HVCC: Home Valuation Code of Conduct Update
A year or so ago, I wrote a petition called “Request For Careful Reconsideration of HVCC” when the implications of HVCC became clear to me. Although HVCC has been looming for quite some time, many are just now hearing about it recently since it was implemented on May 1st. In the last couple of weeks alone, the petition has gained roughly 5000 signatures. If you have not signed, PLEASE DO. Will the petition have any effect? I don’t know, but it can’t hurt. In fact, the true effects of HVCC are still playing out as we speak.
In an email to LeadPress, Douglas Bowes point out:
The HVCC causes the appraiser to have many reasons to appraise a property BELOW it’s true value – because…
- the appraiser is fearful of being kicked off the approved list because someone thought the value was too high.
- the appraiser is being paid less per appraisal, he has to do more appraisals… meaning not enough time will be given to justify a more accurate, higher value.
- So, far my experience has been ….appraisals are coming in about 10% less than the true value. ( 180k instead of true value of 200k).
- At a time when billions of dollars are being spent to allow as many refinances as possible, HVCC serves to actually DECREASE the # of refinances that are possible.
We were also contacted by Craig Butterfield, whom has been very active in raising awareness about HVCC. Craig pointed out this great CNBC video on HVCC and this article as well to us, they are worth a look.
Craig hand delivered the following letter to all 71 Congressional members on the banking/finance committee in DC last week.
I was there all week running through the Congressional halls with three other appraisers), I’ve also E mailed it to about 200 Appraisal board members in all 50 states, and spoke with perhaps 50 of them on the phone.
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Dear Senators and Congress persons:
Please take a moment to review the attached information packet that relates to the new legislation that took effect May 1, 2009 regarding residential appraisals. We represent the more than 1,000,000 people whose livelihoods are being compromised by the passage of the new Home Valuation Code of Conduct (HVCC).
We believe this regulation has been part of the discussion in committee discussing HR bill 1728 (S896) pertaining to predatory lending, whose hearings were recently held in the Rayburn building.
The following is a summary of information contained in the following pages: The purported implementation of the new HVCC regulation is to eliminate a conflict of interest on the part of the appraisal process of a mortgage loan. However, as you will see, that is exactly the opposite of what the HVCC legislation will accomplish.
v Consumers will end up paying more for appraisals because they will be prevented from shopping the market if they are unsatisfied with a particular lender and wish to change to another. A consumer should be able to choose the appraiser, not said predatory lender, so, the consumer can shop for a competitive fee, w/o a lender mandating and controlling what appraiser must be used. Simply stated, let the consumers choose and decentralize control over the appraiser.
v The quality of appraisals will be reduced because appraisers that pride themselves in doing thorough and professional work will be forced to meet deadlines set by the HVCC via AMC companies that are unrealistic.
v Appraisers are being asked to do the same amount and quality of work for 1/2 to 1/3 their normal fees if put through the HVCC when in the past 2-3 years, the cost of doing business has increased. These same appraisals become the property of the appraisal management companies (AMC’S) although the appraiser is taking all liability for its content.
v The AMC companies, which will be the only ones allowed to order appraisals, are subsidiaries of the nations largest title insurance companies and banks. This is in direct violation of anti trust laws and the FIRREA 12 CFR 34 Banking laws. They will have a monopoly, not to mention a conflict of interest, as they will still be able to dictate their unreasonable demands to the appraiser. Freddie/Fannie/Gnma directors are stockholders in these companies.
v Mortgage brokers, realtors, title closing agents, as well as appraisers are being squeezed out of business. Their businesses have contracted considerably over the past 3 years but they still held on to a hope that they could weather the downturn of the real estate market. This legislation will be the final blow wherein they will be unable to recover from this economic downturn.
v Much of the success of this country has been due to the foundation of small businesses. This legislation is a direct hit to the small business person affiliated with the real estate market. What will remain are large conglomerates that will remove the safety net that is currently in place, due to obvious conflicts of interest-exactly what this legislation is supposed to be preventing.
v We are setting a precedent here for other industries. This will be just the first in a series of changes that will mark the undoing of the American free enterprise system. Thank you in advance, www.REAUnion.org C. Butterfield – 954-929-6094
Real Estate Professionals Free Trade Coalition
E mail: Info@Appraisalunion.org
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Craig also provided LeadPress with the following diagram:
HVCC Diagram
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Trace Richardson has written 104 posts on LeadPress Mortgage Websites.
