Could New Home Appraisal Rules Get Scrapped?

Mortgage and Lending with Total Mortgage Services

There is an increasing amount of opposition to the new home appraisal rules as many mortgage brokers and real estate agents are serving up criticism that the Home Valuation Code of Conduct (HVCC) guidelines adopted in 2009 are resulting in inaccurate and low-ball appraisals.

The main argument amongst critics is that the new rules have undesirable affects where appraisers are now being overextended, underpaid and forced to churn out appraisals in a hurried fashion. Conversely, many mortgage lenders, including J.P. Morgan and CitiGroup, have vested interests in the appraisal management companies that now play the role of divvying up appraisal assignments, so they naturally are against revamping the current appraisal guidelines.

Implemented last spring by Fannie Mae and Freddie Mac, the Code of Conduct bans mortgage brokers and loan officers from selecting appraisers to valuate homes in the deals which they are brokering. The purpose is to prevent the inflated and sometimes fraudulent appraisals which were partly responsible for an artificial surge in home prices during the past decade.

According to a recent article by Jessica Holzer in the Wall Street Journal , realtors and mortgage brokers have succeeded in inserting language into a House-passed financial-regulation bill that would end the new protocols. The measure would direct federal regulators to come up with an improved set of rules.

Under the new system, appraisal management companies now solicit out appraisal assignments for a fraction of the cost of what the work used to pay - in some cases less than half of the industry’s former compensation rate. As a result, many appraisals end up in the hands of the lowest bidder, and the work is being done by appraisers who have limited industry experience or are lacking of knowledge as it pertains to a specific real estate market and neighborhoods.

“More and more people are leaving the appraisal business than ever before because appraisals are now going out to the lowest bidders, commanding lower pay and fees,” says Bill Schettler, Vice President of Sales at Total Mortage Services, LLC.

Mr. Schettler, who worked six years as an appraiser himself, added, “Unfortunately, because of what the appraisal management companies are paying, many people are no longer able to make a living in the industry and there are more inexperienced people now doing the job. What is happening now is that appraisers have to travel further and further to cover more territory, so they can’t be as familiar with the homes as they were before”

National Association of Mortgage Brokers CEO Roy DeLoach told the Journal that out-of-town appraisers hired by vendors are diminishing homeowner equity through home valuations that aren’t credible: “It’s basically hollowing out the equity in communities whether you intend to sell or not.”

Do you think the current appraisal process should be changed? Have the new HVCC guidelines hurt the industry?

Comments (122)

socal appraiser

Great Comments....

There's not much more I can add .....Only that we need everyone's HELP to get the HVCC removed!

The Financial Reform/Wall Street Reform is due to be back for discussion in the Senate (after they finish the BP conversations!).  Include/burried within this is HR4173/HR4312 & S3217 - Appraiser Independence - Remove HVCC...

The HR4173/HR 4312 (Title XIIII Subtitle F)  is to be combined with S3217 -CALL you Senators 866-544-7573 - this # will connect you to Your State Senator.  Call them, write them, tell them to Include the Appraiser Independence - remove HVCC.

The CaCAP (California Coalition of Appraisal Professionals) - has great information on their web site. - join, download letters - check out the letter Rep Gary Miller has written.  Check out this site even if you are not from CA! - check out similar organization in your area! 

The National Association of Independent Housing Professionals - - is another organization working on related issues.  Check out their site also. They have been meeting with legislators on HVCC & other issues.

The only way WE can get REFORM is to Contact our Legislators & get them to understand the issues!Most of them have no real IDEA what HVCC is......THe more WE send them letters & Call.....They only work on issue that they RECEIVE THOUSAND of CALL ABOUT....

As an appraiser...HVCC has done little to change any problem....I just heard that OUR Legislators have REMVOVED any Changes for the CREDIT RATING AGENCIES from the Financial/Wall Street Reform/Recovery ACT!!!!!!...yet alive.......  CALL YOUR SENATORS & CONGRESS REP'S!!!!

As an Appraiser - We NEED EVERYONE's HELP with this ISSUE!!!!!!!!


Jun 21, 2010 05:18 AM
Robin Rogers
Robin Rogers, Silverbridge Realty, San Antonio, Texas - San Antonio, TX
CRS, TRC, MRP - Real Estate Investment Adviser

Elizabeth's list of requirements in comment #95 was an eye-opener. How many properties that aren't in new tract subdivisions could meet those requirements for comparables? That is insane.

