Questions about the Home Valuation Code of Conduct

I recently read through the comment section of the Revised HVCC blog post, and one of the comments in particular jumped out at me. It asked some very good questions and made some poignant comments.

I thought I would address the comments and questions, here:

HVCC Frequently Asked Questions

How is it that the Attorney General of the state of New York has the authority to make a code that applies to all appraisers in every state?

He doesn’t. Fannie and Freddie adopted this code voluntarily, and that is why it applies to all 50 states. Now truthfully they adopted the code because Cuomo was threatening them with lawsuits. But really, why they adopted the code is irrelevant in regard to its reach. Fannie and Freddie did adopt it. And as such, it applies to all 50 states.

However, it also should be noted that lenders do not have to comply with these regulations. They only have to comply with the code, if they want to sell their loans to Fannie and Freddie. Banks that keep the loans on their books do not have to comply with this code.

This code does not change any rules or acceptable code that is not already in place.

I think mortgage brokers and loan officers would disagree. The ban prohibiting mortgage brokers from being involved in the appraisal process is a significant change. However, I would agree that the gist of the code, which is to prohibit appraisal pressure, is something that is already in place in many state and federal regulations.

The code seems to drive the choice of appraiser into the heretofore non-existent AMC business. The AMC’s of course will skim off some of the appraiser’s fee and anyone who does not agree with that will be stricken from their LIST.

While the code may increase the use of Appraisal Management Companies, the code specifically prohibits AMC’s from exerting pressure on appraisers to reach a pre-determined value. AMC’s are also prohibited from using any list that acts as a coercive measure on appraisers. Appraisers would be wise to use this code to keep Appraisal Management Companies honest. That means filing a complaint with the IVPI any time an AMC steps over the line and pressures an appraiser to reach a predetermined value.

Truly independent and honest appraisers who comply with USPAP and state laws should not have to be on any type of Approved List to do an appraisal for a lender. In the past this has been discriminatory and exclusionary.

I believe the code actually addresses this concern. Section I.B.(8) prohibits the use of “exclusionary lists” without written notice to the appraiser, including written evidence of the appraisers illegal conduct. As such, any Approved appraiser list will be based primarily on competence and the qualifications of the appraiser.

Who will establish and run the Independent Valuation Protection Institute? We already have state agencies and the Appraisal Institute that seem to do a good job.

This is a good question, as currently it is unclear who will run the IVPI. However, unlike state agencies, the IVPI will enforce appraisal independence directly through Fannie and Freddie. So any lender who violates the code may be prohibited from selling future loans to Fannie and Freddie. Hopefully, the IVPI will act as an advocate for appraisers, keeping banks and mortgage lenders honest.

What will be the result of Appraisal Quality Control? As in the past I think it will lead to “no think” canned appraisal phrases and clauses that will pass QC.

I suspect it will depend on how seriously the lender takes the testing. It will also depend on whether Fannie and Freddie require stringent Quality Control Tests.

Appraiser misconduct action will be conducted by state licensing agencies. What is new?

The code is primarily directed at regulating banks and other mortgage lenders and promoting appraisal independence. It’s impact on appraisers will hopefully be minimal and positive.

UPDATE: Here is Fannie Mae’s Frequently Asked Questions about the HVCC. Excellent document and well worth the read.

Justin Morton
Manager of Appraisal Specialties
National Association of Realtors

  1. What are the requirements for being a correspondent lender? Do they have agency relationships with one or more lenders, or do they have some formalized contractual relationship with one or more lenders?

  2. Debbie Mann

    The problem with this process is the lack of Appraiser control. Many Appraisers carry the name only, but are not appropriately monitored to do their job correctly. Many of them simply put an appraiser value of whatever is on the contract and the home may have been purchased for a lower price due to the sellers needs. This doesn’t decrease the value of the home! Nor, should it effect the bottom line of the other homes in the area that are being sold. Who’s going to monitor the Appraisers performance?

  3. Joseph Russo

    You have correct portions and portions that are way off base. What is happening is that good appraisers can’t afford to be in business. Some AMC’s are doing more then skimming off the fee. How about 50% or more?
    It will lead to the lowest quality of work for the least pay that lenders and appraisers have seen since licensing. I have seen offers from AMC’s now below $200 for the appraisers cut. Did the AMC skim or charge $400 to $600 for the deal.
    There is no voice for the Residential Appraiser in Congress with the Appraisal Institute. It has grown into an organization that caters mostly to the commercial areas not residential.

  4. Joe:
    I agree that AMC’s pose a real problem for appraisers. It doesn’t appear that they pay enough for an appraiser to do a USPAP compliant appraisal.
    However, I think that if appraisers can eliminate most of the pressure that comes with appraising property, they will be able to in-turn demand the fees that allow them to complete quality appraisals.
    If the majority of work goes toward AMC’s, then appraisers really need to ban together and hold these AMC’s accountable. And that means reporting them, everytime an AMC violates one the principles of the HVCC.
    Also, the Appraisal Institute recently released model legislation that would regulate AMC’s. And I know they are trying enact this legislation in several states, so I think there are some folks working hard on this issue.
    I guess, I’m just trying to be optimistic here. And hope for the best.

