Although H.R. 3044 which would put an 18-month moretorium on HVCC seems to have gotten stalled, but some members of the House Financial Services Committee were able to tack a repeal of HVCC onto H.R. 3126, the Consumer Financial Protection Act (CFPA) as an amendment. H.R. 3126 passed committee 39 t0 29 with most Committee Republicans voting against it.
H.R. 3126 has been fought furiously by banks and credit card companies because is severely limits how they can put the screws to you and I when getting or servicing loan or credit card.
If passed by the House of Representatives it will go on to the Senate. President Obama has requested that CFPA be on his desk for signing into law before the new year.
As a brief review, HVCC is the Housing Valuation Code of Conduct, which was the brainchild of New York State Attorney Andrew Cuomo. He was wrongfully assuming that A) appraisers are all pansies, and B) because they are pansies they could be easily bullied by mortgage loan officers and real estate agents into artificially inflating the value of a home.
Well, for the most part appraisers are a pretty honest bunch and housing bubble was much more than just inflated appraisals due to some unscrupulous loan officers, real estate agents and appraisers. All HVCC did was add an additional layer of cost and time to the process: Appraisal Management Companies, or AMC’s.
AMC’s are the go-between for loan officers, Realtors and the appraiser. A buffer if you will. The AMC’s run interference and isolate the appraiser from talking to the loan officer or Realtor, the idea being that if a loan officer or Realtor can’t talk to the appraiser they can’t pressure them into “hitting a target value” to make the deal work.
Well, the market decides the value, all the appraiser does is compare the subject property to comparable properties that sold within a given period and a given distance from the subject property. In short: it is what it is.
There are a number of problems with AMC’s though:
- AMC’s increased the price the consumer pays for an appraisal because it added a middleman into the process.
- Appraisals have to be paid by the borrower before the appraisal is done, it can no longer be rolled-up into the loan like before.
- AMC’s take up to 60% of the amount collected from the borrower as “administrative costs” and appraisers are making only 40% of what they did just last April.
- Because of this the good appraisers have exited the business, leaving green appraisers who will work for pennies on the dollar, and thus;
- We are getting shoddy appraisals using comparatives that are not comparable properties. And, because we can’t talk with the appraiser we can’t go to bat for our borrower by questioning why the appraiser used a short-sale or a bank foreclosure as a comparable as compared to a genuine sales transaction, which represents the true market value of a home.
All HVCC has done is add another layer of bureaucracy, increased costs to the borrower, and hindered refinances that can help a borrower by reducing their interest rate and putting more cash in their pocket each month, thus reducing the chance of defaulting on their mortgage.
You’d think this would be a good thing, huh?
So let’s hope H.R. 3126 passes the House and the Senate and we can start moving forward with real economic recovery and your home will start increasing in value again as real, honest and competent appraisers get back to work doing what they love to do.