HVCC
Alright, here’s your chance to talk about the effects HVCC is having on you and your clients. Technically, HVCC is not a federal law but the result of a joint agreement between Fannie Mae, Freddie Mac, the Federal Housing Finance Agency, and the New York State Attorney General. More on HVCC basics here. Yet this has been implemented nationwide.
The idea behind HVCC was to help ensure appraiser independence and to protect the integrity of the appraisal valuation process. HVCC was a settlement. Instead of the NY Attorney General suing Fannie Mae, Freddie Mac, WaMu and First American’s e-Appraise-it appraisal management company, we ended up with HVCC.
From the New York Attorney General’s press release:
“For more than a year, the Attorney General’s office has conducted an industry-wide investigation into mortgage fraud. On November 7, 2007, Cuomo announced he had issued Martin Act subpoenas to Fannie Mae and Freddie Mac seeking information on the mortgage loans the companies purchased from banks, including Washington Mutual, the nation’s largest savings and loan. The subpoenas also sought information on the due diligence practices of Fannie Mae and Freddie Mac, and their valuations of appraisals.
The subpoenas came on the heels of the filing of a lawsuit by the Attorney General against First American and its subsidiary eAppraiseIt. The lawsuit, announced on November 1, 2007, detailed a scheme in numerous e-mails showing First American and eAppraiseIT caved to pressure from Washington Mutual to use appraisers who provided inflated appraisals on homes. E-mails also show that executives at First American and eAppraiseIT knew their behavior was illegal, but intentionally broke the law to secure future business with Washington Mutual. Between April 2006 and October 2007, eAppraiseIT provided over 250,000 appraisals for Washington Mutual. The lawsuit is still pending, and the industry-wide investigation into mortgage fraud continues.”
Here’s the NAMB resource page for HVCC.
Here is the bill that’s been introduced that would put a temporary moratorium on HVCC.
Tell us about your experiences living through the transition to HVCC, and how things are going presently. For example, has HVCC harmed you or your clients or prevented you from conducting business?
Category: HVCC
I do not believe HVCC is responsible for preventing any business for myself personally. However I have ran into many mortgages from certain banks that are upside down in LTV due to inflated appraisals. Unfortunatley some of my clients are losing their homes because they were put into an exotic mortgage, can no longer afford their payment, and can not refi into a lower fixed rate due to this. It is also obvious that in many of these situations the home is not over LTV due to poor market conditions in that area, but because their home was never worth what it was appraised for by these companies.
I have had situations where appraisers assigned through the HVCC have been so afraid of over valuing a property that they have become moved to far on the other side of the issue and are undervaluing properties instead. I had a client who was buying a home and both buyer and seller felt the purchase price was justified. The appraisal came in 20k below purchase price. Both realtors involved in the transaction provide comps and market data from the neighborhood to support the price. However, with the HVCC the lender, or agents are not allowed to talk to the appraiser directly. They can only provide the data through an appeals process, to which the appraiser refused to comment. Both the buyers and sellers where upset about this, but nothing could be done at that point. I have also had an appraiser refuse to do an appraisal because the property was unique and direct comps were difficult to find. He deemed the appaisal impossible to do. What do you tell your clients when that happens? We eventually got another appraiser assigned, but due to the unique nature of the property the value came in much lower than expected. All of these new regulations are using scare tactics on originators, appraisers, title and escrow companies. We are all afraid to do our job in fear we will be unfairly critiqued. Not to mention the HVCC has slowed the appraisal process so much, that it is difficult to close a loan in 30 days anymore, and you can’t lock a client without knowing the turntimes on the appraisals.
THE HVCC IS HORRIBLE based on my experience.
I recently had an experience where I had an HVCC appraisal done on a 3 family home through “Bank #1″ on a 105% LTV FNMA relief loan. The appraisal came in at $255K and was low by $10K but was done incorectly. I appealed it and the appraiser accepted my appeal but raised all other adjustments so the value would not change. I then paid for HVCC appraisal #2 out of my pocket (since they are not portable)through “Bank #2″ who allows 125% LTV on the same program. This appraisal came in $160K (ALMOST $100K below the first appraisal) but the appraiser called the home a 2 family residence never inspecting the 3rd apt. or checking with the tax office. I appealed and the appraiser continued to use all 2-family comps but raised value to $190K. I appealed again because the appraiser never added a 3-family home, or adjusted for the square footage of the 3rd appartment. The appraisal had a comp with an incorrect address and another comp with an incorrect map location (opposite side of state’s largest highway). Acknowledging only one of my complaints the appraiser then fraudulently called below grade square footage on all comps above grade so he wouldn’t have to adjust value. I complained and threatened and the bank paid for a new appraisal which came in at $280,000.
ALL OF THESE APPRAISALS WERE ORIGINALLY APPROVED BY THE MANAGEMENT COMPANY REVIEWERS UNTIL I FOUGHT. THIS DESERVING BORROWER WOULD NOT HAVE BEEN ABLE TO REFINANCE (AND THEY REALLY NEEDED THIS LOAN) THE HVCC DOES NOT MONITOR ITS OWN APPRAISERS AND THE REVIEWERS SEEM TO PROTECT THEIR OWN RATHER THAN DOING WHAT IS CORRECT.
