HVCC: Appraisal Rules Are Posing a Challenge
By Robert Freedman, Senior Editor, REALTOR® Magazine
Since taking effect on May 1, the Home Valuation Code of Conduct (HVCC) has been a source of considerable concern among NAR members, both sales professionals and appraisers. The new rules were forged in an agreement between the New York State Attorney General and the two secondary mortgage market companies, Fannie Mae and Freddie Mac. The two companies’ federal regulator, the Federal Housing Finance Agency, weighed in on the agreement, too.
By now the main concern is widely known. The rules create a hard firewall between those who underwrite loans and those who hire appraisers. So, many lenders, even though they can hire appraisers themselves if they put appropriate safeguards in place, are choosing to work with appraisal management companies (AMCs) to select appraisers.
A survey of NAR members finds that, as a result of the increased use of AMCs, fees to appraisers are going down, appraisals are taking longer, and, perhaps most importantly, deals are falling through when appraisers are chosen who aren’t familiar with a market area.
In the video above, Jerome Nagy, NAR’s policy analyst on the issue says it’s crucial for sales associates to let appraisers know when they perceive an appraisal is missing information or contains errors. There’s nothing in the HVCC rules that prohibits such communication.
Nagy also explained what NAR and other industry groups are doing to resolve the issues. Quite a few things are in the works. Watch to find out more.
From the sounds of the “better, more experienced” appraisers in this thread they are the ones doing all the out of area work. 90% of the “better more experienced appraisers are accepting the low fees. So they are going to give you low fees what the **** do you expect? Stop whining for God’s sake and do not accept the low fees. You all sing about free market capitalism so what do you think is going to happen if you cannot turn down a cheap order? YOU ARE GOING TO KEEP GETTING CHEAP ORDERS!
In reference to the new Appraisal rules closings and financing are driving us up a wall. Due to lack of communication, Appraisals are not scheduled with in time limits, nor (with new homes and Bank owned) they are not checking with Agents as to Utilities being on even when they are given numbers for agents. Also we now need to have time limits up to closing date.
This is costing us closings and clients money.
Yet another government solution that is anythng but a solution. Not only unexpected consequences, but not solving the original problem and going overboard. ( and isn’t this the same government that wants even more control over our healthcare and the process to get it? )
Look at the listing prices of properties and then look at the sales prices of the same properties and then tell me about bad appraisals.
Offers being accepted for 10, 20, 30, 40 and 50% less than listing price, and then the appraisal is in question.
Give me a break.
Many of you need to realize that the authors of the HVCC were NOT appraisers, everyone on board were Bankers, AMCs, Secondary Market execs -did you see me type an appraiser?…NO NO Not one we need a loud voice! We werent invited to the table to explain the plight and consequences.
The HVCC’s were around when the industry was ripe with fraud, they are here now, what is wrong that picture? They are still using the inexperienced , “yes man” appraisers. Still pulling the strings.
It seems like only a few months ago that appraisers were being blamed for the housing bubble bursting due to inflated appraisals. Now appraisers are being blamed for hindering the recovery of the housing market because they won’t inflate appraisals. Soooo, which is it??? I say pick a position and stick with it. Those who are complaining about low (realistic) appraisals and can’t contact the appraiser to discuss (pressure) the appraisal who’ve had their “cheese moved” ought to read the book “Who Moved My Cheese” and learn to do business in the new RE environment, we’re not ever going back…
When an appraisal comes in less than it cost to rebuild and less than what the insurance industry deems (required coverage) – there is a problelm. No doubt about that. Now that we know there is a problem, let’s look at how to fix it.
Given the task at hand, wouldn’t it seem an intelligent decision to have the appraisers come up with a plan, present it the various stakeholders. How about this – give them a timeline 90 days PERIOD. REVIEW time 30 days. No salary, no benefits until its resolved. Come on lets have some incentives to get the job done.
We all are attempting to feed the economy. As they would say in Brooklyn “cut the crap and get it done already”
There is something very wrong when you get paid less to do more work.
I agree the appraisers should be very familiar with the area in which they are working! ! I was involved in a Short Sale where the bank sent an appraiser from over 150 miles or more from our area. He went though the motions of his appraisal & valued the home at the exact amount as a home just put on the market ,when on the next street a property just like my listing had been for sale for a long time and was listed more than six thousand dollars less!! This amount could have just made the difference in closing the deal or having it all fall apart at the last minute!! Esp. when it has so hard to qualify client .