I'm Trace Richardson and am the founder of LeadPress. The LeadPress platform is the most powerful and customizable mortgage lead generation platform available today for brokers and bankers alike. I’m a licensed California Real Estate Broker and a former equities trader previously holding the Series 7, 63, 55 and 24 securities licenses.
The following quote makes NO sense:
“The HVCC causes the appraiser to have many reasons to appraise a property BELOW it’s true value – because…
“……the appraiser is being paid less per appraisal, he has to do more appraisals… meaning not enough time will be given to justify a more accurate, **higher value**.
“So, far my experience has been ….appraisals are coming in about 10% less than the true value. ( 180k instead of true value of 200k). ”
==============================================
Why would the value logically be LOWER instead of higher?
There is no rationale for bias in either direction.
The logical conclusion would be that more experienced
quality appraisers will stay away from mortgage work
as they will be paid only 1/2 fee, leaving the business
to the newbies who will make errors – high or low.
The good Workman is worthy of his pay.
Actually I think the appraiser has more time on their hands because they are not chasing down their money or doing comp checks. How do you define your “true value” is this based on your experience as an appraiser or just someone who has ignored the fact that property values have dropped. I’ve been a field appraiser since 97 and it always amazes me that if the appraised value is low its incorrect. Plenty of HVCC compliant AMC’s are paying good money with no pressure to hit numbers. Bad banks and brokers along with bad appraisers landed us in this box. As far as the repeal, I doubt it. Once a bill is passed and the government goes in that direction almost impossible to change it.
Rick: I think the point being made was that if somebody is paid less, they will tend to do less work and in this case may correlate into less work being done to justify higher values resulting in lower appraisal values…. makes sense to me.
Trace,
I think I can speak for most appraisers here. Paying me a higher fee will not encourage me to work harder to find that higher value. I 100% agree with Riick. What is happening is the appraisal management companies are sending their work out the lowest bidder who can work the fastest. Usually an unseasoned newbie. Your comment, “they will tend to do less work and in this case may correlate into less work being done to justify higher values resulting in lower appraisal values” assumed that bringing an appraisal in at a higher value takes more work. NOT TRUE AT ALL. The truth is, the less time you spend on research and analysis = unsupported results, HIGH or LOW. I can appraise a house on Ocean Drive, all houses on one side of the street are on the sand, worth more. If the house I’m appraising is not on the sand, but all my comprables are beach front, and I don’t to the adequate research, then the appraised value will come in HIGH. There are two big problems #1, experienced appraisers turn town low fee work, #2, many of those who do accept reduced fee assignment turn out equally low quality work, it’s a number game…quantity, not quality.
Since the inception of HVCC our company has lost from appraisals alone over 40 deals. This type of loss rate due to “low ball” appraisals on most of our listed properties will inevitably cause our business to fail. On every sales transaction we have been able to find more than enough sales comps, pending sales and active listings to prove reasonable value. Yet the appraisers being paid so little, pressed for time, and unwilling to consider the facts, choose the lowerst value in the area and that becomes the baseline for adjusting to their “low ball” appraisal method.
I think Mr. Andrew Cuomo in his infinite wisdom just had to add one more feather in his cap when inacting this law in the State of New York and then pushing it upon us all through this secretive legislation in the Senatate and House. I hope the people of NY vote this self aggradizer back to the farm where him and his father can contemplate their navals and write their next thriller on “Socialism in the US”
If anyone has any thoughts on this and would like to share them as a guest post on a new Appraisal oriented blog we are launching, please shoot me an email at trace at leadpress dot com… thanks!
