Appraisal rules hit your wallet
http://www.newstimes.com/ci_12368993

The Advocate Staff

Updated: 05/14/2009 11:35:31 AM EDT






WASHINGTON -- How about this scenario the next time you refinance or apply for a new mortgage: The real estate appraisal that used to cost you $325 now costs $450, even though the appraiser doing the work is getting only $175 or $200.

Plus your appraisal-related charges may now be subject to add-on fees that you'd never heard of before -- $50 to $100 extra in "no show" penalties if you get stuck in traffic and miss your appointment with the appraiser. Or an extra $50 to $150 tacked on if the property is worth more than $500,000.

On top of all this, your mortgage loan officer requires you to pay for the appraisal upfront with a credit or debit card, rather than including the fee with the usual lender origination costs at settlement. In some cases, your card may be charged more than the anticipated cost of the appraisal itself -- leaving debit cardholders in a potential overdraft situation.

Worse yet, the person now conducting your appraisal may be new to the field -- willing to work for a cut-rate fee -- and may not be as familiar with local value trends and pricing adjustments as an appraiser with more experience. If your mortgage application is denied by one lender, you could be forced to pay for a second full appraisal because the new lender may not accept the first.

That scenario now is reality, according to critics of the controversial new appraisal rules imposed nationwide May 1 by Fannie Mae and Freddie Mac. Advocates of the rules vigorously deny



the new system is flawed and say any increase in appraisal costs should be manageable for most consumers.

The rules, which go by the name Home Valuation Code of Conduct, are intended to improve the accuracy of appraisals by eliminating pressure on appraisers from loan officers. The code pushes most large lenders to use third-party "appraisal management companies" that contract with networks of independent appraisers around the country who have no direct contact with retail loan officers or mortgage brokers.

Mortgage brokers, who formerly chose appraisers and kept a competitive eye on appraisal fees, claim that Fannie's and Freddie's rules are adding 20 percent to 30 percent to consumers' appraisal costs. Jeffrey Hawk, vice president of Maryland Mutual Mortgage LLC in Forest Hill, Md., said a standard appraisal that previously went for $325 jumped to $400 or more May 1, when he was forced to use management company appraisers.

Some applicants also are balking at handing over credit card information upfront when they're not completely sure what the charge will be. "I lost three clients the first week (because of the credit card requirement)," Hawk said.

Buddy McCombs, senior vice president of EverBank, a Jacksonville, Fla., lender who buys loans originated by Hawk's firm and now contracts with management companies for appraisals, conceded "there's probably a little increased cost" with the new system, "but I don't think it's devastating."

Sacramento, Calif.-based appraiser James Facchini of American Pacific Appraisal Co., said, "What's terrible is what's happening to (long-established) appraisers who won't work for the low fees" management companies pay. "On May 1," Facchini said, "I lost almost my entire customer base" -- mortgage brokers who now can't pick up a phone and order an appraisal from him.

Instead, Facchini and other appraisers either have to sign up with management companies or find other employment. What "really bothers me is that the consumer has no idea what's going on," he said. After signing up with one management company, he said two consumers commented to him after finishing his appraisal, "Wow, you really charge a lot."

They were each being hit with $550 appraisal fees, while he was getting just $250 through the management company. As he sees it, that leaves $300 of "slush" somewhere in the process -- some going to the management company, but the rest probably "flowing to the lender for doing absolutely nothing."

Rich Kuegler, a vice president at MDA Lending Services Inc., a national appraisal management company, said payments to firms like his are compensation for creating, managing and reviewing a network of thousands of individual appraisers -- MDA has 9,000 under contract across the country -- and for the "processing and administrative" costs that have been taken off the backs of brokers and lenders.

As to appraisers' complaints about fees, Kuegler said, "We offer (them) the ability to have a steady stream of work, training and support." In other words, appraisers can expect to make up in overall volume what they're sacrificing per assignment.



