Mortgage nightmare | HVCC appraisal regulation

I KNEW IT - I have been saying that Cuomo had to be in the back pockets of AMCs! 

In regards to #22 Chris:  SUPPOSEDLY they are supposed to base appraisal on principles of absorption BUT if they are hiring the less experienced and bottom of the barrel then they are NOT going to know what is going on in our markets.  THIS IS SO FRUSTRATING!

I have a feeling that BPOs will have more weight than appraisals soon.  I completed a BPO the other day where the AMC had to argue with me that I should price according to list prices rather than sold prices.  They ignored all the other data and my market analysis.  They also ignored the fact I mentioned that one of my buyers placed a good clean conventional financed offer on one of those listings that WAS ABOVE SOLD PRICES and not accepted.

I hate the fact that the servicing companies have little armchair valuators (who are not in state) but seem to think they know market conditions everywhere and try to sway value or list prices in the name of "quality assurance"

Renee,

I just posted my comment above...and saw yours. I love reading your comments. You're obviously very well-educated...and your comments often have a slightly "sassy" tinge, which I always get a kick out of.

But with all due respect...

Are you saying that a sales comparable from six months ago for $499,900 should be given more weight in determining value than active listings in that same community for like properties which are currently on the market for $429,900??

How can an appraiser or lender ignore the obviously declining market values?

And an unnaccepted offer for a property (regardless of what the offer was) should never be considered when determining value. Maybe the buyer withdrew his offer when he found out he offered too much?? How in the world can we expect appraisers to use THAT offer as justification for anything?

I think it's very easy to dismiss appraisers as not knowing our individual market areas. But it seems clear to me that we come from a biased position in many cases.

And a lot of appraising is determined by tried and true principles that apply in ANY situation (thus, if a valuator is from out of state, he/she is still going to have established guidelines that apply regardless).

A person who appraises cars in Alabama can get pretty darn close to the market value for a 1985 Ford Mustang convertible being sold in New York (let's say that value is $6,000). While it COULD be argued that New Yorkers have a renewed love for classic Mustangs and are willing to pay more, if there's no proof of that fact, and instead he sees Mustangs advertised in New York for $4,000...I don't see how he could possibly bring it in at anything more than $4,000.

However, I don't know cars that well.

:: smile ::

Dave

As RR said, the government doesn't solve the problem, it is the problem.

The problem is that appraisals are now being done by the low bidder, often from areas far away from the property being appraised so you get what you pay for. That is, an inexperienced or incompetent appraiser who can only get work on a low bid basis and who doesn't understand the nuances of your local market.

I just don't see the problem!  I see several pluses to the system:

1. You, most likely, will have an appraiser who will be getting less money, thus he can cut out alot of his valuable time in the appraisal process.
2. You, most likely, will have an appraiser that will not have the time to do a measurement of the home, because it is not cost effective.....and all he/she needs to do is pull the measurements off the very accurate tax records.
3. You will, most likely, have an appraiser that does not know the neighborhood, so finding comps will be like finding candy.
4. You will, most likely, have an appraiser that will not want to build a relationship with you for future business.
5. You will, most likely, have an appraiser that will not care the net effects of the appraisal.
6. You will, most likely, have an appraiser that after a few weeks to get the go ahead, will be able to appraise the home and have it to the lender within a few hours (happened to me 2 weeks ago)
7. You will, most likely have an appraiser that never went to see the home to appraise it to save valuable time (happened to me, also, 2 weeks ago)
8. This system will allow us to extend our contract period from 3-4 weeks to a month and half to two, so it won't be such a rush rush transaction. 
9. This system will allow us to have extended finance contingencies that will allow our buyers to get out of the deal further down the road.
10. And the best part, this may allow us to renegotiate the deal when the appraisal comes in below purchase price.

So, I don't get your concern.........  Just my 2 cents for the day. Cheers (Great post, by the way....)

BRAVO......BRAVO.....BRAVO.....to Dave from Flyers To You......

You just nailed it on the head.....the industry, and particularly NAR can complain about HVCC until the cows come home, but it will not change the fact that it is here to stay.

Both of your comments hit the nail on the freakin' head! Now if only the masses would listen.......

When a buyer is able and willing to buy and a lender is willing to lend, the appraisal should come in at the sale price. Happy 4th..