Great post topic, and timely.



Jun 21, 2010 05:28 AM
Anita Batty
Abquest Appraisal Service - San Antonio, TX

This is a great topic, one which I hope will go away or at least turn around by 2011!  I would like to address comments #96 and #97.

Maybe there were no suitable comps for your condo at the time, I do not know all of the details.  Sometimes it is necessary to go outside of the area for comps as long as it is a competing area and the comps are similar to the subject.  It also has to be addressed adequately in the report and explain why this was necessary. If it is explained thoroughly within the report and not all comps are outside of the area, this usually, not all the time is acceptable to the uw. Again the key is the need and the explanation in the report.

I also do not know why it would take 2 weeks to schedule an appointment to do an appraisal, but again I do not know all the details.  The thing here is geographical competence.  I have lived and traveled in the great state of Texas for over 35 years.  San Antonio, Austin, Houston, Dallas/Ft.Worth, Amarillo and more.  All of these cities have suburbs and surrounding little towns. I consider my geographical area to be San Antonio, Austin and the surrounding suburbs and little towns which very well may be in other counties, but no more than a 75 - 100 mile radius.  Some may think this is too far, but this is my comfort zone so to speak.  I am also comfortable in areas outside that radius but choose to stick with my zone.  Have I had some appraisals come in low because of this? No. But I have had appraisals come in low because of the market for that area.

To all the appraisers out there and others who care whats going on with HVCC,  Check out F.A.C.T. Foundation Appraisers Coalition of Texas. Call Amy Ables 512-828-7455.

Jun 21, 2010 06:07 AM

Robin what Elizabeth printed are guidelines. It is the appraisers judgement when to exceed those guidelines but that does require the appraiser to explain in detail the reason for exceeding those guidelines. The items that Elizabeth listed are guidelines not rules. When the need to fill all those guidelines is not available in the market some appraisers try place a square peg in a round hole.

Jun 21, 2010 06:10 AM
Dana Hollish Hill
Hollish Hill Group, JPAR Stellar Living - Bethesda, MD
REALTOR * Broker * Coach

Wow! It's discussions like this one that keep me reading ActiveRain on a regular basis. The idea of removing the option for lenders to hand pick their appraisers seemed like such a good idea at the time. How did we end up with this mess? With the HVCC and the new GFE and HUD-1, it is clear that no one was really looking out for the consumer.


Jun 22, 2010 03:47 AM

Paul is correct they are just guidelines and explanations can be written for all of them.   But, Elizabeth is also correct; trying to complete an appraiser within those guidelines or explain why you had to go outside the guidelines can drive an appraiser crazy. Especially when the guidelines can be 4-5 pages.

Here are some other guidelines or exceptions my reports have been rejected for (that later became guidelines).

•1.        Appointments must be scheduled within 12 hours of accepting assignment.  (Homeowner not calling back is not an excuse)

•2.       Inspection must be done within 48 hours of accepting assignment.  (Homeowner works or is on vacation is not an excuse)

•3.       Report must be delivered within 24 to 48 hours of inspection.  (Nights and weekends count.  Even though AMC has no one working Saturday or Sunday)

•4.       You must log on the AMC site twice each day to update status on all appraisals.  (Even if nothing has happened since last update)

•5.       Must answer emails asking for updates within 1 hour.  (Even if you have updated site or are in the field)

•6.       No pictures with people in them.  (Standard)

•7.       If you use an MLS picture because of gated entry, long private drive or people in it, include your original picture showing why MLS picture was used.  (Help me understand, I can't use my picture because kids were playing in front yard but I can use my picture with kids to explain that I can't use my picture with kids?)

•8.       No pictures with pictures of people in them, either photos or art work.  (The picture of the kids or the Mona Lisa has to come off the wall)

•9.       Must include pictures of all rooms including ½ baths. (without being in the mirror and must show both fixtures)

•10.   Pictures of all 4 sides of the home  (Explanation required for condos that you used 4 sides of building)

•11.   Explain why "Opinion of Value" is more than 5% above or below average value for the market area or city. 

•12.   Must include off market date, closing date, type of sale (typical, short REO, Estate, RELO) days on market,  original list price and sales price on all comparable gridded.

•13.   IF short sales or REOs are more than 10% combined of active, pending and closed sales in the market area must include one of each.