I just found out today that a house that I have under contract for $405K came back with an appraisal of $247,000!!! That is so ridiculous. I have had three offers on the house (I’m a Realtor) in excess of $375,000 within the last two months. My sellers will not be able to sell this house, since they owe $360,000 on it. I am so frustrated and these appraisers really do not know what they are doing!
Gloria Singer
Lang Realty
Boca Raton FL
Liz Iaconetti says:
August 15, 2009 at 8:15 pm
“When an appraisal comes in less than it cost to rebuild and less than what the insurance industry deems (required coverage) – there is a problelm. No doubt about that. Now that we know there is a problem, let’s look at how to fix it.”
Liz,
Why don’t you explain to everyone how that is a problem? Can you back up that claim with some usefull information besides the usual drivel? How is it that you think that when the appraisal comes in lower than the cost approach (which is part of the appraisal by the way) that there is a problem? I would love to hear any responses from the realtor “pros” on this one.
Gloria Singer says:
August 16, 2009 at 11:54 pm
I just found out today that a house that I have under contract for $405K came back with an appraisal of $247,000!!! That is so ridiculous. I have had three offers on the house (I’m a Realtor) in excess of $375,000 within the last two months. My sellers will not be able to sell this house, since they owe $360,000 on it. I am so frustrated and these appraisers really do not know what they are doing!
Gloria Singer
Lang Realty
Boca Raton FL
Wow you guys like to yack alotbut you obviously have attention deficit disorders and are unable to listen over 3-5 seconds. I give up.
George hit the nail on the head when he stated that experienced (intelligent) appraisers have or are leaving the business to the inexperiened. In time even the inexperienced will be forced to concede that they are not turning a profit but rather paying to work in the business. They essentially have 4 options: 1) Take their losses and close their businesses, 2) Live off of the good graces of a spouse or family member, or 3) Come face to face with the cold hard facts of reality vs wishing (bankruptcy court should do the trick).
If you are a residential appraiser, don’t waste your time wishing that things will change for the better. Invest your savings in another venture (preferably one the government cannot ruin) and get out of this flea bitten business.
This whole mess with appraisals come from years of greed on and mismanagment with regard to lending practices. As per the norm, once our goverment does react ,it overreacts and creates a quandrey of rules and scare tacticts to get the system in line. It has now forced good appraisers into situations that they are afraid to do the job that they were hired to. It has put the sellers of properties in conflict with their realtors with regard to pricing the home correctly for the market. We all know that there are gray areas with pricing a home, however, a good agent will demand good information before they price and list a home. If we have to throw money at something, throw money into local, regional inspectors that monitor home pricing. This will give the appraisers a fair chance of being accurate and not presured and will weed out the ones that are not concerned for the well being of an area they are not familar with. There is entirely too much inconsistancy in the appraisal field and this would tighten up the field a bit.
Hi guys and gals:
Know one thing—-the market value of the properties you list has nothing to do with
(1) how much the home owner owes on the mortgage
(2) What the property is listed at
(3) what the contract between the parties stipulates .
(4) the # of offers you have on the property
(5) etc,etc,etc.
SO———stop getting fustrated and angry and discouraged and fed up with the appraisers. Their research and analysis of the market activities in the neighborhood point them in the direction of the value.
