The top three problems with HVCC and with a solution at the end.

By
Mortgage and Lending with Arthur Buhrer, Olympic Mortgage Services CL 1456034

1. Excessive Micro management of the appraisal industry. Now instead of sending a piece of paper directly to an appraiser; a third party company gets my order and sends it to an appraiser. This has increased turnaround times, cost, and quality of the appraisal. Appraisal Management Companies (AMC) are up charging for an appraisal without providing any real service.

2. Increased fees to borrowers. Did you know the fee for an appraisal has jumped from $400 to $525 overnight? How many borrowers have paid for 2-3 appraisals when 1 appraisal would have been sufficient? Every piece of legislation aims to decrease borrowing costs to homeowner and yet this is allowed to happen. A recent transaction of mine the borrower had to pay for 3 appraisals.

3.  Dictatorship of the independent appraisal industry. How would you feel if someone began to dictate to you that you must wear certain clothing, carry an email capable device in the field, return calls within two hours, return emails within 1 hour, and then told you how much less you will receive for the work you previously charged more for? This is criminal what has happened to the appraisal industry.

None of this addresses the real issue: Responsibility. The entities who are selling pools of loans to investors should be responsible for the quality of the investment. If they are relying on another 3rd party to tell them their collateral’s value then they have just created another degree of separation. Which is pretty smart if you thing about it. The next time the house of cards come down the banks will simply be able to point to the AMCs and blame them for their mistakes.

I offer two simple solutions.

1. Make banks, brokers, and correspondents use their own personal rolling appraisal lists. AND enforce it in audits.

2. Make banks read appraisals and review them internally.
 

That’s it. No extra cost to the buyer. No headache to brokers and real estate agents; just plane shifting of attention to what is important.

 

Comments (3)

Anonymous
Chris Jones

Let me see if I understand this correctly.  Your solution to the HVCC is to allow lenders to pick a group of appraisers and force them to use only those appraisers.  Appraisers would have to get themselves onto lender lists, and lenders could drop them any time.  Lenders would, of course, never exert any pressure on appraisers to hit a particular value, but if they did, well, hey, whatever.

As far as I can tell, this combines the worst part of the old system - direct lender pressure - with the worst of the new system - direct enrollment of captive appraisers by lenders.

Why not simply put together an AMC registry and allow any AMC to provide an appraisal to any lender, as long as the AMC is registered.  That will weed out the bad AMCs, relieve lender pressure even more, and get rid of exclusive, lender-owned AMCs.  It will also preserve appraiser independence and exert downward pressure on AMC fees.  I can't see anyone that loses here.  Well, except the big lenders that are milking the appraisal process through their captive AMCs for more money.  And I don't think we care about them overly.

Sep 24, 2009 06:20 AM
#1
Arthur Buhrer MLO 114080
Arthur Buhrer, Olympic Mortgage Services CL 1456034 - Sequim, WA
Owner Broker/ Washington State

The overall concept is that we don't need AMCs. If Big Brother wants us to us a rolling list it is something that any individual broker, bank, etc. can put together. If the idea is to have a random assignment it can be down without creating AMC, increasig consumer cost etc.

Bank/lenders should be responsable for their own appraisal review before a teachers penson in gambled on them. There was a short period between the subprime meltdown and the begining of the HVCC were lenders were actually reviewing the appraisals themselves and during that period the system worked fine.

Adding AMCs to the mix along with all the other obvious problems; increases cost to consumers, gives lenders a future out for responsibilty, and belittles independent appraisers and degrades their profession.

Put yourself in an consumers shoes and the appriasers shoes.

Sep 24, 2009 06:46 AM
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Arthur, you are so right "Responsibility" is the key and "Acountability"  goes hand in hand with it. We are turning into a society of of' finger pointers' instead of taking responsibility for our actions.

Oct 03, 2009 05:05 AM