•14.   If short sales and REO's are included, explanation that price difference is typical for market is not acceptable.  Must include detailed paired sales to prove amount of adjustment.

•15.   1004 MC (to begin with this is a bad form).  A.  Must explain why with only 6 truly comparable sales in the past year, you cannot honestly fill in the check boxes as to decreasing, stable or increasing market trends.   B.  If there are no sales within subject plat or condo, explain why.  (not that there were none but why there were none)

•16.    Any request for correction or explanation must be submitted within 2 hours of time request sent.   (Doesn't matter they sent it at 8 am eastern time,  which is 5 am where I am)

 This is just a sample of some of the ones I have seen.  As you can guess, I don't do work for some of these AMCs anymore.  Some by their choice some by mine. 

 As far as 2 weeks or more to get an appraisal, that sounds about right.  With all the hands it has to go through now, I am surprised it isn't longer.

Jun 22, 2010 05:49 AM
Brett Pehrson
Advanced Funding Home Mortgage, NMLS#13287 - Salt Lake City, UT

Dana (#110) - You're right!  This is a discussion I can't stop reading.  You're also right in the fact that nobody seemed to care about the consumer when these things were all created & implemented; the only one's who even came close to winning here were the politicians with all the PR they tried to get out of their "good deeds."  The funny thing is, taking appraisal ordering completely out of the hands of the loan officer did far more harm than good; most loan officers and appraisers always behaved in legal and ethical manner before. 

John (#111) - That list of guidelines amazes me!  I knew it was bad on the appraiser's side, but I had no idea it was that ridiculous.  As for the two week thing, I've always seen the most delays coming from the inefficient/incompetent AMC's; I've had to wait as long as 3 1/2 weeks for an appraisal report to make it back to me before.

Jun 22, 2010 06:34 AM
Judy Woods Landmark Mortgage Salem Oregon

I am very frustrated with the HVCC rules. This bill was supposed to protect the consumer. The fees are much higher and the values are coming in lower. The appraisers are coming from all over the state and do not know the area's they are appraising. This bill has hurt the consumer with higher fees and inaccurate appraisals. Lots of errors! I feel for the borrowers!

Jun 22, 2010 06:58 AM

Johns list is accurate but that is why after 20 years of having been a professional appraiser I refuse to work for AMC's. These guidelines are created by individuals with no knowledge of appraising or 1 or 2 years of appraising which is probably more dangerous.  I currently only do REO and Estate appraisals for full fees along with 7-10 days to complete the report. Friends of mine with over 20 years also refuse the discounted AMC work many have left the profession or retired. I can't retire so I am currently retraining in another professional profession should the REO work and estate work fall out for some reason. I can understand some people have families and other reasons to accept AMC work but appraisals are hard enough without having to deal with Johns list and some unqualified AMC employee treating you like *****. If this continues older very qualified appraisers will leave the profession as they are currently doing. Entry is blocked into the appraisal industry. How much can a supervisor appraiser pay a trainee when the full fee is $200? Many AMC firms will not accept an appraisal signed by a trainee. Not to mention the new college requirement for certification. The writing is on the wall all one has to do is read it.


Jun 22, 2010 10:09 AM
socal appraiser

I never really understood all the comments, about HVCC bring down the market values!

WELL let me tell you - I sure do NOW!

I just did a review on a Purchase..the "Appraiser/Form filler" - simple pulled up the lowest recent is 9,000 sqft lot  & highly upgraded- not many sales of this size lot & condition - cause the majority of the lots are 5,000 - 7,000 sqft.   THEY used 2  - 5,000 lots & sales $410K & $415K that were at the bottom end of the market......they did find  1 - 9,000 sqft  - $410K- - priced the same as  the 2 smaller sqft lots!!!!  ALL  noted on the Grid as Good Condition ( they were not updated or very little & all  had similar GLA as the subject) -   Lots were adj $4,000. - THAT"S ALL  !!!???? Even the Subject was noted as GOOD on  the Sale Comp Grid ..but noted as Upgraded in the Improvement section....

Now how can a 9,000 sqft 100% flat total lot compared to a 5,000 sqft lot with only a $4,000 adj????  ... & how does the 9,000 sqft that was priced the same as the other 2 - 5,000 sqft are these comparable to the subject???.....

is it me ...or was there no QC done on this ...or is this the way the AMC's want the "FormFillers" to "Appraise"??? 