Gene

Wow! I had no idea that Cuomo was in the AMC's pockets! I can't wait to spread this info and am anxiously awaiting how this all comes out...because it always does...

Tiffany.. it is amazing that they would even pass something lilke this to begin with.

Tiffany,

Perhaps I should clarify a couple things:

1.) My ex-wife is an underwriter and former loan officer
2.) My son is a loan originator
3.) My daughter's mom is a loan processor
4.) My closest friends are either Realtors or in the mortgage business
5.) I've been licensed forever...and up until starting FlyersToYou 8 years ago, I spent 15 years in the mortgage industry running huge operations, and then hopped the fence over to real estate sales as a top producer for 10 years.

I bring all of that up so that no one draws any conclusions about my being biased toward anything BUT what's best for the industry.

But let me share some other facts:

My son, in the early stages of his career 4 years ago, was awestruck and mesmerized by several of the loan officers at his company. They were 25 years old and making $500,000/yr. They drove fancy cars, lived the "fast life"...and were the most successful people he'd ever met.

How they earned their livings, however, was no better than the Bernie Madoffs of the world. They churned refis over and over again ad nauseum. In one year, they'd refinance a single borrower three times, and while they offered their customers "no-cost refis", they were doing so at above available market rates, and earning 3 points on the back end. $800,000 loans at 3 points = $24,000. It was very common to hear young punk loan officers bragging about the fact that they won't touch a deal unless they netted $15,000 to themselves. So with one borrower, they made $45,000 a year. With 20 borrowers, they earned almost a million. Meanwhile, they were sticking it to their customers because they could.

Fortunately, almost all of them are out of the business now. Except for the few that went on to charge $3,500 for loan mods, until that became more regulated (there's that word again).

I also know at least 200 Realtors personally who manipulated the system for personal gain. They'd have a loan turned down by ABC Mortgage, and shop it around to DEF, GHI, JKL Mortgage, until finally XYZ mortgage would do the deal in a (shall we say) less than professional manner? The appraisal was rigged, the borrowers didn't qualify, but the deal was done regardless....and everyone was thrilled not only at how easy this business could be, but at how much one could make while doing it.

By the way, before anyone jumps in and hammers me for calling ALL agents or lenders crooked, trust me, that is NOT what I'm doing. I also am fortunate to know many of the best, most professional people I can imagine working in ANY industry, and they happen to be lenders and real estate agents.

Nonetheless, it wasn't they who caused the mess we're in. But with the magnitude of our economic crisis what it is today, there was an awful lot of BS going on out there. Yes, yes, I know...Wall Street made loans available that they shouldn't have. I hear the blame being placed squarely on the shoulders of the investment banking world until I'm blue in the face. That somehow justified agents increasing values at the astronomical rate of 100% per year....while loan officers made loans of $350,000 to a couple where the husband works at Walmart, and the wife at the local flower shop.

And now...none of can stand that we're being regulated?? LMAO!

NAMB's best argument toward getting rid of HVCC is that it's causing greater expense to borrowers nationwide, yet where was NAMB when their members routinely charged 3 points overage on every transaction? NAMB brings up the time delays hurting the consumer by not letting them take advantage of historically low rates, yet where they when their members upped the rate on loans so they could pocket an additional ten grand? By the way, borrowers today STILL enjoy historically low rates, and had the market recently gone down instead of up, NAMB would have been thrilled with the extra 30 days it takes to process a loan. NAMB argues that HVCC is causing appraisals to come in low, yet no one decries the fact that every agent I know is now a "short-sale expert"...and is out there vigilantly adding to the more than 60% of housing inventory being some sort of short sale...and listed at some ridiculously low price.

But we, as an industry can't believe what HVCC is doing to our values when the home doesn't even have a kitchen??

You don't find that funny?

The only really sad thing resulting from HVCC is the elimination of the really experienced and professional appraisers who did a great job. They can;t work for $200, and are now exploring other lines of work. THAT is a damn shame. It's also a shame that there are really GREAT agents who are leaving the business because they can't survive in our new market. It's a crying shame that the best loan processors are no longer in the business because there's no money to pay them. It's awful to watch the single moms who worked their way up the ladder to become Senior Underwriters out looking for work because their companies have closed their doors.

But to blame HVCC is ludicrous.

