The reason for this memo, a regulatory call to action, deals with a nearly silently adopted regulation which could very well be the most dangerous restriction ever placed on the mortgage industry. It literally threatens to eliminate mortgage brokers almost overnight. We have to act now to stop it, because the commentary period on the proposed regulation ends this Wednesday.
The new regulations came out of a lawsuit brought by the New York Attorney General involving coercion of appraisers by large institutions. In the settlement agreement, the GSEs (Fannie Mae and Freddie Mac), and the Office of Federal Housing Enterprise Oversight (OFHEO) agreed to change national appraisal rules - in exchange for the Attorney General's office terminating its investigation of the GSEs.
Unfortunately, while we believe the agreement has the best of intentions, the hastily written embedded regulations (called the "Home Valuation Code of Conduct", or HVCC) do not solve the problem and in fact severely punish agents, mortgage brokers, appraisers, and ultimately consumers. If there ever was a case of the cure being worse than the disease, this is it.
The two portions of the HVCC that most affect you are:
"The lender will not accept any appraisal report completed by an appraiser selected, retained, or compensated in any manner by... mortgage brokers..." and
"...any person... who is compensated on a commission basis upon the successful completion of a loan... shall be forbidden from... any communications with an appraiser"
No, this isn't a bad dream, and those are quotes directly from the regulation's body. Read them again. You're banned from ordering appraisals and you're banned from even speaking with an appraiser.
Why every mortgage broker should be concerned about the proposed HVCC:
- Brokers are specifically singled out as being "the problem", and are banned from even talking to appraisers at all; that's a RESPA "death sentence" for every relationship you've ever built
- It shifts power toward large institutions and away from mortgage brokers, since the lender alone becomes the sole point of contact for the borrower in critical areas
- Your role as one of the prime coordinators of the transaction will be severely damaged, and handed to the lender
- This completely cuts you out of your role as a broker shopping loans, since the consumer has to either lock in with the first lender or pay for separate appraisals for each lender considered - and ultimately, lenders will exploit that to induce consumers to bypass you completely
- Since buyers wind up paying for a separate appraisal for every lender, closing costs go up, competition goes down, and housing affordability plummets even further
- The business relationships that you've spent years building with agents and appraisers are made worthless overnight
- The entire regulation is biased toward the large institutions and against independent appraisers, mortgage brokers, and agents
- If this becomes law, what part of your value-added role will come under attack next?
As you can see, this isn't just about appraisers. The draconian measures in the HVCC will almost single-handedly eliminate the market for mortgage brokers if left unchecked.
Think I'm exaggerating? Here's what the National Association of Mortgage Brokers (NAMB) said on March 3rd, the day the HVCC came out: "[The HVCC] will create a severe disadvantage to small business mortgage brokers, and prevent them from engaging competitively in the mortgage marketplace ....the National Association of Mortgage Brokers intends to consult with our legal advisors and to take appropriate legal action if necessary." And in a separate call-to-action email on April 25th, from NAMB's president, there's this simple warning as well: "This may be the most important issue facing our industry today."
Indeed, indeed. I couldn't agree more. But you can do something to stop it. By every means necessary, you need to contact the powers-that-be and tell them how opposed you are to the HVCC.
You can do so right now by simply visiting our website and using our convenient political action page to make your opposition known instantly. Your voice will have a huge impact on the OFHEO, Fannie, Freddie, and Congress. All you have to do is click here: https://www.alamode.com/action/default.aspx?m=6
Why are we involved? Any threat to you is a threat to me. Over 30,000 mortgage brokers use my company's websites and tools. And all told, over 100,000 agents, appraisers, and mortgage professionals use our products.
Unfortunately, all the software in the world won't make this latest problem go away. But 100,000 people collectively voicing their opposition to poor regulations - now that can indeed make a difference. Join me in sending a message to Washington, without making any donation or spending any money at all, by just using your mouse. Join us now in sending a clear message by visiting https://www.alamode.com/action/default.aspx?m=6
Thank you in advance for your help.