I easily found 2 recent sales on 7,000 sqft lots, similar condition & gla  ...$460K....    so the sellers & the market are going to loose $50K -....... The Lender Response: "The appraisal was reviewed and rebuttals were submitted at various level inside the company and with the appraisal service. There  is too many sales to the contrary""""   WHAT this was not a "cookie cutter home".......  Not to mention the Form Filler - said the market was DECLINING @ 9% over the last 12 months....I included a Graph of sales from 2007 - YTD 2010....the market looked stable to me!!!!

I say Good Luck on getting the housing market stablized!!

Jun 23, 2010 04:54 PM
Eugene Lew
RE/MAX equity group - Happy Valley, OR

HVCC has really hampered efficiency, and destroyed the hard work for the industry many good appraisers have done. For them to take a 50% pay cut, just so they can get the job while some middle man who does nothing to earn those fees is just wrong. AMCs have absolutely no value other than a leech taking hard earned money from someone else.

I had an appraiser I dealt with as a lender years ago. When I asked him about value, he would always give me what he could support. Sometimes my loans received the value,  and other times it wouldn't. I never pressured him to make value, and people who did, he did not give it, if it wasn't supported. That is one honest appraiser, and there are many more out there. If I was asked to do something illegal in my job, I would not do it. That is the way honest people do their jobs. HVCC has just created a lot of bureaucracy that hampers efficiency. Borrowers pay higher fees, appraisers get less fees, and AMCs collect for doing little. Whereas an appraisal once takes 2 days from date of order, now takes up to 2 weeks.

Hope this changes, since it won't get better with this kind of inefficiency.

Jun 23, 2010 09:27 PM
Reece Nichols-Mary Wilcox - Kansas City, MO
Reece Nichols Mary Wilcox BPOR, CDPE, ASD, SFR, AB

On a different note...  $450-$500 for 4 hours of scoping it out and 4-5 hours (now) of the paperwork ...does not sound underpaid to me.  Let's see BPOs take a good day or so if done right..for a measley $50  sometimes $75

Just sayin'

Jun 24, 2010 02:32 AM
Elizabeth Dingler
Independent Appraiser - Seattle, WA

Mary, some people might argue that a real estate agent makes far too much money considering the time and effort involved in selling a house, too. Breaking our jobs down into 1-hour or 1-day increments and then dividing by fee isn't the way to determine the worth of what we do. Appraisers have a larger overhead than you might believe (data costs, E & O insurance, office space, equipment, phone/fax/internet/ and supplies, gas and vehicle maintenance, continuing education, licenses that expire every 2 years...) but what people are really paying for is our expertise, training and experience, just like you're paid for yours and just like any other professional is paid for theirs. It takes over a hundred hours of classes and thousands of hours (in other words - years) of apprenticeship before a wannabe appraiser can even sit for the state exam. As of 2007 all new appraisers must have a college degree. What does it take to get a real estate license? As for BPOs, well...I'd be willing to sell a house for a lot less than 3.5%, but it's not what I'm trained for and I wouldn't really know what I was doing, would I? Realtors doing valuations is just another way for the lending industry to save money, and it will come back to bite them.  

Jun 24, 2010 05:08 AM

Mary as a real estate agent are you sure you want to open that can of worms?  Appraising as Elizabeth says takes 100's of hours of class room, minimum 2 years exp., and a college degree. A salesman license? Well I know because I also have a brokers license.  As I indicated above I don't do work for AMC's my full fee is $350-375 for REO and estate work which does not fall under HVCC. While you refer to the appraiser scoping the house out it involves much more detail than walking through and commenting on the drapes, furniture and carpet.  Most AMC'sare paying the appraiser $175-$200 with excessive demands and most of the  expenses Elizabeth refers too are fixed no matter what they are paid per appraisal or the volume they get per month. Many AMC's send an appraisal order to  10-15 appraisers at the same time who ever accepts it first gets the job. Our profession has been reduced to this. As I said many appraisers will change careers because they are professionals and expect to be treated as a professional and paid as a professional. Elizabeth did a good job breaking down what an appraiser faces everyday, Mary for you to make the comment above shows you know very little about the appraisal profession just as the people that designed HVCC. I still don't know why some real estate agents feel like they know how to value a house better than most appraisers at the same time when asked if they measured the house before determining the value for a listing or BPO they say measuring a house is a specialized skill they are not qualified to measure a house or the one I love no that would open me up to liability. What makes you qualified to value a home, your salesman license? This is not a slam on all real estate agents there are some very good agents which I work with and don't hesitate to call up to discuss a property at times but when an agent questions the pay of an appraiser it shows a lack of knowledge of the required qualifications and the conditions the appraiser works under.   


