #61


 Lets all hope this get passed FAST

McLean, VA - June 26, 2009 - Last night, Representatives Childers (D-MS) and Miller (R-CA) introduced legislation calling for an 18 month moratorium on the Home Valuation Code of Conduct (HVCC). The National Association of Mortgage Brokers (NAMB) applauds the introduction of H.R. 3044. NAMB would like to thank Representative Childers (D-MS) and Representative Miller (R-CA) for their continued efforts and leadership on this issue.

"The introduction of this legislation is a victory for consumers and members of the industry alike," said NAMB President Marc Savitt, CRMS. "We thank Congress for recognizing the need to address the issue of appraiser coercion without causing undue harm to borrowers or diminishing competition in the marketplace."

NAMB has taken an active stance against the HVCC since its introduction in March of 2008. "We urge Congress to pass H.R. 3044 as soon as possible to ensure that more borrowers will not be negatively impacted by this de facto rule," stated Savitt. "In the period of time since its implementation, the HVCC has increased costs to consumers and decreased the quality of appraisals and has provided a level of uncertainty in an ailing housing market. Tens of thousands of consumers have already been robbed of their opportunity to enjoy historically low rates by Attorney General Andrew Cuomo's rule."

NAMB looks forward to working with Members of Congress as this legislation progresses.


The National Association of Mortgage Brokers is the voice of the mortgage broker industry, representing the interests of mortgage brokers and homebuyers since 1973. The Association is committed to promoting the highest degree of professionalism and ethical standards for its members. In addition to mandating members adhere to a professional code of ethics, NAMB provides mortgage brokers with professional education opportunities, and offers rigorous certification programs to recognize members with the highest levels of professional knowledge and education.


Jun 27, 2009 01:42 AM #62
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