Consumer Beware HVCC - Home Valuation Code of Conduct may cost you much more $$$ and aggravation. 2nd Post!!

The following dialogue is from a fellow mortgage professional Roger Ingalls who gave me permission to re post this very important matter.  Please take note & TAKE ACTION ASAP..

Your Appraised Value Could Fall 10% in Two WEEKS

OK, that was rather alarming, but I needed to get your attention on an urgent risk, and a limited opportunity. I will explain. Perhaps, too thoroughly.

No one, anywhere, is talking about this in the mainstream media. I have, to people that have inquired about refinances lately.

Effective May 1st (two weeks), ALL lenders, loan originators mortgage brokers and loan officers will be prohibited from selecting an appraiser, or communicating with an appraiser in almost any fashion. Most lenders have already implemented the changes, and some are waiting until May 1st.

I will provide links for further reading below, so for now, just humor me.

So, why does that matter to the average borrower, and why will that lower appraised values?

1. Appraisals will be ordered blind, through an appraisal management company (AMC). They charge more, and pay the appraiser considerably less, keeping the remainder. Typically it will make an appraisal about $100 more expensive, and they typically pay the appraiser about 50% of the charge. The payment is ALWAYS taken upfront, usually by credit card, before it is even scheduled, and NEVER at the door.

2. On a refinance, Loan Originators (like me), will NOT be allowed to tell the AMC or appraiser what the borrower thinks the property is worth. We will not be able to discuss beforehand if the assumed value is reasonable, nor challenge/discuss the appraised value (the bank can…to lower it!). That means that your $500 appraisal is more of a gamble than it is now.

3. Since the banks select the AMC’s, the appraiser is now more beholden to the bank, than he was to the borrower or the loan originator. Previously, it was evenly balanced. Banks do not backlist appraisers that understate value, but they do penalize appraisers that overstate value (which is why I NEVER pressured an appraiser to change his value). That will cause appraisers to instinctively become more conservative in valuations, as a survival tactic.

4. Independent appraisers usually are paid about $400-$450 locally. That allows them sufficient time to do excellent work, and really study the subject property, and to research the best comparables. Going forward they will be paid about half that amount. It is reasonable to assume they will attempt to recover their loss by doubling their work load, and spend half the time on each appraisal.

OK, so I could be wrong. And I am sure not EVERY appraisal is going to be undervalued.

But I think I am right, at least on average, and so does most everyone in the industry I talk to.

The difference between hitting 80% loan to value and 90% loan to value on a refinance is pretty easy to quantify. It means about 0.7% mortgage insurance added to the payment, or about $145/mo on a $250K loan. There are other examples, and they are almost all bad.

So, IF you are sitting on the fence, hoping for better rates, or dealing with more urgent matters (like getting your taxes done!!), I beg you to consider taking action now, while we can still use independent appraisers with a few lenders.

Before your appraised value falls 10% in two weeks. Maybe.

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

Attention:


    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






View Current Signatures




869 Total Signatures

to date

SEE: 

http://www.petitiononline.com/mod_perl/signed.cgi?hvcc 

http://www.petitiononline.com/mod_perl/signed.cgi?hvcc

Dear NAMB Member,

IMMEDIATE ACTION REQUIRED! Today the House Financial Services Committee will hold a mark-up session on H.R. 1728 to decide which provisions will be included in the bill.  Please contact your Congressmen and urge them to support the Childers/Miller Amendment (which imposes a 12-month moratorium on the Home Valuation Code of Conduct ["HVCC"]). Click here to find your Congressman's contact information.

In addition, please stress the importance of Title I, Section 103 that was carefully drafted and negotiated as part of HR 1728. This Section does its part to ban incentivized compensation from all distribution channels while still protecting mortgage brokers' ability to earn a living.  It offers true consumer protection.

You must act NOW! Below are talking points to assist in your conversations. Preserve your ability to make a living by urging your Congressmen to vote for the Childers/Miller Amendment in H.R. 1728!

Talking Points:

I. Support the Childers/Miller Amendment
A) Imposes a 12 month moratorium on the HVCC.
B) Additional information about the HVCC is available here.

II. Title I, Section 103: YSP
A) Protects small business.
B) Bans incentivized compensation from all distribution channels.
C) Provides true consumer protection: protection from incentive-driven practices while still allowing competition in the market.
D) Consumers want zero-point or no cost loans. In order to make a living and compete with larger banks, brokers must be able to earn indirect compensation as part of the rate or financed into the mortgage amount.

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