Recently proposed legislation would put an 18-month moratorium on the recently-created HVCC appraisal process, which (while well-intentioned) has increased consumer costs, decreased consumer choice, and greatly slowed down the appraisal process in general. Ethical Homes strongly encourages all agents and consumers to support that legislation.

There is probably nobody in the industry who is more skeptical than us of the appraisal process; modern appraisals are in many ways a farce that provide only minimal protection or assistance to either consumers or lenders. The Home Valuation Code of Conduct, or HVCC, was a “voluntary” agreement that was forced on Fannie Mae and Freddie Mac (and thus on most lenders) by the New York State Attorney General early in 2009 that attempted to address some of the issues involved in the appraisal process, by creating third-party “appraisal management companies” (or “AMCs”) through which most appraisals must be ordered.

Unfortunately, the way the code was designed was itself very flawed, and the end result has been that the new process has increased consumers’ costs (as the AMCs are tacking on their own fees to existing appraisal costs) while decreasing their choice by limiting their ability to shop their loan among multiple lenders (since most lenders will only accept appraisals from their preferred AMC, which means consumers who are loathe to pay for a second appraisal become hesitant to move their loan to a different lender once the appraisal has been performed). The new process has also greatly increased the time that many appraisals take, by removing all incentive for appraisers to perform in a timely manner and especially to attempt to accommodate contractual and/or rate-lock-related time frames, as well as further decreasing the reliability of already-subjective appraisals by giving the appraisal management companies an incentive to use the cheapest appraiser for any given appraisal rather than using one who might have specific experience with a particular type of property or geographic area. In the months since HVCC was implemented, for example, I’ve had many clients end up choosing lenders who weren’t otherwise the best fit for them in order to avoid excess costs imposed by HVCC, and seen fluctuations in valuations on the same property when appraised multiple times (which HVCC has sometimes required) of as much as $300,000; while I’ve had some appraisals under HVCC come back literally the day after they were ordered, on average they are taking a few weeks now, and some loan officers I’ve spoken to have reported delays of up to 6 weeks in getting appraisals back.

On Thursday night, Representatives Childers (D-MS) and Miller (R-CA) introduced HR 3044, legislation that calls for an 18 month moratorium on the HVCC in order to allow the industry to look at what isn’t working with the new system and design a better alternative. We strongly encourage both consumers and industry professionals to contact your Representative to indicate your support for HR 3044, as well as signing this petition to request a review of HVCC. In particular, if you are a consumer who has been affected by HVCC, your comments in particular will probably carry a lot more weight than those of industry members who might be viewed as trying to protect their own interests, but every signature and contact does count, so everyone, please take the 5 minutes needed to shoot a quick message to your Representative (even one sentence will help the cause) supporting HR 3044 and to sign the petition opposing HVCC.

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Tags: activism, appraisal, hvcc