Home value

The HVCC, in its current form, contains select language that hurts brokers, agents, appraisers, and consumers.

The underlying story is how well this story has flown under the radar. A handful of appraisers, agents, and mortgage brokers I have spoken with were either unaware or vaguely aware of the HVCC and its implications. Unlike legislation moving through the Senate and House, the HVCC has received very limited coverage. While we are acutely aware that with less then 36 hours until the feedback deadline meaning a petition may be a bit late, we are also aware that you miss every shot you don’t take, that is why we ask you to join us in signing the Petition to Reconsider HVCC.

History:

After an investigation by New York Attorney General, Andrew Cuomo into Fannie Mae and Freddie Mac Appraisal practices, the agencies (with the Office of Federal Housing Enterprise Oversight (OFHEO)) agreed adopt new changes to how appraisals are processed in the mortgage industry in exchange for an end to the investigation. The centerpiece of the agreement is the HVCC, which contains many positive and common sense initiatives to help clean up the industry, but also contains significant negative changes to the how brokers and agents are able to work with appraisers and how appraisers are able to operate, hurting consumers, mortgage brokers, agents, and appraisers.

What it means for Brokers:

1. Brokers (or anybody compensated on a commission basis upon the successful completion of a loan) may not choose appraisers to be used for loans they originate and may not engage in any communication with appraisers. Choosing appraisers and all communication with appraisers is delegated to lenders. This means that brokers are not only not allowed to choose appraisers based on quality of work and professionalism, but ultimately lose control of an integral part of the loan origination process, possibly increasing loan funding times and increasing costs to the consumers in the form of longer rate locks and the need to order new appraisals if there is a change of lender.

2. Since appraisals are made in the lender’s name and not the broker’s, if the broker chooses a new lender for the deal, a completely new appraisal will need to be ordered. This increased consumer costs and the time involved in the transaction.

3. All relationships with appraisers are rendered meaningless overnight.

4. Brokers lose control over transactions and are put at disadvantage as power is shifted toward and biased towards large institutions.

What it means to Appraisers:

1. Must use AMC’s (appraisal management companies), meaning independent appraisers are forced to join and AMC and give 40% or more of their income to the AMC. You read that correctly, this will deprive independent appraisers of nearly 50% of their income in most cases (this could likely mean many experienced appraisers will leave the industry altogether). AMC’s are not regulated, by the way.

2. Unfairly targets appraisers, does not affect AVM’s (Automated Valuation Models) and BPO’s (Broker Price Opinions). This not only hurts appraisers as Lenders may prefer unregulated and unrestricted alternatives that are not included in the HVCC and in a manner which is in contrast with the stated purpose of HVCC.

3. Disallows appraisers from engaging in ANY communication with mortgage brokers, loan officers, agents, or others that may receive a commission upon funding of a deal. This means appraisers are not allowed to talk to their clients, a restriction no placed on any other industry to date. This means all the client relationships they have built are rendered meaningless overnight, an unprecedented act against any industry segment to date.

What it means to Consumers:

1. Higher Costs: If there is a need to change lenders or brokers as a new appraisal will be necessary.

2. Increased time to fund loans as brokers lose control of choosing and managing appraisals and may necessitate longer rate locks or extensions of existing locks. In the case that a new lender or broker is chosen, a new appraisal will be necessitated, increasing time to funding.

3. Decrease incentive to change lenders or brokers if they are not getting the service they deserve due to increased costs and time involved.