Appraisal Scoop

Video - Fox 5 News - Washington, D.C. - HVCC "Appraisal Rules" Impact Housing Market

From the video below . .

Now, instead of lenders pressuring appraisers it's the AMC's. Garber says members complain the AMCs are forcing up to 60 percent reductions in their fees, and that can lead to problems.

"If you're seeking out a low cost service provider, you may not be able to find that in many of these markets. You may have to go out of market to find somebody that's willing to accept that assignment," he says.

"An appraiser not from this area may not know what communities compare to this property," says McKee as she shows us around the three-bedroom, brick end unit.

VA Fee Increase for 1004MC Addendum - VA Circular 26-09-11

Effective on August 1, 2009, for any appraisal assigned on or after August 1, the appraisal fees have been increased by $50 to cover the new 1004MC form.

MARKET CONDITIONS ADDENDUM TO VA APPRAISAL - PREPARATION FEE

1. PURPOSE. The purpose of this circular is to announce that, effective with appraisal assignments dated August 1, 2009 or later, VA is increasing the maximum allowable appraisal fees for all property types by $50.
2. DETAILS. Circular 26-09-4, dated March 27, 2009, required that all VA appraisals include Fannie Mae Market Conditions Addendum, Form 1004MC. Also, VA stated that it would monitor the impact of this new industry requirement on appraisal fees and make adjustments as appropriate. A nationwide survey has indicated that $50 is the prevailing fee being charged for preparation of the market conditions addendum on conventional appraisals. Therefore, VA is authorizing an increase in fees to match the conventional market.
3. ACTION. VA Regional Loan Centers will revise their appraisal fee schedules, with an effective date of August 1, 2009, to reflect the authorized increase.

See VA Circular 26-09-11, http://www.homeloans.va.gov/circulars/26_09_11.pdf

Webinar: HVCC . . .and survival as an apppraiser afterwards

Frank Gregoire's wonderfully thorough "Home Valuation Code of Conduct . . .and survival as an appraiser afterwards" webinar presentation addressed not only what the HVCC is and its effects on business, but also what your opportunities are in overcoming any business obstacles.  For more information about Frank Gregoire click here! 

Here is the recording of the session for your future reference: click here!

As Frank mentioned during his presentation, NAR offers some additional resources for you to access.

Below is a list of those resources:

National Association of REALTORS® HVCC Page – realtor.org/hvcc

National Association of REALTORS® HVCC FAQs - click here!

National Association of REALTORS® HVCC Myths and Facts - click here!

Home Valuation Code of Conduct - click here!

Fannie Mae HVCC FAQs - click here!

Freddie Mac HVCC FAQs - click here!

Freddie Mac Guide Bulletin 2009-18 click here! (see page 5)

H.R. 3044 – Bill to impose 18 month moratorium on HVCC – click here!

NAR Survey Shows HVCC Impacting Housing Markets

"An analysis by the National Association of REALTORS® (NAR) indicates that the implementation of the Home Valuation Code of Conduct (HVCC) appears to be having adverse impacts on the housing markets. Recently, NAR Research sent a survey on this topic to a random sample of approximately 40,000 NAR members which generated 3,600 responses. An analysis of REALTOR® responses follows."

• Approximately 76% of REALTORS® representing buyers or sellers indicated that the time to obtain a completed appraisal increased after May 1.
• The number of Appraiser members reporting they obtain over 50% of assignments from Appraisal Management Companies (AMCs) increased from 13% to 40% after May 1st.
• Similarly, 71% of REALTORS® noted an increase in the use of out of area appraisers.
• Approximately half of NAR Appraiser members reported a reduction in fees received by them.
• More than 70% of NAR Appraiser members reported that consumers were paying higher fees.

An Outsider’s Appraisal of the New HVCC Rules

“What’s HVCC?” I believe those were the exact words I used in response to being asked by the editor of this magazine to write a July cover story on the Home Valuation Code of Conduct.

“But I don’t know anything about appraisals, much less the appraisal industry.” Those were my next words. “All I know about appraisals is that my mortgage broker orders them, and someone has to wait at home for the appraiser to arrive, a job that has historically fallen to my wife.” We’ve purchased three homes and the truth is that I’m not even sure I’ve ever actually met an appraiser".

 “Perfect,” was my editor’s response, “That’s exactly why we want you to write it. You’re going to be outraged, and readers love it when you’re outraged.”

That's the way CUOMO’S CROSSING: An Outsider’s Appraisal of the New HVCC Rulesby Martin Andelman begins.

I had to weigh the entertainment value of his article against some of the errors in his research and his conclusions.  Those familiar with the HVCC will spot them pretty quickly.  Those that aren't will at least be entertained while getting up-to-speed on how the HVCC got started.

Tip O' The Hat: http://www.ICAPWeb.com members T.J. McCarthy and Maureen Sweeney for the link to this article.

