NEW APPRAISAL GUIDELINES – HVCC
We now have new rules for appraisals effective May 1st 2009 for all conventional, single-family homes that’s destiny is Freddy Mac or Fannie Mae. In effort to curb fraud, padded or wink-wink appraisals we now have HVCC (Home Value Code of Conduct).
Trying to build to a firewall between appraisers and loan offices, many banks have formed AMC’s (Appraisal Management Companies). AMC’s are essentially booking agencies ordering lenders appraisals. AMC”s orders the appraisals from a pool of appraisers that’s rotated in an effort to curb any business relationship between the mortgage brokers or loan officers. Sounds good so far doesn’t it? Should protect you and the banks financial position? Well it’s not by a long shot!!
The problem is the new appraisal guidelines. They are killing home values. AMC’s are also taking a big chunk of the appraisal fee. The reality is only about 50% of what the bank is charging on the HUD is being paid to the appraiser. Good appraisers are leaving the business or not working for AMC’s. With this happening we are now seeing the AMC’s recruiting new or inexperienced appraisers. We’re seeing appraisers from other counties driving over an hour, hired to determine the value and market conditions for homes and areas they’ve never seen the likes of. It’s starting to be a mess and deals are dying that shouldn’t be. I recently had an appraisal come in real low. The appraiser was from Stone Mountain and used comps that weren’t apples to apples by a long shot. One of his comps was over 20 years older than the subject property. In fairness to many appraisers I believe they’re simply using the guidelines provided by the HVCC. But those guidelines to me just do not make since nor are they accurate in regards to the true value of a property. Foreclosures are a major problem for appraisals right now and at least one of them will be used in all appraisals if they’re in your community.
I understand what the lenders are trying to do, but as a broker from North Carolina put it, “It appears to be a horse put together by a committee and the result is a camel”. The new HVCC guidelines are so difficult to understand that Fannie Mae produced eight pages of frequently asked questions; Freddie Mac recently published help guidance also. Obliviously there is confusion!
With the decline in home values the lending industry needs to be sure they’re sending the best qualified appraiser to that property and pay them a fair appraisal fee. This will do more to protect the integrity of the property’s current and future value which they hold a financial position in. Low and inaccurate appraisals can hold the housing recovery back even when we’re seeing stronger demand.
There seems to be fee greed on the AMC’s part, paid for by consumers that aren’t getting what they’ve paying for in many cases. Many AMC’s are owned by banks trying to increase their bottom line and not truly watching out for the customer!! You know the ones that bailed them out!!
