Living with the code
Resources for coping with new appraisal rules
By Inman News, Tuesday, July 28, 2009.
Flickr image by D Sharon Pruitt.The Home Valuation Code of Conduct -- a new set of rules governing appraisals conducted on loans slated for purchase by Fannie Mae and Freddie Mac that took effect on May 1 -- has been a contentious issue for real estate professionals.
Some industry groups say the new rules, intended to protect appraisers from coercion by lenders, have derailed sales in part because lenders are shifting work to appraisal management companies that may employ appraisers with little experience in the markets they are assigned to work in.
Too often, critics say, appraisers are relying on distressed properties -- homes threatened by foreclosure or repossessed by lenders -- as "comparable sales" to value non-distressed or newly-built homes, without making appropriate adjustments to reflect differences such as a property's condition or geographic location. Property values can vary greatly from neighborhood to neighborhood, critics say, and inexperienced appraisers are often unaware of such boundaries, critics say.
Many appraisers and appraisal management companies say market forces, not faulty valuations, are more likely to be the cause when appraisals come in at less than an agreed upon sales price. With many markets continuing to experience double-digit price declines, appraisers can't turn a blind eye on recent sales that reflect those trends, they say.
The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, has also defended the Home Valuation Code of Conduct, saying it has not led to lower appraisals or encouraged the use of appraisal management companies.
A trade group representing appraisers, the Appraisal Institute, maintains the code has not only shifted work to appraisal management companies when mortgages are slated for purchase by Fannie or Freddie, but has had a similar impact on loans guaranteed by the Federal Housing Administration (FHA).
The National Association of Realtors has called for an 18-month suspension of the rules, and a bill has been introduced in Congress to accomplish that goal. The bill, HR 3044, had 46 cosponsors as of July 28.
In the meantime, Inman News has compiled a list of resources to help readers better understand and cope with the new rules.
Home Valuation Code of Conduct
Freddie Mac's home page for the Home Valuation Code of Conduct includes links to the code itself, a fact sheet, a bulletin to lenders, and a "frequently asked questions" reference page.
Federal Housing Finance Agency
In a July 22, 2009 notice, "Update on Enterprise Implementation of the Home Valuation Code of Conduct," FHFA addressed "misinformation" about the code, which the agency said "is serving the intended purpose."
Freddie Mac bulletin to lenders ...CONTINUED
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Submitted by Barry Noble on July 29, 2009 - 9:13am.
HVCC was created to "protect" the appraiser from the possibility of Lender "pressure" in reference to values.
The Appraisal Management companies were supposed to be independent "middle" companies - not associated with Lenders or Appraisers.
How come so many of the most active AMCs are owned directly by the lenders or their owned subsidiaries? Where is the anonymity? Where does it say they should take up to 1/2 or 1/3 of the appraiser's already low subsistence fee?
I've never provided an appraisal report to any company that hinted at coercion or cajoling by the lender in the past 20 years. Yes I HAVE lost a few jobs over the years, by refusing an assignment, when the ordering party HINTED at a potential value).
Now, I am highly offended that, and I believe, rightfully so, as an honest and very accurate appraiser, I must now struggle to find work related to purchase or refinance loans. Perhaps I can get more work if I kiss up to multiple AMCs and offer my services at near 1/2 the price I need to earn a living and remain viable........but is that reasonable or even ethical? I don't think so.
I am now turning a lot more to listing appraisals and legal, estate retrospective, divorce and insurance value appraisals - but may have to revert back to RE Brokering, if things continue to get worse.
I just watched an appraiser from a major metro city over 100 miles away do a drive-by appraisal of a neighbor's house. Questioned, from the driver's seat of the car, the appraiser was amused to come to our uniquely Mid-Century Modern tract in this resorrt city for the first time and took the assignment because it would be a nice day out. The appraiser wondered why these "old" houses were special. I explained "architecturally significant" to the appraiser. "Oh, Okay!" NUF SED.
www.MyPropertyIsWorth.com
Submitted by Truett Neathery on August 3, 2009 - 6:17am.
Truett D. Neathery
Real Estate Appraiser
Machinery and Equipment Appraiser
1216 A High Street
Auburn, CA 95603
530 885 4475
The HVCC has resulted in the following: Bad appraisals due to AMCs hiring the low bidder to do an appraisal in the shortest time, appraiser using any sale as a comp regardless of the condition of the home, concesions, motivation of the seller, just getter' done and on to the next one 2 counties away, No MLS membership, use public data or unverified agent input, appraisal comes in low, buyer or refier looses loan lock, seller looses customer, agent looses commission, lender looses borrower, seller pays too much for appraisal, seller or refier has to order another appraisal from another lender and a different AMC, (no refunds), agent looses credibility with clients and customer. All because Cuomo had something on the corrupt GSEs Fannie and Freddie.