The article was written by a fellow mortgage broker

Brian D. Tata 

It is ironic that you call this “The Big Picture” when you don’t take a big picture approach to HVCC while also shamefully seizing the opportunity to sensationalize it. HVCC is just another knee jerk reaction to impose a ‘fix’ on a scapegoat and a potential resume builder for Atty. General Anthony Cuomo. Very interesting that Cuomo was representing an Appraisal Management Company in an alleged potential law suit against Fannie Mae when Fannie Mae adopted this ‘agreement’ to mandate the use of Appraisal Management Companies, hmmm. Additionally how does Fannie and Freddie, Nationalized Government Entities make an agreement to make changes on such a sweeping scale without legislation? Wouldn’t it be like the IRS arbitrarily deciding to raise your taxes?

A lot of things are ‘created’ for a purpose but sometimes they create more problems and negative consequences than intended. HVCC is definitely one of those cases. Of course it is difficult to be an expert on every subject, especially something as complex as housing which entails so many highly specialized areas of expertise, but I’m sure if you look into HVCC and how it affects costs both direct and indirect in the home buying and refinancing process, you will realize HVCC harms consumers and the housing market more than it helps.

Let’s look at ‘the big picture’. The stated reason for HVCC is to create ‘fair’ appraisals. How do we know if HVCC accomplishes this if the appraisals are not reviewed for ‘fairness’? Well, fortunately the existing process already provides for this. It’s called underwriting. So since these appraisals need to be reviewed for ‘fairness’ anyway, the goal would be much better accomplished by better trained underwriters at no cost to customers or the housing market.

Let me repeat that because it is so important to understanding ‘the big picture’; “The stated reasons for HVCC would be much better accomplished by better trained underwriters at no cost or ill effects to customers or the housing market.” Even Obama’s new Financial Regulatory Reform Plan states “the financial crisis was triggered by a breakdown in credit underwriting standards in subprime and other residential mortgage markets”. While this statement does not identify the more fundamental reason of the FED’s monetary policy in this decade, there is no doubt the most important individual in the process is the underwriter. Underwriters exist for a reason. They decide if the documentation to grant a loan is acceptable. It is only through them that a loan is granted. Underwriters have access (or should) to all the data appraisers used to justify value and therefore should be able to verify the information that was used is accurate. Underwriters do not and should not simply look at the stated value on an appraisal and rubber stamp it approved. Without improving on this most important area of the process, faulty appraisals with ‘mistakes’ will still be a problem.

Appraising real estate is not an exact science no matter how the process is changed because no two properties are the same. But there are standards in place to ensure a level of consistency. Appraisals determine market value, determined by consumer demand. If there was no flexibility you could never have appreciation or pay a reasonable premium for a home that was more desirable to you because it was next door to your aging parents, or because a new business center was built in the area where you want to work. Condition of property is also a judgment call. The point is there are many things that effect the desirability and value of real estate in any area for which comparables may not completely bear out.

HVCC prohibits the appraiser from speaking not only to the originator, and lender, but also the real estate agent, and home owner. How would you like to have a medical operation without the anesthesiologist being able to talk to the doctor? Do you think it would help the process?

HVCC allows Appraisal management companies to reap great fees for passing the order through to appraisers while it has raised costs to the consumer at a time when people and the housing market can least afford it. Prices went anywhere from $250 per appraisal to upwards of $500. Desperate home owners may opt to choose foreclosure rather than take a chance spending their last $450 or more for an appraisal to find out if they have a shot at refinancing and keeping their home.

HVCC is anti business and anti consumer by allowing Appraisal Management companies to set the price of appraisals and compensation of highly trained licensed appraisers reducing appraisers careers to that of order taker. This attracts less skilled individuals, reducing the quality of the very product it is supposed to improve, while raising costs to the consumer and reducing customer service – and we are talking about responsiveness to completing appraisals and clarifications to underwriting conditions which are required on most appraisals. By setting prices HVCC eliminates the right of appraisers to compete in their own industry via service or on price, to the detriment of the consumer.

HVCC forces consumers to pay by credit card only. Cash and checks are no longer acceptable. Consumers that may need it the most may not have this option so they cannot get financing.

HVCC ushers in a previously unheard of ‘no show charge’ in the event there is no one to let the appraiser into the property at the scheduled time of the appraisal, the borrower can be charged an additional fee.

HVCC has lengthened the time required to underwrite loans requiring longer rate locks at the expense of the consumer.

HVCC limits consumers financing options by causing non-transferability of HVCC appraisals which means consumers cannot use the appraisal at another lending institution. Since value determines financing options, only after the consumer’s money is taken and the appraisal complete, will it be known if that lender can provide financing. If, based on the completed appraisal the lender declines to offer financing, or better financing is available elsewhere, the customer must pay for a 2nd HVCC appraisal. This makes costs even more prohibitive and the process longer, often resulting in lost rate locks and higher rates. The consumer must also be concerned that a new appraiser or recent market changes may cause different appraised value, negating any benefit at a high cost to the consumer.

HVCC may be forcing lenders and brokers to act in conflict with certain State laws which require lenders and brokers to make appraisals available to the consumer indefinitely. A) Brokers will not have the appraisal to give to the consumer. B) HVCC requires consumer to sign a document indicating weather or not they waive their right to receive a copy of their appraisal which may be in direct conflict with States law.

HVCC requires this ‘right to receive appraisal’ document be signed by the consumer after the appraisal has been completed and requires a 3 day waiting period after it is signed before the loan can close. This will prevent timely closings and cause rate lock expirations at the cost of the consumer. It gets complicated.

Forget rush closings, although there are some Appraisal Management Companies that will do a rush for a fee – This was unheard of before HVCC.

HVCC removes the mortgage originators ability to coordinate the financing process to keep it moving in order to meet consumer deadlines indicated by sales contracts, of which failure to meet can have expensive consequences for the consumer. In addition to breach of sales contract closing delays cause added expense and great distress to both buyers and sellers in other ways. For instance those who are moving into or out of a home to meet a specific deadline like a new job or school, and can force a consumer to pay an additional months rent if their closing is delayed provided their apartment isn’t already rented. Then there are moving companies, storage fee’s etc.

Consider, many banks own their own appraisal management companies. What a great new way to squeeze more profits from every transaction for the ‘protection’ of consumers.

These are just a few of the ‘details’ of how HVCC negatively affects consumers and the housing market. Unfortunately complex issues cannot be summed up in a headline and not everything trade organizations says is self serving. We are all in this together.

HVCC should be abandoned ASAP while the underwriting process should be improved to not only identify faulty appraisals, but all other documentation. The cost to consumers and the housing market is way beyond any benefit it might yield.