Also See: REALTY CHECK With Diana Olick

http://www.cnbc.com/id/30521887

Request For Careful Reconsideration of HVCC




View Current Signatures - Sign the Petition


--------------------------------------------------------------------------------

To: New York Attorney General, Freddie Mac, Fannie Mae and the Office of Federal Housing Enterprise Oversight

The Home Valuation Code of Conduct ("HVCC") stands to be an important step forward for consumers and the Real Estate industry, but in its current form there are some important changes that require your attention.

In its current form, Consumers have a great deal at stake as HVCC will not only require consumers to buy a new appraisal if they decide to change brokers or lenders, but will have to pay for longer rate locks as HVCC will extend the time it takes to close mortgage loans and deprive mortgage brokers and agents of the control that is fundamental in closing mortgage loans efficiently. Ultimately, this means costs are increased for consumers and there is less incentive for consumers to exercise their right to shop for the best deal when acquiring a mortgage as doing so requires purchasing an entirely new appraisal.

The HVCC is also discriminatory against mortgage brokers, appraisers, and real estate agents. The HVCC stands to eliminate independent Appraisers overnight by requiring them to join Appraisal Management Companies (AMC's) in order to continue doing business. After joining an AMC appraiser will be disgorged of 40% or more of their income as a fee required by AMC's. This not only means the end of the Independent Appraiser as we know them, but means that virutally half of Appraiser's incomes will be shifted to unregulated entities, AMC's.

HVCC has great potential, but only if careful consideration is given to the existing flaws that will only serve to hurt consumers, brokers, agents, and appraisers. We humbly ask for your help in helping HVCC live up to its true potential. Thank you.

Sincerely,

The Undersigned





http://www.petitiononline.com/hvcc/petition.html







TAKE ACTION AND WRITE AND CALL YOUR ELECTED OFFICALS TODAY!!



http://capwiz.com/namb/dbq/officials/

Increased cost, increased turn times, and no guarantees that you are getting an experienced appraiser...

What gets me is the AMC are shot gunning orders to multiple appraisers to find the cheapest.  If one appraiser will do the appraisal for $250 but another bids $225, the AMC picks the lower one to increase their profits.

I asked a lender that question directly and i was told that they do not believe AMC's do find the cheapest appraiser.  However, i than asked if the AMC reports to the lender how much of the money went to the appraiser and how much did the AMC keep.  I was told that the AMC will not give the information for what they pay the actual appraiser.  I wonder why?

Basically, AMC are finding the least expensive appraiser and this is supposed to increase the quality of appraisals?  What a joke. 

I also asked an AMC if they do shot gun appraisals.  I was sent a long list of what criteria they use and one being price.  I than asked, lets say 10 appraisers fit the criteria for doing a certain appraisal, how do you choose the one you select?  Guess what, never got a response.

What a coincidence, Vic, no response to the questions that actually mean something?  LOL!!  The $63,999.99 question is: Do retail banks use the AMC's as well?

Here is the email from the AMC with how they select appraiser.  I am deleting their name.

I can appreciate your concern. The industry is certainly in a flux and the HVCC adds to the current challenges that we all face.

Your perception of the services that we provide to our clients is not accurate.

Awareness and education are critical anytime that new processes and procedures are put into place.

Your passionate concern for your customer is admirable and allows me the opportunity to help you better understand our role in the process.

************* is an objective and independent third party selected to supervise the procurement of valuation services on the subject property.  We have formally adopted the written policies and procedures established by the Federal Housing Finance Agency dated December 23, 2008 known as the Home Valuation Code of Conduct. 

The ********** appraiser database includes over 10,000 residential appraisers nationwide that are ranked by their overall performance.  In addition to the current database, *********** has several other methods for locating qualified appraisers through extensive recruiting efforts.

