For the last several months we have been grumbling in this space about the Home Valuation Code of Conduct (HVCC) and the horrible impact it is having on the market. It’s a poor deal for the consumers it purports to protect and it should be revoked. However, that has not stopped the impact it has had on the day to day activity here at America’s Mortgage Choice.
We used to spend time on appraisals. Lots of time. We never realized how much until the last few months. Here is what the appraisal process looked like before the passing of the HVCC:
- Check the comps with the appraiser in advance to make sure the transaction made sense and the consumer was not wasting $300 on an appraisal that would not accomplish their goal.
- Relay that information to the consumer who normally would also feel that this was a “commitment to value” on our part.
- Collect the fee for the appraisal from the consumer and pass it on to the appraiser.
- Ensure the appraisal got ordered from the individual that did the comp check.
- If there was a delay in the process, field the consumers calls on the question “the appraiser has not called me” as well as the calls to the appraiser on “what’s the status of the appraisal since you were out there long enough that the report should be delivered”.
- Relay messages of argument from the underwriter who felt the appraisal was “too aggressive” to the appraiser who felt that the underwriter was being “ridiculous, silly or unrealistic in their perception of the market”
- Argue with the appraiser that additional comps were a reasonable request.
- Argue with the underwriter that additional comps were an unreasonable request.
- Eat the costs for a second opinion (appraisal)
- Eat the costs for a review appraisal.
- Discuss with realtors and mortgage applicants why the appraiser did or did not use certain comps and thus did not “hit the number”.
- Receive the blame when people thought that “our appraiser” was not getting the job done.
Now few of these (maybe number one and three) really were part of our job description but we were accepting all of the work and blame associated with the appraisal processes. Well no longer. In the name of consumer protection, all of this has been pulled from the mortgage broker.
In fact, now the rules prohibit us from comp checks so the homeowner’s opinion of value, which is usually a bit high sets the preliminary numbers we work with. Realistic or not (and most folks have a slightly unrealistic view of their own home value) we have to start somewhere. Now the process looks like this.
- We guess at the value with the consumer up front.
- We place the consumer’s information into the lenders appraisal ordering system.
- The lender’s appraisal service (which they own a chunk of usually) charges the consumers credit card for $400-$500 bucks. Consumer protection is not cheap you know.
- We wait for the appraisal to show up.
- We send it to the lender, or don’t when they show up with low ball values.
We no longer find ourselves in the middle of arguments. It’s nice that we have freed up all of this time but it’s hurting consumers by reducing values (since the banks now want conservative appraisals), and eliminating the help that everyone was supposed to be getting when the Obama Plan to reduce rates and liberalize the ability to refinance bad financial situations was introduced.
The bottom line is that until the HVCC is revoked or otherwise eliminated several problems will not go away:
- Foreclosures. If people with problems cannot refinance they will lose their homes.
- Housing Market. Will not improve if HVCC prevents buyers and sellers from doing business at agreed upon prices.
- Economy. Will not recover if the people who earn a living in it have their closed transactions reduced by the deal killing HVCC.
- More Economy. Non distressed borrowers cannot refinance and save. Savings that they could spend which would help the rest of the economy becomes money they must spend on debt service and thus the big banks win again.
Consumers are being damaged by this and we welcome our problems back anytime.
