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First and foremost, I am writing this letter to ask you what your TRUE intentions are... Since beginning using this Standard, I have had ZERO ROV requests. Appraisers, the latest ‘buzzword’ around appraising is Standard. We’ve got to have a Standard for measuring a subject dwelling, even though the comparable GLA reported figure may have been measured far differently from the new soon-to-be mandated Standard.
Dear HUD, recently, within the past year or so, you have been on a crusade to prove discrimination and racism in the appraisal process. Your actions haven’t gone unnoticed by many within the appraisal profession as well as outside it. It’s become clear that you are the go to organization for complaints. Please read this in its entirety and see my thoughts at the end before making a judgement. The reason I am writing you this letter is for a couple of reasons.
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This is probably not what you were expecting to hear, but HVCC has actually been a catalyst to take my business to the next level. Look, I’m not an HVCC groupie by any means, but rather than focus on the problems created for the appraisal industry due to HVCC, I have worked hard to expand niche areas of business instead. It’s in my DNA to find solutions – whether with business or community involvement. The HVCC portion of the suit, was written and implemented without challenge.
And yes, you can still have conversations with appraisers about your listings and the neighborhood market – just don’t pressure to “hit the number”. HVCC came about because people in and around the mortgage industry felt that loan officers were strong arming appraisers into creating false values or inflated values to get loans done. The idea went like this, the loan officers would threaten the appraisers that if they didn’t “stretch” the value they would no longer get business from that source. Believe me, many times this was true and if the appraiser complied, he was in violation of many existing rules and laws. Appraisers are licensed professionals who must at all times adhere to a code of ethics. For those that didn’t , well this is the reaction.
Home Valuation Code of Conduct: Y2K of Appraising?
Created by the Appraisal Foundation, USPAP set forth the guidelines for how appraisers should perform their work. By following these standards, appraisers ensure that they act in a professional and unbiased manner. To expand, even more, USPAP states, “While USPAP does not... A real life illustration as to the impact of the Home Valuation Code of Conduct on the appraisal industry is The Appraisal Corp in Orange County CA. The firm was founded in 1988. In 2006 the firm employed a staff of approximately forty professional and clerical persons. Many of the employees having been with the firm from its beginning.
The HVCC prohibits mortgage brokers and real estate agents from selecting or paying appraisers. Instead, lenders or third-party companies selected by the lenders are the only parties allowed to contact, retain, and compensate appraisers. This adds a buffer between the appraiser and the interested parties trying to close the deal.
What is the Home Valuation Code of Conduct (HVCC)?
Here’s a one-minute video I did while at the Vendor BBQ. If an appraisal came in lower than the purchase price, the loan likely would be denied. Since loan origination staff is typically paid by commission, a failed deal meant no paycheck for them. If that happened too many times, Frank says, lenders stopped sending the appraiser work. I get asked quite a bit about HVCC and how I feel about it, so I wanted to offer my two cents.
Starting April 15, all good faith estimates provided to applicants must indicate a flat $455 charge for appraisals arranged through the appraisal management company. Consumers will now have to pay the appraisal fee upfront -- before any inspection or valuation is completed -- using a credit card, debit card or electronic fund transfer. The thought is that now the loan officer and appraiser have no contact, so that no pressure can be placed on the appraiser to inflate values. This may be true, however if a licensed appraiser was submitting false values for the sake of more business he or she was already committing a crime that we have laws in place for. This HVCC rule only helps the lenders and owners of the AMC’s. Lenders are pressuring AMC’s to be conservative when appraising homes in a declining markets and leaning towards appraising homes at the lower end of the spectrum.
Appraisers have no way of controlling the apples to oranges dissimilarities. For clarity, the code was inserted as a portion of a lawsuit filed by NY Attorney General Andrew Cuomo against Federal Government controlled FNMA and Freddie Mac. Even though a small part of the entire suit, the AG's office widely publicized that portion. Many who researched the background of the suit came to the same conclusion. It appears the then AG Cuomo was under investigation for unaccountable billions of dollars missing from the coiffures at HUD during his time in charge of the Dept.
The only people who benefit from this rule are the AMC’s, the large banks that own them and the bureaucrats who got paid for months working on this rule to justify their job. In the meantime, here is a small sample of the aggregated data we will provide. It's the VA appraisers turn now to enjoy what the rest...
There is no correlation to the loss of employees to HVCC. The correlation is the loss of employees is a direct result of a market crash. Starting on May 1st, Fannie Mae and Freddie Mac will not purchase mortgages from Sellers that do not adopt the The Home Valuation Code of Conduct . The intention of the code is to insure the independence of the appraiser. HVCC will be phased out over the next 90 days, with the end of October closing this sad chapter in real estate housing history. In today’s Buzzcast, we dive into the Home Valuation Code of Conduct, where it began, and how it’s viewed today in the industry.
In days past, loan originators would develop relationships with local appraisers who knew their market and conducted the appraisals required for consumers to obtain loans at various lending institutions. We would tend to try several appraisers and find out who do a better job at the most competitive price. Personally I would look for appraisers that had good people skills, were professional, friendly, on time , diligent and knew their local market. I would also expect the work to be done in a timely fashion and would also look for someone who understood that sometimes certain jobs needed to be rushed when the situation called for it. The Home Valuation Code of Conduct is a set of federal guidelines designed to make the home appraisal process more reliable.
Believe me, appraised values on residential homes is more art than science. The old saying was that an appraised value was just one man’s opinion. Send 3 different appraisers and you will probably get 3 different values. So enough background, here is the problem for consumers. Lower values equal higher interest rates and we know who benefits here.
Rules to cover rules are usually designed to protect the corporate interests in this country and not the consumers. We need to enforce our current laws to the fullist before creating new ones. I feel bad for the veteran, quality appraisers who are now out of business and the consumers who were forced to pay for 3 appraisals just to try a get a good mortgage loan. Frank Garay with National Real Estate Post interviewed Mark Skapinetz on Monday May 17, 2021. They discussed racism, entry into the appraisal field, appraisal fees and appraisal waivers. Frank intends on having Mark back to discuss other issues at hand within the appraisal industry.
While reading comments to a post in another blog, I picked up the quote “They meant for the acronym HVCC to be pronounced “havoc” right? ” It’s been used as the tag line for nearly all of my blog posts about the HVCC. I’m please to have found you as the source, and made the attribution tonight, along with a link to your podcast.
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