It is amazing at the context of some of these messages. In a nutshell, BLAME THE APPRAISER!! I am a Certified Residential Appraiser going on my 19th year. As with RE agents, the first few years are spent developing relationships, trying to get clients, Hitting the sidewalks, banks, credit unions, whatever it took to “sell yourself”. I have had many good years as an appraiser, some even lucrative. I have enjoyed the people that I “worked for”, although not as an employee, knew specific likes and dislikes the lenders or banks wanted indicated in the verbage of the report, ie: “the sales appear to have been arms length transactions”, or “The net and gross adjustments are within FNMA guidelines”. I knew who wanted what and did the best reports I could for them. There was never pressure, never threats and the estimated value was it. Period. They never called to complain. They believed I was professional enough to know what I was doing, used the same MLS system the agents and brokers do, and I am sure there were times, if unhappy, most likely reordered through another appraiser that was more
“aggressive”! Now, with the HVCC being implemented, I have lost all those clients. Each one I developed relationships with (not personal), ones I had for over 15 years, clients who knew they would receive an appraisal with all their requirements (requests!) and now…………..POOF!! They are all gone. Had to find AMCs to work with and hope to receive enough orders to survive. Since May 1, my work is down by approximately 80%. Not too good for paying bills. I am sure some agents are upset when a number is not “hit”, but be on our end. Would you like to have all your clients taken away?? Told you could not talk to anyone?? Given 4 or 5 clients a month instead of 25-30?? Lose all the clients you have gotten to know over the years and most likely have sold them all their homes and listed their homes and maybe their family members?? Would you like more paperwork added to what you have done for years, then be told you will receive less money because the AMCs need a percentage? How many agents and brokers would tolerate this? Or any profession for that matter?? Yet, appraisers were what I feel “punished” for things that were never appraisal issues to begin with. Clinton wanted SubPrime Lending. Loan originators falsified w2s so people appeared as though they could afford the home. And…….I know some appraisers “hit numbers” to appease their clients. But now, all of us are blamed and were made to follow new rules they may cause many appraisers to seek other work, work two jobs, whatever it takes to survive. Complain all you want about appraisers ruining deals, having low values………what’s the saying….Walk a mile in OUR shoes……
I have been a certified appraiser in the state of Massachusetts for almost 20 years. Over the past year, mortgage originators were required to become licensed by the state. The fallout rate was approximately 60% due to failed backround checks. The #1 reason was for insufficient credit scores. The #2 reason was, you guessed it, felony convictions!!
As I understand it, the HVCC was created by the New York Attorney Genaral’s office as some type of plea deal with a national lender and a national AMC (Appraise IT) to avoid prosecution for mortgage fraud. As a result of this deal, mortgage companies are required to use AMS’ or other “buffer: groups to insure appraiser independence and to avoid pressure to inflate values. The entire cost of these entities has been passed on to the appraisal industry through substatially lower fees for the appraiser and higher fees to the consumer. No contributions from the lenders that we bailed out. Try that with the Teamsters. I work with AMCs’ for a portion of my business and have found that several are calling me back and requesting higher values to make the deal work. Sound familiar? The AMCs’ are an unregulated group and appear to conduct themselves as an advocate for the lenders. This is reform? Give me a break!
If the use of AMCs’ as part of reform is to work, they need to be regulated the way that appraiser’s and realtors are. The state of Arizona has done this and appears to be on the right track.
Get back to work on this and get it right New York!! You are the New York Attorney General’s office, not the New York Yankees!!
James, feel free to weigh in at any time!
A home value should be based on whatever somebody is willing to pay for it, not the opinion of an individual. Inspections are there to protect the buyer from unseen damages and concerns. It’s ridiculous that individuals are dictating the price of homes.
James says:
It seems like only a few months ago that appraisers were being blamed for the housing bubble bursting due to inflated appraisals. Now appraisers are being blamed for hindering the recovery of the housing market because they won’t inflate appraisals. Soooo, which is it??? I say pick a position and stick with it. Those who are complaining about low (realistic) appraisals and can’t contact the appraiser to discuss (pressure) the appraisal who’ve had their “cheese moved” ought to read the book “Who Moved My Cheese” and learn to do business in the new RE environment.
James,
Learn your history and get your facts straight. HVCC was created as a backlash against Washington Mutual pressuring Appraisers (at the corporate level) to inflate appraisals. NY sued WAMU and Cuomo started pushing for HVCC.
The inherant problem and oxymoron with HVCC, is that all of the Major Banks OWN the Appraisal Management Companies (AMC). Ergo, they get to choose their appraisers and then pressure the AMC to up the value if needed. Sound familiar? The independent mortgage brokers arent allowed to own an AMC and have to use whoever the lender tells them to which leads to inexperienced appraisers setting the values and getting a rubber stamp by a minimum wage clerk.
HVCC can be repealed, you all just have to get off your A**es and call your Congressman and Senator and pressure them.
Checkout: http://www.hvccpetition.com/ to read more stories of these “Realistic” AMC fubars.
Regarding AMC’s….Why are the appraisers the only ones who take a pay cut? Why isn’t some of the cost to hire the AMC absorbed by the mortgage company? No one has been able to anser this question for me. It’s completely unfair.
