3 Myths vs Realities in the Home Valuation Code of Conduct
July 2nd, 2009
Categories:Real Estate News
The Home Valuation Code of Conduct (HVCC) took affect on May 1st, 2009. Since its implementation lenders, Realtors and appraisers have been making a lot of noise over the new rules and are starting to petition its reversal.
The Appraisal Institute recently published an article attempting to clear up the misunderstandings surrounding the HVCC. They do this by listing the myth they are attempting to bust and then the “Reality” as they see it.
Lets look at some of their explanations in closer detail. Here is the link to download the Myths and Realities pdf.
Here are 3 of the myths they chose to “bust”:
- HVCC Requires Lenders to Use Appraisal Management Companies
- Loan Officers are Prohibited from Communicating with Appraisers
- Licensing of an Appraiser Ensures His or Her Competency
Myth1: HVCC Requires Lenders to Use Appraisal Management Companies
Supposed Reality: Lenders do not have to use appraisal management companies under the HVCC.
Noise on the Street: Anyone involved in the loan process or paid based on the mortgage company’s loan volume/sales can’t order the appraisal. This means if the mortgage company is small and they don’t have the finances to afford a full time employee to order the appraisals, the lender will have to use an appraisal management company.
Which means small lenders have to pay appraisal management companies to order appraisals and that means the self-employed appraisers (the little guys) just found themselves out of work.
Myth 2: Loan Officers are Prohibited from Communicating with Appraisers
Supposed Reality: Loan production staff may communicate with the appraisers but they cannot: select, retain, recommend, or influence the appraiser being selected. Further more they cannot have “substantive communications with an appraiser or appraisal management company relating to or having an impact on valuation, including ordering or managing an appraisal assignment.”
Noise on the Street:
- Problem #1: If the loan production staff can’t have any say in who does their appraisals, how are they supposed to know the appraisal is any good?
- Problem #2: If the loan production staff can’t communicate in anyway regarding the appraisal value, what are they supposed to do if the appraisal that comes back half-assed?
The next myth puts the cherry on top of this issue.
Myth 3: Licensing of an Appraiser Ensures His or Her Competency
Supposed Reality: “Licensing does not necessarily ensure the competency of an appraiser”
Noise on the Street: Lets put these issues together.
First, I can’t choose a quality appraiser and I have to use some big corporate management company to choose my appraiser. Second, if the appraiser does a crappy job I can’t communicate with him or her regarding their poor performance/report.
The only way this could possibly work would be in the event the appraiser could be guaranteed competent. But wait, now you won’t guarantee their competence?
The report continues on by quoting Fannie Mae guide lines that state if a lender is not sure the appraiser is “qualified and knowledgeable” the lender should not give the appraiser assignments. Anyone else see the problem here?!
Lets sign the petition and continue making noise about how ridiculous this Home Valuation Code of Conduct is!
- Click Here to sign the HVCC Petition
- Click here to find your representative and tell them your thoughts!
Resources
- Fannie Mae – HVCC and Frequently Asked Questions
- Freddie Mac – HVCC and Frequently Asked Questions
- Federal Housing Finance Agency
Related posts:
- Bill Introduced for 18-month HVCC Moratorium
- Top 10 Myths Shared by First Time Homebuyers
- Appraisal Resources
- Appraisers Call for More Federal Regulatory Power
- Government Workout Programs