An appraiser is selected for an assignment based on the following criteria (not necessarily in this order):

·         Experience with specific product type

·         Experience in geographic location and proximity to the subject

·         Overall computerized performance ranking:

°           Turnaround time on current and previous assignments

°           Capacity and current open units

°           Quality and error rate of assignments completed

·         Response time and follow up

·         Professionalism

·         Ability to follow instructions

·         Electronic capabilities

·         Meeting the state’s continuing education requirements for real estate appraisers

·         Pricing

**********’s focus on the quality control process provides customers with the accurate and consistent information necessary to make sound lending decisions. We only recruit top quality, licensed/certified appraisers who can perform effectively and efficiently in their areas of geographical expertise.

·         All guidelines and requirements are outlined to each appraiser with each assignment

·         Once the appraisal is completed and prior to the delivery to our customer, it is reviewed to ensure that the individual customer’s specific requirements have been met and to ensure compliance with FNMA / Federal National Mortgage Association (Fannie Mae), FHLMC / Federal Home Loan Mortgage Corp (Freddie Mac), FIRREA / Financial Institution Reform, Recovery, and Enforcement Act, and USPAP / Uniform Standards Professional Appraisal Practice

·         Revisions are made prior to the final product being sent to the customer (unless directed otherwise)

·         A complete review and comprehensive study of the report is conducted

·         All errors and omissions are tracked, monitored, and play a part in the overall appraiser ranking, enabling us to determine whether an appraiser is a candidate for suspension or removal

·         Random audits are conducted on all appraisers quarterly

Hopefully this information helps you better understand our role in servicing your customers.

An appraiser is selected for an assignment based on the following criteria (not necessarily in this order):

·         Experience with specific product type

·         Experience in geographic location and proximity to the subject

·         Overall computerized performance ranking:

°           Turnaround time on current and previous assignments

°           Capacity and current open units

°           Quality and error rate of assignments completed

·         Response time and follow up

·         Professionalism

·         Ability to follow instructions

·         Electronic capabilities

·         Meeting the state’s continuing education requirements for real estate appraisers

·         Pricing

Like how they put pricing as last bullet here, but made disclaimer above!!  Sure thing.

Here is another one to digest.

The AMC chose to charge an additional $7.75 because the order was on a credit card.

Retails banks have beeing using the AMC.  In fact the bank I work for has had most of these new rules in place for close to 2 years. 

Emails were sent out around this time that if an LO was caught trying to contact an appraiser you were terminated.

The main difference I've seen with retail banks since May 1st is turn around time has become even slower.  I use to wait to order an appraisal until I got a firm loan commitment from an underwriter, but I can't afford to do that any longer as it is taking almost 2-3 weeks to get an appraisal report back.  On top of that I usually have to wait for my back office to ask the appraiser for more comments on an appraisal that takes another 2-3 days.

bump

I love this one:

Bob V-G:

·         Overall computerized performance ranking:

The computer is impartial, right?  No one would ever write a program that would weight pricing very high.

Why wouldn't a lower price be passed on to the consumer?  Why is there an uproar if a broker doesn't pass on YSP to the consumer, but it is ok for the AMC to pocket extra from a lower priced appraiser.  Do they take on an added work at the AMC?  Have they earned the extra somehow?  I think not!

HVCC is a nightmare!!!!!!!!

The AMC call centers are clueless. They are located all over the country and require there hand to be held with repeat phone calls to process the upfront orders.

So now with HVCC:

You hurt the small local appraiser or put him or her possibly out of business.

Charge the customer more for an appraisal.

Take much longer in delivering the appraisal.

Poor quality appraisals as to the fact that the appraiser is now taking a huge cut in his or her pay and now must substitite quantity for quality.

Customers are now complaining on the complications of the new and improved HVCC system.

This is just the tip of the ice berg.

HVCC MUST BE STOPPED.

Hmmm... my apraisal was in april and it was $405.  The broker collected $500 up front (claimed it was the least they could charge at one time but would credit the remainder at closing... sounds fishy but what to do). 

The Misconduct of the Home Valuation Code of Conduct (HVCC) – Detroit

http://www.free-press-release.com/news/200905/1242586601.html

United States of America (Press Release) May 17, 2009

DETROIT, MI – Despite the efforts of the real estate and lending industries, the Home Valuation Code of Conduct went into effect May 1, 2009, bringing a dramatic change to the home financing process.