I was an extremely ethic and professional Certified Residential Appraiser with 11 years of experience and many clients nationwide. I got out of appraising 10 months ago for a better opportunity. It’s a shame what is happening. Although this mortgage crisis was completely predictable, nothing was done about the fraud until the bottom dropped out. Too bad there weren’t more proactive actions taken to prevent all this lender fraud. Greed, greed, greed. Glad I’m not directly in it anymore, but indirectly we are all affected.
I bought a bank owned property in Dec 2008 (on the market, not short sale or courthouse)and self financed 40K worth of renovations on the home. For the last six weeks, I have been battling with Wells Fargo Mortgage about the newly appraised value of the home (done by a local licensed real estate appraiser chosen by the lender)
Now I have an appraisal value, a bank underwriter determined value, and a tax assessor value all of which are at least 30K apart from each other … WHAT GIVES?
The bank underwriters have unilaterally deemed the house to be worth 63K less than what the appraiser valued the home in july (with strong comps in the neighborhood including one comparable sale on the same street within 1 week of the appraisal.)
I am not sure if appraisers have been in cahoots with banks, but it seems to me we also need to examine what the bank property underwriters are doing (they seem to want to be holding on to that tax payer cash they got last year!
I agree with the Sept 1st comment. The Underwriters are holding us hostage.
An investor buys this subject home from the Bank; which was listed with a Realtor for $9,900.00
Investor pays $16,000.00 after all the bidding wars are over. He re-vamps it to the tune of $25K or so in improvements. He puts it on the market For Sale By Owner for $59,900.00 (going prices in the neighborhood is $50-$70K). My buyer clients and I present our offer to buy the 5 bedroom home for $59K. 30 days have passed, closing day went by and an extension has now been put into place. PROBLEM: the Underwriter can not accept the fact that the investor paid $16K for it in Feb of 09 and is selling it in July 09 for $59,000. Seller had to itemize each and every improvement made, supply Underwriter with receipts for carpet, paint, shingle, ply wood, drywall, etc etc….This is an FHA deal, appraised for $60K now the Underwriter has ordered ANOTHER APPRAISAL which made my FHA buyer client shell out another $350 for the 2nd one. My problem is….why is the Underwriter waisting our time with a 2nd appraisal for something that happened one Seller ago?? My buyer client was to get the keys Aug 28th, is living out of packed boxes and is waiting her fait by the Underwriter. I have never seen such a mess and how afraid everyone is to declare value. What a crock!
James says:
It seems like only a few months ago that appraisers were being blamed for the housing bubble bursting due to inflated appraisals. Now appraisers are being blamed for hindering the recovery of the housing market because they won’t inflate appraisals. Soooo, which is it??? I say pick a position and stick with it. Those who are complaining about low (realistic) appraisals and can’t contact the appraiser to discuss (pressure) the appraisal who’ve had their “cheese moved” ought to read the book “Who Moved My Cheese” and learn to do business in the new RE environment, we’re never going back…
Brusbob says:
Learn your history and get your facts straight. HVCC was created as a backlash against Washington Mutual pressuring Appraisers (at the corporate level) to inflate appraisals. NY sued WAMU and Cuomo started pushing for HVCC. The inherant problem and oxymoron with HVCC, is that all of the Major Banks OWN the Appraisal Management Companies (AMC). Ergo, they get to choose their appraisers and then pressure the AMC to up the value if needed. Sound familiar? The independent mortgage brokers arent allowed to own an AMC and have to use whoever the lender tells them to which leads to inexperienced appraisers setting the values and getting a rubber stamp by a minimum wage clerk. HVCC can be repealed, you all just have to get off your A**es and call your Congressman and Senator and pressure them.
Brusbob:
I don’t recall mentioning the HVCC once in my post (included above)…nope, just re-read it and sure enough the HVCC isn’t mentioned once…
I also noticed something in your post that troubled me, you said: “…appraisers setting the values…”. Appraisers don’t SET values, they REPORT opinions of value. I wonder if this fallacy is part of the increasing disconnect between RE professionals?
Re: the relationship between AMC’s and the HVCC…I completely agree that AMC’s have diluted the theory behind the HVCC. My personal belief is that a set of rules that creates a buffer between interested parties (those who stand to gain from a pre-determined opinion of value) and the appraiser is a good thing. The problem with the HVCC, in my humble opinion, is in the implementation.