Appraisal management companies blamed for undervaluation

Inman News author Jack Guttentag wrote in today's story Appraisal rules backfire in down market:

"Because AMCs operate nationally but do not have appraisers everywhere, more appraisals are being done by appraisers who are not familiar with the local market. Appraisers working for AMCs are also paid less per appraisal than independents, which may induce them to invest less time.

Less knowledge by appraisers means more scope for bias, and in a declining-price market, the prevailing bias is toward lower values. ..."

Click here to read the full Inman News article

Home Valuation Code of Conduct - NIMBY?! No one is immune to the impact of the HVCC

Yesterday, my local newspaper published an Associated Press story New home appraisal rules stir backlash with a follow up piece by local Pantagraph reporter, Bob Holiday - McLean County not feeling sting of new appraisal rules.   It seems that two local appraisers and the local home builders association feel that the HVCC has not impacted their business.  

"Controversy over new appraisal rules that some contend are undermining the housing market hasn't made its way to McLean County."

I've tried to post a comment there but only come up with an error message.  I sent a personal email to the reporter, but so far he's "Unavailable for comment".   So, not to waste my thoughts . . .I'm posting them here:

 

The Bloomington-Normal market is NOT  immune to the effects of the Home Valuation Code of Conduct (HVCC).

Appraisal Ordering:  The HVCC, in its effort to diminish pressure on real estate appraisers, attempts to place a “firewall” between loan production and the appraiser. When it became apparent that the HVCC would go into effect, most lenders either adopted a “blind” rotation system of assigning orders or began using an Appraisal Management Company (AMC) to handle the appraisal assignment process. Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.

Appraisal Pressure:  The HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo’s investigation. As a result of the HVCC, at least 50% of appraisals nationwide are now processed through AMCs. AMCs are unregulated and can easily blacklist an appraiser when they do not meet value goals. Remember, AMCs are a business and they don’t want to lose a large lender client by assigning appraisals that are coming in “short”. That’s exactly what triggered the HVCC in the first place. Delays in processing:

The HVCC can cause significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time. I’ve personally been called by a local real estate agent that was desperately trying just find out “Who has been assigned the appraisal?”. The ordering AMC would not even give him the name of the appraiser!? The agent was not trying to influence the deal. He was only trying to hold his “time sensitive” contract together. Many in the real estate chain have overreacted to the HVCC provision that blocks access to the appraiser by loan production staff. Fannie Mae and Freddie Mac have recently (July 2009) updated their “HVCC Frequently Asked Questions" document to clarify this issue.

Good-Fast-Cheap (Pick Two):  Virtually all Appraisal Management Companies (AMCs) either mark-up the appraisal fee (costing the consumer more) or they skim off up to 50% of the appraisal fee (appraiser receives less). Currently this is not disclosed to the borrower. Many experienced, local, appraisers have been forced to either work for less or not at all. When they choose not to work for an AMC, this leaves a void for less experienced and out-of-town appraisers to enter the market.

Geographic Competency:  With “blind rotation” systems, or “cheap-fast” AMC models, many lenders have little to no control over who is being selected to appraise the real estate that will be the security for their loan. When a appraiser accepts an assignment, in an unfamiliar market, the chances are just as good that he/she will be high as low? Either way . . .the client is getting an inaccurate appraisal. In the case of an appraisal prepared for a sales transaction, all the involved parties love it when the appraisal comes in high! That is until the borrower loses their job, tries to refinance, or the economy softens further. Then the effects of that “high” appraisal become evident.

Repeal of the HVCC:  The HVCC is due to expire in 2010 (18 month life). By the time all the efforts to block the HVCC can be enacted . . . it could die all on its own. The problem? The impact of the HVCC has ALREADY become part of Fannie Mae’s and Freddie Mac’s Selling Guide and lenders and brokers have already changed their business models. The appraisal profession has been adversely impacted for years to come.

To read more about the HVCC one can go to http://www.AppraisalScoop.com’sHVCC category - http://tinyurl.com/dmzgbm  

Author: Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 25 years of appraisal experience in Central, IL and hosts the Appraisal Scoop blog, WinTOTAL Users Group, and Appraiser's Water Cooler network.

NAHB delvers testimony on Hill: Appraisal and AD&C problems hampering housing recovery

July 23, 2009 - The National Association of Home Builders (NAHB) told Congress today that inappropriate appraisal practices and the acquisition, development and construction (AD&C) lending crisis that has choked off credit for home builders threaten to prolong the current housing and economic downturn.

 

Testifying before the House Small Business Subcommittee on Finance and Tax, NAHB Chairman Joe Robson, a home builder from Tulsa, Okla., said these two issues “are placing enormous pressure on home builders’ bottom lines and, for many, endangering their ability to survive the economic downturn. Additional credit resources could be extremely helpful to them and other small businesses to bridge the divide and survive to the eventual economic recovery.”