HVCC is the result of a 2007 lawsuit brought against an appraisal division of First American Corp. by the New York Attorney General, Andrew Cuomo, for allegedly inflating appraisal values on an estimated 260,000 WAMU mortgages.

So now, in typical government fashion, we go from one extreme to the other – unmonitored appraisal inflation replaced with bureaucratic appraisal deflation.

The intent of HVCC is to prevent loan originators from having undue influence over appraisers on the valuation of homes and prevent inflated appraisals.

Appraisals for mortgages on 1-4 family homes to be sold to FNMA or FHLMC, will no longer allowed to be directly ordered by loan originators. They must be ordered through Appraisal Management Companies (AMC) that act as middlemen between appraisers and loan originators. (Currently HUD’s FHA loans are not subject to HVCC. Loan originators can still order their own appraisals from trusted appraisers for FHA loans.)

Sounds great in theory, but the reality is far from perfect.

I had lunch with several of my mortgage competitors this past week. The main topic ended up being the HVCC and what it’ll mean to the process of financing a home. The consensus was that there are going to be a lot of unhappy people – homeowners, homebuyers, sellers, real estate agents, loan originators and more.

Was there a problem with inflated appraisals?

Yes, but HVCC in its current version, creates more problems than it solves. Underwriting departments at most lenders were already using advanced computer programs to address the problem of inflated appraisals. Appraisers found to be providing questionable values and work, were banned by that lender.

Why is the industry so up in arms over HVCC? Well, let’s look at how the system is supposed to work:
• Loan originator orders appraisal from AMC (usually via internet)

• Payment must be made when the order is placed to avoid appraisers being forced to bring in a specific value in order to get paid.

• AMC randomly assigns the appraisal order to one of the appraisers on its list of approved appraisers

• Appraiser is typically required to complete & deliver the appraisal within 48 hours

Sound easy doesn’t it! So what’s the problem?
• There are no requirements concerning the proximity of an appraiser to a property or their knowledge of an area. I know of a recent occurrence where an appraiser from Grand Rapids was assigned to appraise a home in Livonia. Not surprisingly, the value came in significantly under what local real estate agents estimated it to be.

• The cost of appraisals has gone up. Our appraisers typically charged $300-$350, now the AMC’s charge $450 or more. Instead of an appraiser getting their full $300, AMC’s only pay them $175-$250 of the $450 charged. So, appraisers will have to do more appraisals to earn the same amount they have in the past. This will lead to shoddy work.

• The AMC doesn’t care if data for the appraisal is difficult to find and would normally take longer to provide an accurate value. They want them ALL back in 48 hours, failure to do so could exclude the appraiser from their list. Again, this will lead to shoddy work. Many high end homes sold in the past recorded the sales price as $1 in the MLS. Normally, an appraiser would go to county records to research the actual sales price. The 48 hour turn time requirement will now lead to appraisers just ignoring these sales, which could negatively impact the appraised value.

• There is very little anyone can do to challenge a low valuation at this time. Oh sure, there are forms you can fill out to do so, but the real chances of an override occurring are slim. The only option then is changing lenders and paying for another appraisal, while still hoping for a better value. This will all have to be paid by borrowers and mean longer application timelines.

• Each lender has their own approved AMC. There is nothing in HVCC requiring lenders to honor each other’s appraisals, so switching lenders could mean paying for another appraisal.

source: FPR

• I haven’t seen anything in writing about how AMC’s will monitor and rate appraisers for the quality of their work. Will it be any surprise that appraisers will just use the first three comparables that pop up on their computer searches? What incentive do they have to put more time into making sure an appraisal reflects the best and most accurate value possible?

These are not the type of challenges you want to hear when real estate values are dropping, especially for those trying to refinance.

