So I'm currently working on my licensing so that I can start originating loans. Working as an assistant in a mortgage office I hear nothing but complaints about this HVCC  issue. Appraisers that are inexperienced either in their career as an appraiser or in the area that the subject property is in. Home values that are lower than the value listed on Zillow. Countless deals lost due to values returned from these AMCs that issue inexperienced appraisers.

      While working through my Chamberlin online course, I came acrossed the following verbage "The most valuable component of an appraisal is the competence and experience of the appraiser." (Chapter 13, Sect. 8). If this is the most valuable component, why wasn't this taken into consideration when HVCC was thought up and implemented? Lowering home values in an already unstable home market doesn't seem like the right path to recovery. While we've recently seen a small increase in home values in major cities, I can't help but feel like this issue is only slowing our recovery process.

Anyone have any thoughts or personal experiences that they would like to share?

To be honest, I don't think appraiser incompetence was ever considered as a factor. I think the legislators drafting HVCC had never even seen an appraisal, let alone a bad one. I think they just assumed that an appraiser was an appraisal, and a license to appraise was just that.

If you take a step back from the practical reality (the one those of us in the industry know as our everyday experience), it looked like this:

Wow, gee, appraisers are in cahoots with those evil mortgage brokers! They are telling the brokers that the homes are worth more than they are just to get the deal done and get more business! Gasp! The poor innocent homeowners!

Well, then, we shouldn't let the brokers talk to the appraisers. Neither one can be trusted!

OK, then we should make a company that makes sure that the brokers/lenders and the appraisers, the two professional ends of this transaction, never get to talk to each other! That way, they can't get together on a fixed value! Haha, they cant even TALK about the house! And, the appraisers will know that more than one person is going to see their work - PERFECT!

So, lets make it manadory to have these middleman companies or buffer people! We will save the poor, innocent homeowners from the evil mortgage people! VICTORY!

The practical result. . .

They created an opportunity for a profitable business: an appraisal management company. People with entrepreneurial sort of minds realized that they could make a lot of money. . . . and like any business, all the people in the chain need to get paid.

But how do you add a link in the chain without adding more cost? The way it was, the borrower or homeonwer was paying one person . . . the appraiser. Now, somehow, two people have to get paid for the same work: the appraiser and the AMC.

Well, wait . . .we don't want to charge the borrower MORE money - this was supposed to protect them! So, as the AMC, we'll just skim a little off the appraiser's pay in exchange for "managing the process" . . .

Problem: The AMCs had no idea how the appraisal industry worked. They didn't have the ability to recognize a good or a bad appraisal because they had no history in the industry. So instead, they just announced that they were going to pay appraisers less than they were getting before. In some cases, much , much less. Appraisers that used to get $350 for a report (which, mind you, is a lot of work if done right!) could now only get $150 . . . the AMCs wanted the rest. Nothing personal, it is business, you understand.

Now, if you have been in the industry of appraising for a while and you are good at what you do - why would you suddenly take an over 50% paycut???? Well, you might if you were starving. But you might also leave the industry, or start working appraisals for different clients, like divorce court, or whomever, where you would still get your full pay. The only ones that were willing to work for the $150 were the newbies trying to get their feet wet, or the ones that were only  half the work anyway, so they could bang out 2 or 3 reports in the time that it takes to do one good one. Even some good appraisers adjusted the amount of work they did to meet the pay they received - meaning that they arent going to write a lot of explanations, or look for extra comps, or do off-mls searches . . . they simply couldn't do enough reports to make a living.

And the AMCs didn't know the difference, at least not at first - because they are business people, not appraisers. THey LOOKED like appraisals . . . they were about 20 pages long, had some grids and numbers, and some pretty pictures . . . And frankly, why did they care? If the lenders were giving the borrowers and brokers no choice, they were getting their money no matter what. Kind of like if the big chain store drives all the little stores out of business . . . the you have to shop at the big store, even if the stuff is of lesser quality, because you have no remaining choices.

So now we have AMCs that are like "this is great. we are in the MONEY!" But we have to keep the lenders happy - so we have to make sure that we get these reports in really, really fast. ANd a lot of the appraisers said they didn't want to work for us. So we are short handed . . .so they start hiring WHATEVER appraiser on their list has a license and some free time RIGHT NOW - even if they have to drive 100 miles to a town they have never seen before. Because, after all, how hard can it be? We give them $150, they give us that nice pretty 20 page report with the grids and the pictures. Great.

Bottom line: Hvcc took away half the appraiser's pay, cut their time to work in half due to red tape and delay, left them no ability to get feedback from the person managing the loan, and put non appraisers in charge of the appraisal process. It eliminated competition, and nationalized a localized business. There was no place to go but down in terms of appraisal quality.

BUT - surely the big business men and women at the AMC couldn't possibly be as corrupt as the bad appraisers and the brokers . . . no way . . . a company that has absolutely NO hand in the transaction and nothing to lose by fudging, rushing, and faking couldn't POSSIBLY be as corrupt as the people whose license and livelihood are on the line in every deal . . . could they? Nah. Couldn't be. Because we invented them to be the good guys. And we promised the poor, innocent homeowners. SO this must be success. LOOK AT US! WE FIXED THE EVIL MORTGAGE INDUSTRY! NOW VOTE FOR US!

Sigh . . .

(NOTE: there are good appraisers, brokers, lenders, omeowners, AMCs just as there are bad, incompetent, and dishonest in every category. This is not meant to vilify any one group. It was just the complete lack of common sense behind it that kills me . . .)

Nathan: 

The HVCC isn't the enemy.  It was created because there was too much abuse by people in the mortgage industry.  Some predatory lenders, along with compliant appraisers who would go along with the scum to inflat values on properties and put some innocent homeowners, BUT OFTEN WILLING PARTICIPANTS, upside down in their homes. 

HVCC is an attempt to stop the abuse.  I think people now want a scapegoat and the Appraisal Management Companies are the ones who are get complaints.  In reality, AMC's have been around a long time.  Some of them are fairly well run, others are not so good. 

I laugh when I hear people in the lending area complain about the appraiser not having enough competence, or experience or whatever.  It's funny how it's all ok when the appraisal comes in and it meets the value they need on their deal.  lol  Then the appraiser is smart, savvy, knowledgeable etc... You get the idea. 

This mess we are in has been created mostly by the sheer greed of people in the lending field, and that includes the big dogs at the top.  We're now paying the price for it.  The real estate market is in a frigging mess and hopefully it will get turned around over the next couple years. 

Hubba Bubba,

You are correct, HVCC is not the enemy. However all of the major lenders I work with choose to use a AMC to become HVCC compliant. I have had huge quality issues with the appraisals that I have received from the AMC. For example, wrong house picture of the subject property, not explaining why they used certain comps over others, 25% or more adjustments, etc. I have had NO ISSUE with value on any of these appraisals.

But here is the problem, once the appraisal is delivered to the underwriter he or she then requests 10 + revisions to the appraisal that ends up costing me at least a week or more in time. Prior to HVCC the underwriter would occasionally ask for revisions. That is because we used local appraisers who have 10 + years in the business and knew the local market and what they are doing. No quality appraiser here wants to work for AMC's.

I am all for regulation of appraisals...my suggestion is they should use a system like the VA does. We order it, the VA assigns it and they are always very quality people. Plus they still get to make a living.

Stacey

For $125 Dollars, hard to expect any explanation. As to the picture, the appraiser probably can not pay for gas and used any available MLS picture.