Posts Tagged appraiser

HVCC in plain English and how it affects you, the borrower

A lot has been said about HVCC, the Home Valuation Code of Conduct, that radically changed the way the appraisal process of your home happens. But still most homeowners know nothing about it until they go to refinance their home or buy another one and they discover they have to pay for an appraisal up-front and it costs more than it did a year ago. Here’s why.

Andrew Cuomo

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HVCC was the brainchild of New York Attorney General Andrew Cuomo. Cuomo, in an effort to get political brownie points decided he would singlehandedly clean-up the real estate business.  He felt that the problem was fraudulent appraisals and that loan officers brokers, Realtors, borrowers and sellers were strong-arming appraisers into inflated values on appraisals. So he sued Fannie Mae and Freddie Mac.

To settle the lawsuit Fannie and Freddie agreed to a new appraisal process, one where the appraiser would be insulated from anyone having a financial interest in the transaction.  From this Appraisal Management Companies (known as AMC’s) were born.

This one change from New York became a nationwide law that affects us even here in Utah.

Appraisal Management Companies purpose was to insulate the appraiser from any undue influence a loan officer, Realtor or homeowner may try to impose upon them.

The short version of HVCC is that anyone who will financially profit from the sell or refinance of a home can not choose an appraiser, nor can they deal directly with the appraiser. Any appraisal ordered for and paid for directly by the homeowner, loan officer or Realtor can not be used in the process of obtaining financing on the property.  Also, appraisals must be paid for in advance to discourage “value shopping” by the lender, Realtor or homeowner through getting several appraisals then using the highest one for obtaining financing. It’s a one-shot deal now.

Here’s how it all affects you. When you apply for a purchase or refinance mortgage loan, your loan officer will have you sign a credit card authorization form.  The lender will then order the appraisal from an Appraisal Management Company and send them that authorization form to charge your credit or debit card for the appraisal. Although the borrower can’t directly pay for the appraisal, they can pay for it through a third party. The AMC then assigns the appraisal job to one of the appraisers on it’s list and they complete the appraisal and forward it to the lender.

So there in a few paragraphs is how things have changed and how it affects you. When you go to buy a home or to refinance, be sure you have $400 to $500 available on a credit card or in a checking account for the appraisal. Your loan officer should be sure the loan amount is enough to give you back that $500 when the loan funds.

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Saving money on your property taxes

With property taxes due in just 3 months from now, it is a good time to look at how to reduce your property tax liability, especially if you feel your property value has dropped dramatically.

If you need a good appraiser here in Salt Lake City, UT and surrounding cities to determine the actual value of your property I recommend Timberline Appraising.

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The Financial Reform Bill could be a game-changer for appraisers

President Barack Obama speaks to a joint sessi...
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Let’s face it, the Housing Valuation Code of Conduct (HVCC) has been heralded as the greatest disaster in real estate legislation… Ever.  It’s created a middle man – Appraisal Management Company (AMC) –  who a lender has to order an appraisal through so that the loan officer has no contact with the appraiser.  The idea was that this would prevent the loan officer from influencing the appraiser’s opinion of value.  Fair enough, sounds reasonable.  Except…

In reality it created a middle man, the AMC that upped the price of appraisals by $100 or more, while bidding-out the appraisal work to a pool of appraisers, the lowest bid usually got the job and the AMC kept the difference.  I heard stories from appraisers of being offered $75 from the AMC while the AMC was charging the borrower $450.  In the days before HVCC the appraiser would charge $350 and that was his compensation (minus and split he may have if he worked for an appraisal company or was an apprentice).  All appraisers saw their income cut by 40% or more overnight for doing the same work – and I didn’t know any rich appraisers to start with, either.

HVCC also dictated that the appraisal be paid for in advance by someone with no financial interest in the transaction (such as the loan officer or real estate agent) BEFORE the appraisal could be done.  The days oft rolling-up the cost of the appraisal in the loan, or having it paid by the seller through seller concessions was gone.

So the borrower or buyer now had to pay for the appraisal by cash or credit card before the loan transaction could be done.  I presently have several clients who’ve paid for appraisals that came back with a value too low to refinance their home or purchase the property they were looking at.  They are all out $400 – $550 and don’t have a refinance or a new home to show for it.

Before HVCC I could call my favorite appraiser and say “Adam, my client is thinking about refinancing his house, can you look at some comps and tell me if you think an appraisal will come-in high enough to do the loan?”

If he said “Nope, there aren’t any comps to support that loan amount” I could go back to my borrower and say “I don’t think this deal is going to work, maybe we should look at it again in 6 months or so”.

Now days a home owner has to pay for an appraisal to find-out if a refinance is even possible. If it isn’t, he’s out $400-plus for nothing.

Tell me how that benefits the consumer the law was intended to protect?

Well, HVCC sunsets in November, and the Financial Reform Bill signed into law by President Obama this week makes some sweeping changes to the appraisal process that should be more borrower-friendly.  If Congress doesn’t re-up HVCC in November we’ll really have something.  Below is a link to a good blog that outlines the changes to the appraisal process contained in the Financial Reform Bill.  Hopefully it will help many appraisers get back to work and be able to feed their families again in a field they trained for two years or more in before they could become licensed.

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