So, that leads me to another question, if the current HVCC isn’t effective and we certainly cant go back to no ‘firewall’…shouldn’t we all be using our brilliant minds to propose new ideas to alter the current HVCC or create a new HVCC that does work???
THIS IS ONE ,I HAVE A REFINANCE CLIENT PAID 135,000.00 FOR THE PROPERTY IN 2007 AND THEY WAS $6000.00 IN UPGRADE. THERE WERE TWO PROPERTY SOLD IN THE SAME AREA . THEY SOLD IN 2008 FOR 127,500. AND THE NEW APPRAISAL CAME BACK WITH A 127.500.00 VALUE. ALLTHOU THE APPRAISAL SAID THAT THE MARKET AREA WAS NOT IN A DECLING MARKET. SO WHY DID THE APPRAISAL COME BACK AT 127,500.00 VALUE .SOMTHING IS WRONG WITH THIS .ALSO THE APPRAISAL WAS 120 MILES FROM THE AREA .THIS IS A 1HOUR 45 MINUTES DRIVE ONE WAY.
I am a residential appraiser and I am with the other appraisers on this post. I have lost 80% of my business. I have to consistently call these AMC’s for my money which I should have received 40% more for and collected it at the door.
The realtors on here on blaming appraisers for low values, guess what, appraisals are based on facts and closed transactions. Listing prices are not. When a realtor calls me complaining about an appraisal, I tell them to find me some comps. Not the comps that are 1,000 sq. ft. larger, or that are on sites 3 times as big as the subject or located 4 miles away when there are plenty of sales in the subdivision. Real comparable properties. 90% of the time they are not comparable.
Much more work for appraisers with the 1004MC and 50% less money and having to wait for it and make tons of phone calls to get it. How can we not collect our own fees and be able to discuss issues with the property to other “professionals” involved in the transaction?
I don’t agree with having an appraiser from a 2 hour drive away, but how are we supposed to make a living?
There are some companies that have a computer that tells me how to do an appraisal. What about my 8 years of experience? How is an appraiser supposed to even get in the business when no one will accept a report from a trainee. They all just want a one man show that will be at their beconing call when they want a $175 appraisal.
The government should be sued by all appraisers!!!!
I saw the perfect house for me so I gave an offer at the listing price. Paid the earnest and loan app. fee just to find out it appraised $9,900 less than offer and $4,000 less than the seller bought it for in 2001. This home has a new(less than 1 year old) roof and new siding. Either the seller refuses to believe it is a buyers market thus overpricing or we have an appraiser that is scared due to the new rules. Am I the only one that smells a rat ? I will ask the seller to go down to the appraised value but I doubt that will happen. It is no wonder why the housing market is rebounding so slowly.
The cost to reconstruct improvements is going to be higher than the current market at this time. We just had a housing crash or correction in which demand is lower than supply. This doesnt neccesarly mean that the cost of materials is going to crash right away with the market! The cost of material is still at previous market but it is starting to decrease along with labor.
I belive that the HVCC, even though the concept is good, creates a situation were it blames the appraisal process when the blame lays with senate finance and the lax of lending standards. Appraisers should not be coericed into value they do not feel comfortable with, but they should also be trusted in delivering the market value. Not to say that there are not crooked appraisers, there are many more honest appraisers than crooked. The crooked appraiser usally dont last long in this business.
I am a Realtor in Michigan and wonder why 3 out of 4 of my sales that have used an AMC in the last 60 days, appraise for 10% less than the agreed sales price? The 4th sale (the few that have no appraisal problems) are ALWAYS bank owned ranging in price from $60,000 to $300,000. Why do my forclosed sales always appraise and the privately owned ones never do?
It seems that the government ,once again swooped up the chance to take control over yet another issue when were in a vulnerable place.
It is important that everyone in this industry sign the hvcc petition!
So many complaints.
Lenders order from the dollar menu and expect a half pound angus steakburger with all the trimmings. Keep hoping, it is not going to happen.
And going through exploitive middle-men doesn’t help.
There are three levels of appraisers: Licensed residential (green belt)
Certified residential (brown belt)
Certified General (black belt)
The lenders and their puppet AMCs expect black belt work from green belt appraisers.
So, what is happening now?……………. Enjoy!
To learn more about the HVCC scam (and how to stop it) visit http://www.investsmart.com