 

While there are several signs that the housing market may now be at or near bottom – new and existing home sales have stabilized, the inventory of unsold homes continues to fall and single-family housing starts have posted four consecutive monthly gains – Robson said the appraisal and credit crunch problems are headwinds that continue to buffet any significant housing recovery.

 

“The inappropriate use of distressed and foreclosed sales as comparables in determining new home values is needlessly driving down home prices and forestalling an economic recovery,” he said, citing a recent NAHB survey that found 26 percent of builders are losing sales because appraisals on their homes are coming in below the contract sales price.

 

These appraisal practices are a major contributing factor to the current AD&C credit crisis. Falling appraised values for land and subdivisions under development have led some financial institutions to stop lending to developers and builders, to demand additional equity and even to call performing loans.

 

NAHB is calling on housing and federal financial regulators to adopt clear, concise regulatory guidelines that will allow appraisers to develop realistic valuations based on sales that are truly comparable.

 

To maximize the ability of the Small Business Administration (SBA) to help home builders and other small businesses to gain access to credit, NAHB recommends increasing funding and the loan size for the America’s Recovery Capital loan program. This program offers small businesses guaranteed deferred-payment, interest-free loans of up to $35,000 that can be used to pay principal and interest on existing loans; qualify small business debt, including mortgages; and for other purposes. The $255 million program continues through Sept. 30, 2010 or until the funding is exhausted.

 

NAHB also supports proposed improvements to the SBA 7(a) program, which provides capital for a range of purposes, including construction and supplies, to increase the participation of  non-traditional lenders in SBA programs.

 

Finally, Robson commended the committee’s proposal to establish a supplemental loan assistance program to complement the lending initiatives currently administered by the SBA. A primary objective of this program would be to target businesses with capital needs in excess of $10 million.

 

“Like all small businesses, home builders vary in size and many would find much greater benefit from a program that would expand and increase loans for businesses with higher capital needs,” said Robson.

 

Source: NAHB.org

NAR UPDATE: FHFA and GSEs Act on HVCC Concerns

To: All REALTORS®

From: Charles McMillan, 2009 NAR President

Re: UPDATE: FHFA and GSEs Act on HVCC Concerns

Dear Fellow REALTOR®,

I am writing to you with an important update on NAR’s efforts to address ongoing problems with recent changes to appraisal rules. As a direct result of my recent meetings with the New York Attorney General’s office, the Federal Housing Finance Agency, and Fannie Mae, both Freddie Mac and Fannie Mae this week issued new guidance to all lenders on the Home Valuation Code of Conduct.

The alert clarifies two very important points that we raised in our meetings with officials. First, it states that lenders should use appraisers who have clear experience in the geographic area. Second, it clarifies that appraisers are not prohibited from talking to real estate agents.

 http://www.fhfa.gov/webfiles/14611/hvcc_NOTICE_7_22_09F.pdf

In addition to this guidance, both Fannie Mae and Freddie Mac recently posted extensive Qs and As on their respective web sites, based on information that NAR provided when the code was first adopted in May.

https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvccfaqs.pdf  http://www.freddiemac.com/singlefamily/hvcc_faq.html

We have posted links to all of this information at: www.Realtor.org/HVCC .

Although this is certainly a step in the right direction, more still needs to be done to address problems with the HVCC. NAR will continue to push for a moratorium on the Code, and I will continue to meet with industry partners and officials to convey our concerns.

Thanks to all REALTORS® who have shared experiences and concerns with us. Once again, you have proven that we are the “Voice for Real Estate,” and I am proud to serve as your 2009 President. Sincerely,

Charles McMillan, CIPS, GRI
2009 NAR President

Agencies Release Revisions to Interagency Questions and Answers and Proposed New Questions Regarding Flood Insurance

The federal bank, thrift, credit union, and Farm Credit System regulatory agencies today released revised interagency questions and answers regarding flood insurance and requested public comment on several new ones.

The Interagency Questions and Answers Regarding Flood Insurance (2009) supersedes the 1997 interagency questions and answers document and supplements other guidance or interpretations issued by the agencies and the Federal Emergency Management Agency (FEMA). The Interagency Questions and Answers Regarding Flood Insurance (2009) consists of 77 questions and answers, which were revised based in part on comments received during the public comment period.

The agencies are also proposing for public comment five new questions and answers on determining insurable value in calculating the maximum limit of coverage available for the particular type of property and the timing of force placement of required flood insurance by lenders. After receiving and considering public comment on the five new proposed questions and answers, the agencies intend to incorporate them into the Interagency Questions and Answers Regarding Flood Insurance (2009).

The Federal Deposit Insurance Corporation, Federal Reserve Board, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, and Farm Credit Administration invite comment on the five proposed questions and answers and, more generally, on other issues and concerns regarding compliance with the federal flood insurance statutes and regulations.

Comments specific to the proposed questions and answers regarding determination of insurable value and force placement of required flood insurance are requested by September 21, 2009. The Federal Register notice is attached with instructions on how to submit comments.