HVCC is the new standards and procedures for residential appraisal orders. It was negotiated by FNMA and FreddieMac with the New York Attorney General Andrew Cuomo in a settlement of a law suit brought by the NY Attorney General's office against Washington Mutual, a lender, and First American, an appraisal management company. The law suit was brought in November 2007 alleging the "appraiser colluded with Washington Mutual, one of the largest savings and loan companies, to inflate home values."
The HVCC procedures require mortgage brokers, who were not involved in the original lawsuit, to use 
lenders and appraisal management companies, who were involved in the original lawsuit, to order residential property appraisals.
Did you catch that? The appraisal process is being entrusted with the appraisal management companies, the same industry that was cited in the original law suit.
Several problems were identified at the time by industry professionals and the implementation of the HVCC was delayed. Now, 2 months into the actual implementation of HVCC, the chief economist for the National Association of Realtors®, Lawrence Yun, pointed to HVCC as a contributing factor to less than expected improvement in existing home sales.
From today's NAR press release, "Yun said the appraisal problem is serious. "Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales," he said. "In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected." "
The mortgage broker's association, NAMB, is encouraging members to communicate with their local congressional representatives and local media about problems with the HVCC. They also are soliciting information from other industry professionals as well as from home owners and from buyers. Problems might include delays, low valuations, extra costs.
For me personally, I have not experienced problems with delays or low valuations. I have heard of problems with other mortgage brokers. For the most part the appraisal management companies have used the same appraisers that I would have used. And they have received the same valuation that I would have received.
I have seen no change at all in valuations.
What is different is the consumer is paying about more for that valuation.
What is different is the consumer has lost some flexibility with lender options because of difficulties with transferring the appraisal to a different lender.
What is different is that the local appraiser is burdened with additional paperwork in order to deal with the administration and procedures of numerous different appraisal management companies.
What is different is the local appraiser, a small business person with local ties to the community, is getting paid less for the valuation, even as the consumer is paying more. This means that more money is leaving the local economy and going to a large out of state corporation.
These changes do not make sense to me.
When trying to understand why an action was taken, I tend to look at the results and who benefitted from the action.
The mortgage process is not helped. The housing recovery is not helped. Consumers are not helped. Valuations are not better.
Appraisal management companies certainly benefit. Why would AG Cuomo seek to boost the revenues of appraisal management companies? Especially when one of the appraisal management companies was involved in the original law suit.
Judging based on the results of the implementation of HVCC it appears to me that the intentions of the New York Attorney General were to:
•· Increase consumer cost
•· Reduce consumer choice
•· Increase appraiser work load
•· Decrease appraiser income
•· Slow the housing recovery
•· Increase the income for appraisal management companies
Oh, and as I was writing this, I just received notice that one of the appraisal management companies ordered an appraisal from an appraiser who is on the lender's "Do Not Use" list. This means we need a new appraisal, we will miss the closing date, the borrowers will need to pay for a lock extension, and the sale is in jeopardy because we will need a contract extension.
Kind of makes me wonder about the quality of appraisers that the appraisal management company is using. My guess is that the QC standard for selecting the appraiser is the one who will work the cheapest. In this particular case, the QC procedures for approving a quality appraiser appear to be deficient.
At least the appraisal management company apologized. I wonder what the New York Attorney General thinks.
BTW, the appraiser on the lender reject list who was used by the appraisal management company is not someone that we typically would have chosen.
I hope this all settles soon. I haven't had any problems personally, but these type of articles and others that are similar make me nervous.
Richard:
I get a bunch of calls each week from appraisal management companies I have never previously heard of, asking what my fee would be to appraise such and such, and also asking, what my turnaround time would be. You pretty much hit the nail on the head. These guys typically, (but not always), fee these jobs out space shuttle style, i.e., to the appraiser who will do it the cheapest and the fastest. Since I am never the cheapest, they just keep calling around and I never hear back from them. Most could care less about the actual quality and accuracy of the appraisal, as long as it fits into a neat little box with regard to FNMA's recommended guidelines.
Experienced appraisers like me have been put from one untenable position into another. First, since the advent of national appraisal licensure in the wake of the S&L "debacle," lenders were free to pressure us to appraise properties for more than they were worth, (or they would not give us work), and now, we are being asked to appraise properties for what they are worth, but for much less money than we have made in the past, as they demand more and more paperwork and quantifiable support for our opinions.
I am in a fortunate position, as very little of my work is from appraisal management companies, and, those companies I do work with are ethical. The average honest and competent appraiser, however, is in a much more difficult position.
Joan,
Basically HVCC has not cost me a loan yet. I have had more difficulties with lender underwriting on some appraisals. The system though seems to me to have no positives to offset its negatives, and there are many negatives. Not the least of the negatives is that appraisal quality is jeorpardized with a priority to the cheapest and fastest.
Now, it may be that this fiasco with the unacceptable appraisal costs a sale, a loan, and a new home. We will see. Trying to get the company to pay the lock extension fee, and any other associated costs.
Richard
David,
Thanks for commenting. Most of the appraisers I have spoken with complain about constant phone calls and emails requesting various corrections that generally do not have impact on the valuation. With this added work from the administrative side of the AMC, they are receiving less of the appraisal charge.
Richard