We, as an entire industry, acted like unsupervised kids without a babysitter for 5 years. We made truckloads of money while doing so. And now that someone realized we probably need a babysitter so we no longer have free rein to break the furniture, rip the carpet to shreds, and use magic markers all over the walls, we're upset.

The HVCC babysitter will not be going away any time soon (you and I disagree on that point). Some form of babysitting has to remain intact. Free for alls in this industry should have stopped a long time ago, but they didn't. It's time they do now.

Lastly, regarding how will prices ever go up if we abandon the "willing buyer, willing seller" rule? We're not abandoning it. They're still entitled to pay whatever they want for the home. But the lending world will now forever have checks and balances in place to prevent the widespread abuse that got us where we are today. 100% inflation per year?? Those days are over. Will prices go up when a normal real estate market returns? Yeah...but don't hold your breath. That won't be for another 8-10 years.

In the meantime...if you want...present a seminar to your local Realtor community and show them why the constant listing and promoting of short-sales and price reductions are ruining this industry FAR more than HVCC ever could. And tell them to quit signing petitions to revoke HVCC, as with the standards of practice as they are today, that will not help in any sort of housing recovery.

Also, write a letter to NAMB informing them that the reason they're on time out now is because they refused to behave and earn any semblance of respect whatsoever over the last 5 years.

Whew, now THAT was a long read (sorry).

Dave

Boy, this sure started some hefty debate.  I have to say I agree with Tim's take on the whole thing.

Also, how is this helping the consumer?

Tiffany,

You bring up a valid point. The bad loans are finally gone, the bad loan officers are finally gone (well, at least a BUNCH of them are)...many of the bad "everythings" are finally leaving the industry so that perhaps the cream WILL rise to the top...and we can begin our road to recovery.

And no, by the way...I am not saying that I like any additional regulation if it's not necessary. I hate the fact that an industry that's responsible for the American consumer's major purchase of a lifetime has been allowed to operate so "willie-nillie" for years. Hell, used car salesman had more of a conscience that what I've witnessed.

And so....now the cleanup happens.

Guidelines have tightened to the point of near impossibility (those will remain in place whether HVCC stays or goes). Review appraisals will create hits on value just as much as HVCC appears to, although it's become fairly convenient to attack HVCC anyway. Consumers will pay more in appraisal fees, yet no one seems stimulated or concerned enough to actually pitch in $200.00 to "lessen that particular blow". Heck, in the last two weeks, I've read blog after blog after blog here about Realtors who, while advising sellers to reduce their price by $45,000 wouldn't EVER entertain the idea of pitching in $200.00 of their $12,000 commission toward the buyer's increased appraisal fees. My conclusion is that I guess the increased appraisal fees really aren't that big a deal after all? If they were interfering with a successful close, someone would pitch in, but really....it's such a nominal amount anyway that who really cares??

I don't see ANYONE clamoring for the title company to reduce their premiums, or the home inspector to reduce his...or escrow, or homeowner's insurance, or termite company, or home warranty, or notary, or WHOMEVER (you can fill in the rest of THAT list). NO ONE'S fees are going down. But HVCC comes along, and it increases the costs to borrowers by a couple hundred bucks....and all hell breaks loose?? LOL!

If I were selling real estate, I'd explain to my buyer that the increased cost "assures" them of an unbiased, unprovoked, unthreatened, unethical, unimaginable appraisal that simply came in at value because it "needed to". EVERY buyer I know would be thrilled to tears knowing that no one's going to artifically influence the value of the home he/she wants to purchase, and if asked whether they want the appraisal inflated for a couple hundred bucks in savings....or accurate for a little more, they'll choose to pay the couple hundred bucks every single time. I'm not going to debate here whether they actually are getting what they're paying for, ok? I already addressed some of that above.

But remember, they already know tons of people who found out too late that their homes weren't worth ANYWHERE near what they paid. If a couple hundred bucks gives them peace of mind, we should embrace it, not fight it. It's all a matter of perspective, I guess.

And no...I don't think it's fair that ANY of us have to pay increased taxes to bail ANYONE out for ANYTHING that THEY DECIDED TO DO! We all know people who shouldn't have bought their home for $500,000. They couldn't afford it. They also shouldn't have gone out and spent the rest of their money (you know...the money they didn't have to put down)...to buy ATC's, Jet-Skis, RV's, Plasma TV's, Harley-Davidsons, new SUV's, etc. They put themselves in financial hell....and we have to bail them out with higher taxes???? Who in the world believes THAT's fair???