Let me see if I’ve got this right, Gregg Wynn. I am supposed to stop taking appraisal orders for $250 instead of the $350 that I got for over fifteen years, so that I can receive $0 and a big long vacation from work. I should also go find a job elsewhere in this broken economy (so many jobs to choose from). My mortgage will get paid, my car payments will get paid, my children’s education will get paid, by who again?
Not every appraiser that is accepting these cutrate orders is an “ignorant newbie”. Some of us are still trying to make a living here. $250 is better than nothing. I guess some of you out there can afford to quit appraising. Not me. I suppose when my work gets down to the sub $20/hr rate, I will have to try something else (is McDonalds hiring?). I’m in my fifties and that is not a good age to start a new career. I will, however, continue to write appraisals to the best of my ability. It looks like this industry won’t last much longer though, and I will be forced to give up my lifestyle and be more of a burden on society. The fact that our government let’s all of this garbage happen makes me sick. “Home of the free”, my ass. Free is only available to those who can afford it in this country anymore.
The real reason appraisers have not been able to fight the HVCC is the reason the HVCC was created in the first place, appraiser independence. We are not an organized group, most of us work for ourselves or a small appraisal firms. If the AG had a problem with an appraiser why did he not target the culprit and not the industry. If there is a bad cop do you change the entire police dept. or go after the bad cop. I agree that there are some bad appraisers, and I think everyone will agree there are some bad politicians.
Wasn’t the creation of the HVCC blackmail or extortion, but I guess that is legal from a politician. Maybe the Supreme Court needs to get involved.
Ray you are exactly right. Extortion is illegal except when a politician is involved. Senator Jim Bunning seems to be especially fond of the Home Valuation Code Of Conduct for some reason. I’m guessing that his old geezer retirement nest is being feathered by a few of the larger banks of the country. He was made aware of the HVCC plight nearly 18 months ago by my office. He chose to sweep the issue under the rug and has yet to comment on it publicly. Note that although the House Of Representatives has already passed legislation to halt HVCC, the Senate has refuses to touch it. The Consumer Protection Bill that is currently before the Senate has been scrubbed free of any reference to HVCC. Another telling sign that banks continue to control the Senate in every respect.
Cheers: to Senator Bunning and all of his dumb ass old f*ck collegues.
You hit the nail on the head buddy. As long as you guys continue to compete for the lowest fees (even though they ask for 15 comps) YOU ARE THE CAUSE OF THE PROBLEM.
I am amazed that appraisers were unable to comprehend that a simple 1 to 2 month strike would have solved the problem and forced FNMA to rewrite HVCC.
The bottom line is that HVCC is based purely upon an EXTORTION BUSINESS MODEL…give up 50% of your monthly income if you choose to remain in business.
I have no pity for those who continue in the struggle to survive off of the appraisal bones that AMCs are tossing out. Today it’s $175…tomorrow it’s $95. You guys are idiots.
I didn’t hesitate to close my business of 18 years. If I wanted to be raped on a daily basis I would go share a jail cell with Bubba. I would also choose losing everything I own over being screwed daily. It’s called integrity guys.
Low appraisal fees = less experienced appraisers = values all over the place, low and high. While some of the goals of the HVCC are laudable, the implementation of it is flawed and must be re-addressed.
In a market that’s already being “drug through the mud” (i am in Phoenix)and is really struggling to climb out. HVCC is just another Bureaucratic hoop we have to jump through and it IS NOT helping
Just a word of advise from an insiders perspective, not all AMC’s are bad. All you need to do is find the few of us that understand where you are coming from and who are willing to pay fee’s between $300-400. Theres not many of us, hell, we could be the only one, but were here.