As many of you may or may not know, there has been quite an upheaval in the real estate appraisal profession, that is due to change the face of the appraisal and lending world as of January, 2009 if the new HVCC regulations pass as written. (Home valuation Code of Conduct.) This started when Attorney General Cuomo was investigating Fannie Mae and a large Appraisal Management company for fraudulent activity as it relates to the foreclosure mess we are in today.
Ever since appraisers have been doing business, lenders have applied pressure to "hit a number" to make the deal work, Realtors and homeowners have also applied their fair share of pressure, but it was the lenders that basically threatened to take business from the appraiser if they did not make the deal work.
Well many appraisers folded and did some unscrupulous things, but for many, it meant you either make the lenders happy or lose your livelihood. The ironic thing is that the sole reason appraisers exist is to PROTECT the lenders from making risky loans on real estate, but since brokers were not the ones LENDING the money, they were not too concerned with risks to the lender!
Unfortunately the general public feels that the sole responsibility for this HUGE foreclosure mess we are in is due to APPRAISER fraud...Well they did not do this without help...the lenders had a big hand in this but whenever a home went into default, who did they penalize and punish....the lender....Oh no, it was and always is the appraiser. We are always the fall guy and it gets tiresome for many of us as we are really trying to do our jobs to the best of our ability.
The whole point of this BLOG is this: If the HVCC passes as it is written, most mortgage brokers will be taken out of the appraisal ordering process and the only ones who will be doing the ordering will be the BANKS and Appraisal Management Companies. This affects Homeowners, Realtors and Brokers by removing ANY influence you feel you have with any mortgage brokers with whom you do business. There will be no relationship between the person ordering the appraisal report and the appraiser, total independence. Get ready for most of your deals going south due to the appraisal not meeting the value.
This is not all bad, as the appraisal should be what prevents the loan from taking place IF the home is not worth the price and if you are a Realtor who represents buyers, you want your buyers protected too right? But having total independence from the appraiser does not necessarily mean an accurate and fair appraisal. What if the BANK who is randomly selecting appraisers uses one who has no clue about a particular type of property. In our case we specialize in Lakefront property. With the new HVCC rules, Realtors, Homeowners and Brokers will not be able to intervene and say....We must have an experienced appraiser in a given field, be it Lakefront, Oceanfront, Riverfront, Golf Course, Condos, etc etc. You get my point?
Lenders and Realtors and even Homeowners will be subject to federal offenses if they pressure the appraiser in any way to "hit a number".
Personally most appraisers are happy that for ONCE, we can just do the jobs that we were trained heavily for and that is to provide an unbiased opinion of value for the subject property, however many of us spent years developing our business relationships with the mortgage brokers, realtors and homeowners only to have that taken away.
There were thousands of appraisers that wrote to the Attorney General and to Fannie Mae & Freddie Mac (including yours truly) to voice their concerns about the way the new guidelines were written, so we shall see.
One big issue we have is that lenders can use AVM's (automated valuation models), BPO's or other avenues to obtain a value for the subject property, without having to disclose this to the potential homeowner, in other words, they can play the system until they get the number they want without consequence. Lenders will not be held accountable by using these forms of unregulated and unrestricted forms of valuation but are held accountable when an appraiser is providing the valuation product.
The end result is they will avoid appraisers and use these less than reliable forms of valuation and we are right back where we started, faulty loans on properties that have not been properly appraised.
So if you are asked to join in on the protest against the HVCC as currently proposed, please consider joining us in this fight, because WE ALL LOSE, Realtors, Lenders and Appraisers and of course the HOMEOWNER!
As I mentioned above, I am all for punishment of lenders who apply pressure on appraisers, we need to be left alone to do our jobs! But I am not for throwing the Baby out with the Bath water, which is what is happening and it will affect your business!
Just thought you should know what is going on in the appraisal world. Have a great day!