Should we blame the appraisers when their valuations start affecting transactions? I don’t think we should. None of the appraisers I know have anything good to say about HVCC. Many of them have spent years building their businesses by establishing relationships through providing great service. Now those relationships are all being taken away from them. They’re also not happy about the time constraints the AMC’s are placing on them. HVCC and the AMC’s treat appraisers like they’re a commodity and 100% the same. It’ll create a race to the bottom and reward appraisers who work the cheapest and fastest at the expense of quality.

I’m going on record here advising real estate agents to pull their own comparables and hand them to the appraiser when you meet them at a property. Maybe even go one step further and do a mini Broker Price Opinion! Otherwise you’re leaving the fate of your transaction in the hands of an appraiser who really may not care if your deal closes or not.

If you’re a homeowner looking to refinance, you may want to get back in contact with the real estate agent that sold you your home and have them do what I suggested for a purchase transaction in the paragraph above.

By the way, anyone thinking that going to a bank or a certain lender will avoid the problem, is seriously mistaken. Everyone in the industry will be facing the same problems. Homeowners trying to refinance won’t be able to threaten to go to their banks to avoid the problem. Real estate agents won’t be able to blame loan originators if a sales price is not met. It’s a new reality we’ll all have to learn to deal with.

A BETTER SOLUTION?
Obviously, there was a problem with inflated appraisals. HVCC is a step in the right direction to address the problem, but several logical modifications can be made to improve it.
• Create a nationwide, central database where all appraisers have to register, so “bad eggs” can be identified by all. The federal government required it for loan originators due to fraud issues, so why not appraisers? The same mechanism can also be used.

• Require any and all owners of AMC’s to pass a background check. Currently, an appraiser, lender or real estate agent could have their license revoked, but still open an AMC.

• Create a national system to randomly review the work of appraisers and address complaints. HVCC as it is, leaves this to the AMC’s themselves. Self-regulation really worked in the banking industry, didn’t it?

• Require all lenders to use independent AMC’s. Banks are currently allowed to own AMC’s, which makes absolutely no sense - unless you’re a politician getting bribed by the banking industry.

• Standardize the AMC’s appraiser approval process and require that they all accept each other’s appraisals.

• Create penalties for AMC’s that pressure appraisers to work on unrealistic deadlines to stay on their approved lists. The 48 hours that most AMC’s require is foolhardy. A week is more realistic. Pressuring appraisers to rush their work is really no different than pressuring them to inflate values.

• There should be geographic proximity requirements for assigning appraisals. Is it reasonable to expect an appraiser desperate for work to turn down an order in an area they don’t know?

• Create a standardized system of review, so shoddy appraisal reports can be properly addressed. Since any review system takes time, which could cause a transaction to fall apart, the review system should provide a borrower the option of ordering and paying for a 2nd appraisal, but then require a full refund of the 1st appraisal if it’s found to be suspect.

The improvements suggested above won’t create a perfect solution as that’s impossible in the real world. They could dramatically improve a seriously flawed HVCC though.

Please keep in mind that we’re all in this together, both borrowers and industry professionals. We have a government that’s giving out hundreds of billions in bailout relief to those at the top that caused the housing crisis – while seeming to make everything harder for the average homeowner. We have to stick together to find our way through this new challenge.


http://www.free-press-release.com/news/200905/1242586601.html

No responses from Catherine Coy?  That's shocking.  You'd have thought she was the one who passed the law , based on all her comments and arguments against everybody else who can see that it's going to cause many problems and not solve anything.

I was wondering where she went too!

Great post, I was just discussing this very topic with another lender and I said it will not be much longer before the cost of this clever idea will start costing homebuyers.

It looks like she's actually written some recent posts and tried to respond to this one in particular (when I look on "My Threads" on the home page I saw she had done so today and yesterday), but the moderator must be blocking her comments so we can't see them.  Good riddance I say.  I don't mind having intelligent arguments about different issues on here, but she wasn't listening to reason. 

Maybe she had guilty feelings about influencing appraisers in the past and that's why she was so gung ho on the new law?  She acted like everybody on here had done so in the past and that's the only reason we are against HVCC. 

If a tree falls in the forest and no one is around to hear it, does it make a sound?  Apparently not!