Definitely not me!

A dear friend of mine hasn't made a payment on his home for almost 15 months, and the lender hasn't even filed an NOD. He think it's the coolest thing! Can you imagine?? 3,500 square feet, beautiful pool and spa, RV parking, etc....and instead of paying their housepayment of $3,600/mo., they're living there scott free. And once the NOD is filed, you're right....they'll be there another year and half before ever being forced to move. Meanwhile, you and I will somehow have to pay for them giving all appearances to their neighbors that nothing's wrong. That they're still fine, upstanding people. Of course, a couple months before they actually LOSE the home to foreclosure, they'll list and apply for a short-sale due to hardship. I hope the lender just laughs.

And even today....right now as we speak, they taking their $3,600/mo housepayment, and instead of paying their mortgage, they're going out to dinner, or buying a 2nd 50" plasma TV for the bonus room.

My brain honestly cannot wrap itself around these kinds of things.

I know how you feel about regulations...but if I was in charge...I'd implement a new regulation that said the moment a borrower fell behind by 60 days, the lender had the ability (NOD filed or not)...to disconnect all essential services from the property. Gas, water, electricity, trash, etc. Make the property uninhabitable. Problem is, the occupants would beat the house up, steal the appliances, thrash everything within baseball-bat distance, and the lender would wind up with perhaps an even greater nightmare on their hands than they have now. After all...all of us are going to bail them out anyway, so why not at least protect the property's condition by allowing the borrower and his family to stay??? It's all so incomprehensible.

Every rule I can think of needs to be re-written...and I guess the only thing that you and I actually disagree on, is whether new regulations should be implemented in an effort to at least TRY and correct what they see as "the problem".

Are they right? Ideally, yes....but in practice, no...(not yet). Am I glad they're finally at least trying?? You bet I am.

And since some of those officials are not as familiar with the inner workings of real estate, should they go to NAR for advice? That's one of the most laughable thoughts I could ever possibly imagine. NAR doesn't have a clue either, and have already demonstrated how effective they are at running their side of the business. They define impotence.

Should the government go to NAMB for advice? Come on Tiffany, look at how pathetic your industry's national association is. They, too, are in complete denial over their role in this mess. They ALL knew (EVERY SINGLE ONE OF THEM!!!!) what was going on in the mortgage industry (hell, overage has been "blessed" for over 30 years now). Crooks have made fortunes, and many have served as part of the leadership dais for NAMB. Good fronts don't mean anything to me anymore. Suits and ties do not a good lender make. And in the last five years, the thing they got the most pissy about was when they had to disclose their own cheating of the system (YSP), but the banks didn't have to (SRP). They were right in principle, of course....but to try to pass that whole thing off as anything but thugs whining because they couldn't steal and pilfer anymore...and someone else could...is just amazingly ridiculous.

So if ...

a.) the industry is completely incapable of policing itself...and b.) the industry's leadership ALSO doesn't have a clue....then they either let the professionals on the street (like you) handle it, or they let people in New York with an interest in the solution do it.

I'd rather they talk to you and your family about it. But until you distance yourself away from the industry affiliations supposedly acting on your behalf...you'll never stand a chance. The government will (and should) laugh right in their faces....and send them on their way.

And for YOUR voice not to be heard...is sad.

Dave

Tiffany,

Wait a minute!  Every one of these posts are negative on the HVCC, and some are downright malicious.  It's time someone from within the industry spoke in its favor and described for all the nay-saying ninnies all of the positive aspects of the HVCC and its beneifts to the loan consuming public.

Ok, here goes:  Oh, hold on a second!  There aren't any!  Sorry!  My egalitarian side got ahead of my pragmatic side.  I hate when that happens!

What started out as really an appraisal industry problem has now metastised into an industry-wide problem with both industries taking it in the shorts.  Clearly there were abuses by the lending industry against the appraisal industry, but the HVCC is not the proper response to that problem.  The folks who spawned the idea were indeed werll-intentioned, but the golem that is today's result is not the solution to the problem, either.

While I am an appraiser, I support the NAMB's attempt to get the HVCC suspended or repealed.  I also laud the NAR's and the AI's attempts to have the HCVV struck down.  Legislation by attorney general fiat is wrong and not part of the law-making process the founding fathers envisioned.

TIM ANDERSEN