HVCC and Me

A perspective on the HVCC (Home Valuation Code of Conduct) from loan officer and colleague Randy Sawyer:

HVCC has been all around the blog world and the press of late. When it first rolled out on 5/1/09, HVCC reminded me of 10CC in that “I’m not in love” came to mind. After having experienced some of the ramifications of the HVCC, I offer this as an originator.

While I think the idea of an HVCC is good, I am not sure the idea is producing the desired outcome. An appraisal should be a justifiable and objective report. Whether there is the HVCC or no HVCC the goal of the appraisal is to quantifiably report a realistic property value. This protects lenders and borrowers which is a good thing especially these days.

Allow me to enumerate some issues I do have with this new process. First of all, appraisals now cost more money as there are more moving parts in the process, ranging from lenders, Appraisal Management Companies and their staff, the actual appraiser, and loan originators. This has ultimately added expense to the appraisal process, generally anywhere for 10% -20% more than this time last year. So the customer and/or the loan officer are straddled with the extra expense. Unfortunately, the appraisal now has to be paid for via credit card which can hurt a borrower who has no credit card, no credit limit left, or keeps a balance that will accrue more interest charges. I suppose one could dispute the charges for good reason, but that’s another issue.

Secondly, the process can take a little longer. An appraisal used to take a week, now it is probably closer to two weeks. Not a huge difference, but maybe enough of one to delay or derail a conventional mortgage loan.

Finally, we as originators are not allowed to have any contact with the actual appraiser. Sure we can call the AMC (Appraisal Management Company) but not the actual appraiser. Hence, more layers, more potential delays. I could go on about more disclosures needed with this new process, but that is really my problem not yours.

The Home Valuation Code of Conduct In Full Effect

The HVCC, or Home Valuation Code of Conduct (link: Fannie Mae FAQs), went into effect on Friday, May 1, 2009.

Michael wrote about its imminent arrival in an April post as the National Association of Mortgage Brokers (NAMB) had just announced the withdrawal of their lawsuit versus FHFA, thus ending their legal battle against the HVCC.

After months of preparation by lenders and appraisers alike, we're just past the May 1st start date and now submitting files according to the new guidelines. At this point, any appraisal ordered or paid for by loan production staff members (loan officers and processors at brokerages and banks alike), homeowners or real estate agents will not be accepted by Fannie Mae or Freddie Mac.

While NAMB was vociferously opposing the Code, the reaction was mixed in the appraisal industry (as far as I could see).

But the grumbling in the appraisal industry is picking up: HVCC Appraiser Talkback Survey: What's Really Going On? (Appraisal Scoop, April 30th)

The intentions of the HVCC were admirable. Everyone wants a better appraisal system. The reality of the new rules? So far the biggest beneficiary has been AMCs, or Appraisal Management Companies - the companies through which lenders order/pay for appraisals. Business is booming for them. Borrowers pay $50-75 more for appraisals, the AMC takes their cut, and the appraiser gets paid approx. $100 less for the same report they did back in April.

But I guess only time will tell if the HVCC is the appraisal panacea, or if it was just an ill-conceived solution to a complicated problem.

Full Steam Ahead for HVCC

The National Association of Mortgage Brokers (NAMB) announced today that they were withdrawing their suit against the Federal Housing Finance Administration (FHFA) to block the implementation of the Home Valuation Code of Conduct (HVCC). 

What this means is that the HVCC is coming.  Nothing is going to stop this train.

The intent of the HVCC was to clean up the appraisal process, to keep loan officers from exerting pressure on appraisers to inflate home values.  It attempts to do so by separating the loan originator from the appraiser.

Starting May 1^st, mortgage brokers will not directly be able to order appraisals for borrowers.  They will have to use national clearinghouses to make the order. 

Thus, the new process puts another middleman collecting his ounce of flesh in the process.   Additionally, appraisers will feel less need to be competitive, as their services will no longer be “shopped.”

It will make the process more expensive to the borrower.  And it is unclear what benefit the consumer, or the housing market, will reap from these new regulations.

The NAMB claims their withdrawal was done for strategic reasons.  It hopes to assess its legal options and challenge the HVCC through various means.  I hope they find this route soon.

NAMB press release.

More on HVCC.

Friday Links 1/09/2009

Life around the office has been busy lately. Understandably, the lowest mortgage rates on record are making everyone want to refinance (and a few to purchase). We're in a "refi boom". And from our perspective it appears to be picking up steam.

But it's also cutting into my blogging time. So here are some links :-)

Mortgage Rates Set Another Low (Housing Wire, 1/08)

Bernanke's buzz killer: China Losing Taste for Debt From US (NYT, 1/07)

Realtors Slam New Fannie Mae Fees, Bloggers (thetruthaboutmortgage.com, 1/05)
"Realtors slam..." is a over reaching and a bit harsh. "NAR has issues with.." is more like it. NAR's "downpayment clarification" from Dec. 31, 2008.

BOE Cuts Rates To Lowest Since Bank's Creation in 1694 (Bloomberg, 1/08)
The Bank of England takes a cue from the FED.

I received an email from Fannie Mae (that doesn't make me special - you can get on their email list if your so inclined) on Thursday. The HVCC, or Home Valuation Code of Conduct, has been amended and will be implemented May 1, 2009. Here's their announcement with FAQs.
Also reported on at the Appraisal Scoop (01/08).

Local:
Some PHA clients escape foreclosure (C-ville Weekly, 1/08)

Jim Duncan on the problems with Charlottesville's housing market (cvillepodcast.com, 1/08)

Video: Today Show on UVA's Ranking (UVA Today News Blog, 1/08)
Meredith Vieira: "... and number one is the University of Virginia, a fantastic school."