Allthough I so far have not been exposed to any negative experiences with the HVCC what I am hearing is mainly negative with regard to the HVCC requirements and the practical reality of working within the guidelines and requirements. Lenders are permitted to use in house appraisers but can not use use appraisers that have been retained by a Mortgage broker or RE agent.
And it seems HVCC transferability of loans between lenders has been hampered and with slow turnaround etc.so consumerers are sometimes required to pay additional fees for rate lock extensions,not good!
Obviously there are major problems of production that will have to be dealt with and that lubricates up the situation somewhat.
Through the transition to HVCC I would not say that myself or any of my clients have been harmed, but I would say that we both have been almost protected from a possible future problem. I have had many homes that my clients have tried to refinance out of the current loan but since the original value was inflated well above the real value of the home, it is impossible to do a refinance into a loan that is manageable for the client. Almost every appraiser that I have talked to recently has mentioned to me that they provide real values and sometimes even lean toward the more conservative side of the appraisal so not to raise any red flags and protect not only themselves but the broker as well. All in all if everyone operates above board we will all help clean up the loan process and its reputation.
I work for a very small independent mortgage brokerage firm specializing in reverse mortgages. To date, to the best of my knowledge, we have not had any negative reprocussions from the HHVC. However, of particular concern, is the restrictions on engaging a competent appraiser familiar with rural communities and getting a fair and realistic assessment of a particular property. There seem to relatively few appraisers from which to choose without importing from the “big” city which just can not be in the best interest of our cllients. Stay tuned, these regs will be hashed and rehashed before being settled. I used to think WAMU was a wonderful bank! Tooo bad for their sharsholders and all of the problems caused for good folks who just want to do the honest thing.
Home Valuation Code of Conduct, in my opinion, is an EXTREME regulation and needs to be re-evaluated! I believe there has been some abuse; however, the appraiser(s) should have fallen back on the “Main Function Of USPAP”; the appraisers should have not lowered their standards by allowing lenders/loan originators to compromise their “ability to promote & maintain a high level of public trust!” HVCC has almost made it impossible to direct future clients toward purchasing or refinancing property without value guideance. Researching comparables through various websites is still a “crap shoot” Clients are reluctant to provide a non-refundable $450 up front deposit for an appraisal that might not reach value, not to mention the inability to lock their desired rate without an appraisal. Lenders & Loan Originators rely on the appraisers expertise to fulfill their responsibilities and educate their customers as well. Appraisers are still receiving their fees regardless if the loan closes and our internal/external customers are suffering the consequences.
I too have not had any negative responses from HVCC. However, the negative impact it has had on independant appraisers is devasting. I know some appraisers are unethical but what about the ones that are and have spent years building their business to only now be forced into looking for new jobs. What is interesting the appraisal company that was going to be sued is still be used as an independent third party appraisal company. So, it hurt the little guy that may have been honest and put more money into the pocket of the ones that weren’t. Seems like they know how to play the game really well. They still are keeping the business and consumers are still getting hurt. Does not make a lot of sense to me.
Hopefully the independent appraisers can register with these large appraisal companies so that they do not continue to suffer. I do miss being able to call my appraiser, who never inflated value and getting my appraisal done within a week. Now I just schedule every closing for on or before 60 days. If I close early then everyone wins, but I do not look like a bad guy for not closing on time.
I feel that the HVCC is extreme, however getting the appraisal part of the equation right is very important in our industry. I have seen customers up side down in their properties and I understand the frustration, but I think in the long run doing something to get the appraisal system in check will prove to be a good choice. Even if it might have gone a bit to far.
HVCC:
This is the most ridiculous piece of work to come from our government yet. I believe it is a complete lack of moral character within the leadership of Washington that led to the demise of our home lending industry not just the appraisers. I live my life with a little thing I like to call integrity and if more of these Leaders and Appraisers would do the same we would not have this problem. For me the HVCC takes me out of the loop as if I am the problem. Not only that but there are no more comp searches to estimate value so not only does it slow the process down but it also sometimes screws my clients out of their hard earned money when the value does not come anywhere close to where we think it will! HVCC is less then worthless.
Our company uses an appraisal management company in order to eliminate over valued appraisals. If I have an issue with the value I can submit a question on a form letter. Using this management company nation wide leads to accurate and acceptable appraisals at a reasonable cost. When I was doing refinancing I saw apprasials that where totally out of line with the area and home. Something needed to be done to protect the home owner and the value of there home. Maybe this is a start.
HVCC is very harmful to the industry sine the banks have all bought 10% positions in the AMC’s. They are paying less and they are assigning appraisers from out of area or with no knowledge or experience with a property type. I had an appraiser from Snohomish try to appraise a waterfront property. It has made it too difficult to get a fair shake. There should be a moratorium on this practice.