Jun 24, 2010 06:05 AM
Brett Pehrson
Advanced Funding Home Mortgage, NMLS#13287 - Salt Lake City, UT

Mary - I have to agree with Elizabeth and Paul here.  The other point that needs to be made is that there isn't a single good Realtor out there who does BPO's without the expectation of getting REO business from the Bank or Management Group they are completing them for.  Could you make a good living just doing BPO's for $50 a piece?  Your payoff for doing this "favor" should be the potential for real business.  From what I understand, that only covers time and travel costs and a Coke at the gas station on the way.  Just because an appraiser does one HVCC appraisal, it doesn't mean they'll get a chance at doing another one or even open the door for them to do more unless they bribe the AMC company somehow to make sure they're picked more often (which I'm pretty sure is happening, too).

Remember that the only thing HVCC has really accomplished is a destruction of free enterprise for good appraisers, poor appraisal quality, declining real estate values, and increased costs and delays to consumers.  Whether you think those things are important, or not, I'm sure you've noticed fewer dollars in your wallet and more consumers being harmed since HVCC's implementation.

Jun 24, 2010 08:13 AM

Most of the comments listed are apparently written by real eatate agents. You no longer have any control over picking the appraiser.  Just because appraisals come in low does not make it a bad appraisal.  Most lenders still have a panel of appraisers they choose and set up with the AMC's.   HVCC has been good for the most part and the more recent AMC's have much higher fees.   I have been an appraiser for over 20 years and it was about time that real estate agents were taken out of the process of picking appraisers to suite their needs.

Jul 05, 2010 04:43 AM

After being pre-approved and given a go on a great piece of property selling for 1/2 of its tax value (then told no because of not being able to get an appraiser out to look at a piece of property), I am very discouraged with the whole appraisal process.  Apparently, the home is much larger than all the rest in the neighborhood and appraisers are refusing to appraise the property indicating there are no real "comps" to compare with.  The house is gorgeous and in beautiful shape.  There are homes in closeby neighborhoods that sell in the millions, but local appraisers claim they cannot use them.  I am really upset over this whole thing and cannot understand why they cannot just use the largest properties in the neighborhood or the other surrounding houses within a few miles or so.

Aug 02, 2010 06:30 AM
Elizabeth Dingler
Independent Appraiser - Seattle, WA

CC, I'm sorry to here about your situation. Maybe I can shed a little light on what could be happening.

First and foremost, all properties can be appraised. Complex properties with few and far-flung comps have to be approached carefully, and the appraisal has to be very thorough and well-supported. Then there's all the driving, and no matter how well-done there will be lender stipulations afterwards wanting this, that and everything explained and repeated. Overall, these types of properties can take 3 or 4 times the hours of a typical appraisal. The problem is that no one is offering a higher fee to cover the appraiser's extra work. We can't help but do some simple math and realize that we can do 3 or 4 regular appraisals in the time it will take do this one, and it's just not cost-effective. I turn down complex work regularly for this reason. Sure, I'll make a bid for what I think is reasonable compensation for the project, but it's rarely accepted. 

Do you know what the fee is that the appraisers who have turned down appraising your property are being offered? Not the Appraisal Management Company, the appraisers themselves. It could be the answer to the issue of no one wanting to touch the assignment.

Aug 02, 2010 07:27 AM

The whole HVCC thing is the terrible.  I think the original intent was good but it has completely backfired. The quality of work from appraisers who are contracted by the AMCs is awful because they now have no accountability. 

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Dec 30, 2010 03:11 PM
Stephanie Zielke
Eau Claire, WI

I just have to say, that AMC's were created because of the unethical appraisers and banks. AMC's have to exist because of what has happened and those people can't work for free. I feel for appraisers who now can't get paid what they use to, but why should the homeowner have to pay more? The homeowner is the one who has suffered the whole time, and now they have to pay more!? They have lost their homes, lost value because of falsified appraisals, and now because appraisers need a babysitter the homeowner is getting screwed again! Wake up and point the fingers at the real "bad people."

Jan 17, 2011 06:17 AM