Mind you Andrew Cuomo was the cheif of HUD when all these risky loans and home ownership expansion programs were being touted. Basically, there is a segment of society that is unable or unwilling to be a responsible homeowner. Now he is suing Fannie and Freddie to pursue his own political agendsa.
In the name of protecting the consumer(borrower) they’ve come up with something I feel goes too far. It seems the primary beneficary from this legislation apart from the AMC’s is the big banks. It makes it hard to transfer appraisals between lenders (and thus protects banks from losing deals because they’ve been transferred to another bank by the broker.) Having the broker being unable to select the appraiser will certainly help prevent a broker from influencing value, but not being able to talk directly with the appraiser is a huge disadvantage for the LO’s and our clients. It also seems to have driven out a lot of the good professionals who no longer care to work for half the money after the AMC gets their cut.
One advantage to brokers however is that we no longer have to worry as much about being stuck with an appraisal invoice our client neglected/chose not to pay because they have to pay with a credit card up front before the AMC will send an appraiser to do the job. I also have to admit I was able to transfer an appraisal from one lender to another in one of my recent deals because they both used the same AMC. I’m getting used to living with it but I definitely think once the appraiser has been chosen by the AMC and the appraisal has been done we should be allowed to talk directly with the appraiser. It allows us to provide better service to our clients.
I mainly do non-owner occupied SFR for investors and I have not seen much impact from HVCC. It is difficult to find lenders that will loan to investors and the amount of paperwork involved has grown. With the number of foreclosures and declining real estate value it has made the rental income statement harder and it seems the cost has increased.
My experience with HVCC has been both difficult and easy. The ordering and getting appraisers out there was easy. The familiarity and rationale used in my appriasals was not easy. That became more of a problem as I had several appraisers that were not even from the same county as my properties. This caused a $100k + difference in value perception. I did find that my HVCC company was very easy to work with in getting the appeal but the time lost almost cost my borrower $5000.00 on a purchase. HVCC just does not seem to guarantee legitimacy so much as a crap-shoot on compentency.
I have to agree that ordering the appraiser was easy, however it has happened that the appraiser was indeed from another county and not familar with my county. It does make a difference in the appraisal, especial if the appraiser is from King County and doing appraisal in Pierce County, or vice versa
The HVCC settlment has put a major tilt on home values. I feel that it is unfortunate that WAMU would engage in such practices that have lead us to this conclusion.
After 16 years in the business I’ve been through a few roller coaster rides. I must say nothing like things the I have experienced in the past few month’s. Appraisials coming in below tax assest value. Clients losing there apprasial fee due to lack of value.
The most frusrating part is not being able to contact the appointed appraiser to ascertain value befor the clients money is spent.
There is something missing in this new system. There needs to be a additonal component. A componet that would refund client money if value is not there. Something that doesn’t seem like the system is penalizing the consumer for the industies past short comings.
Ultimately HVCC is protecting the integrity of the appraisers valuation process. Good.
Again, there are a number of bugs that need to be worked out in this process. I feel the client is gettig the short end of this deal in it’s current format.
This entire procees needs to be re-evaluated. Period.
My experience with HVCC has been limited, however I have found that the appraisals tend to come in on the low side. Unfortunately the appraisal has to be paid for and when it comes in the value may be too low to do a refi and the customer has alright put out their money. There must be a way around all of this.
I do not believe the HVCC agreement has been helpful and has been harmful to my clients personally. I have even had one of my previous appraisers come in after the change took place in May and did a second appraisal for my client (as ordered by the lender after an appeal process drug on to no resolution). It was a coincedence that he was the one that was assigned my client’s home for appraisal and after looking over the appraisal that had been done one month prior to the cut-over, agreed that the he would have come up with a similar valuation. But, due to his new “lens” as you will, he felt he had to take a different approach in order to mitigate the risk to the lender, hence the “change” in his perspective and a significantly lower value. I would not have been aware of that if he and I hadn’t been working together as one of my better appraisers for years. Interesting. I believe there should have been better solutions than throwing the entire process upside down.
I do think this is extreme and I feel like we all are paying for a few unscrupulous appraisers/lenders. It is hard to be taken out of loop so we have no communication with the appraisers. I wish there was a better way to handle this, however, I do think that we need to get the appraisals under control and once that happens then the valuations will be more accurate.
The hvcc system is not o value to the customer they overpay and I have over 25 cases that exploit this, it became to much government enfroced and dosen’t need there oversight, after all when they see a problem what do they do tell the world and the customer has to still seek an attorney to defend them if the Attorney geneal wants some action in on this then they should defend the customer after all they have more legalaffiliates than aneone,also lagistics is a concern and knowing the specifics of the market conditions and truly aware of where a comp is located and does it conform to the value of the subject property.Some appraisers need controlled but the Appraisal Institue should police ther own to assuree consistent and logical ethics to what will always be an opinion of value, not scientific.
I argree with Kimberly on that.