  5. H. Rawie

    Quality will be put at the bottom of the list with these AMC, they take more then 1/2 the fee in most cases and only care about turn times and this is the problem. This is the key problem with AMC, and NONE care about Quality.

  6. H. Rawie

    Another thing, said in the starting comments, this new AMC roll, I don’t know where he has been but AMC have been around more then 10 years, driving down quality and recently they know full well about the HVCC coming and they still black ball appraisers that don’t hit the number. Where is the control on them in this HVCC?

  7. You’ve only addressed a few issues Justin. Not the meaningful ones.
    Why would an intelligent residential appraiser stay in their business now that Appraisal Management Companies (aka “Firewalls”) are firmly in control of appraisal ordering.
    Fact: Most AMCs keep 50-60% of the appraisers fee.
    Fact: Overnight appraisers were told that business relationships that they’ve spent years building were useless.
    Fact: Appraisers ARE BEYOND DOUBT being asked to foot the bill for both the appraisal review and the ordering process out of their fee. I’m sure banks loved that idea. What a great way to cut their overhead.
    Fact: An appraiser cannot stay in business working for $150 per order. The overhead is simply too high.
    Fact: Even if AMCs did pay fair fees, many AMC rosters are simply closed to appraisers (and have been for years)
    Fact: AMCs engage in price fixing on an extremely large scale.
    Fact: AMCs pressure appraisers just as much as lenders have in the past. They use a more subtle technique.
    Fact: Both Lenders and AMCs continue to mislead the borrower on the HUD 1 statement when claiming that the appraisal receives the entire fee.
    Let’s face the plain and simple truth. AMCs and banks had complete control of how HVCC was structure. Cuomo was merely the puppet. Both had everything to gain and nothing to lose. Mortgage brokers lost some of their flexability but they will survive. No party involved came close to losing as much as appraisers (who are being asked to surrender both their labor cost and their profit margin).
    Banks chose to use HVCC to drive more Mtg brokers out of business and to reduce their ordering and review overhead. It’s saves them millions of dollars. Appraisal management companies are obviously using it as a way of making millions (if not billions) off of appraisers.
    Does HVCC cut the cost of appraisals for the borrowers? Quite the opposite actually. Most AMCs bill at at least $400 and pay around $150 to the appraiser.
    It is my hope that the public soon realizes that they’ve just been bamboozled by banking and AMC pressure. Even more interesting since they were the ones who just bailed out banking. I sincerely hope that the public soon holds Congress responsible for the HVCC fee grab/deception. I think it will become more apparent once tens of thousands of appraisers quit their careers during 2009.
    Care to address these issues Justin Morton? They are the ones that will truly matter in the coming months.

  8. David, I agree that AMC’s are a problem and the fee structure makes is very difficult to complete a quality appraisal.
    However, the first section of the HVCC explicitly mentions Appraisal Management Companies and prohibits them from any type of unethical behavior.
    If appraisers can keep AMC’s honest, then I think this code can ultimately be a benefit to appraisers.
    That said, I’m open to other potential solutions.

  9. Earl Watrous

    Requiring the use of AMC’s, regardles of form has the immediate effect of reducing the appraisers income by a minimum of 50%. By redirecting which appraiser is called (i.e. the cheapest or most “accomodating”) the intent of the HVCC will be circumvented. As currently written the mostly likely events are: a reduction in residential appraisers and a significant increase in appraisal fees. The concept is good, the execution poor. Better use of my time will be working at a fast-food restaurant if this is implemented as currently written. Final comment: cookie-cutter, canned appraisals will become the norm if all work has to flow thru an AMC. Good Luck.

  10. George

    My concern especially in this market is bank controlled appraisers that will undervalue a property to gain and continue favor as a bank approved appraiser, which will make it difficult for properties to appraise at fair market or get refinanced. Will this code of conduct help with this at all?

  11. Gary Oakley

    You spend years building up a relationship with individual clients. Only to be told, They have no part to play in your use as an Appraiser. How would this play out if Buyers and sellers couldn’t pick their Realtor, but were asssigned one by a Realtor Management Company.

  12. J. Craig Sewell, SRA

    The biggest problem with the AMCs is they very competitively bid for a lender’s business, but then want the appraiser’s to work for 60%-75% of the appraiser’s typical full fee. I have been in the business for 20 plus years and I am very good at what I do. I will not work for a reduced fee, and in turn the lender’s will get less than what they are paying for. The HVCC will push appraisal quality well below where it should be (is that what we want). It has always struck me as ironic that lenders want to save $50 in collateral valuation when they are making a $200,000 loan.

  13. What are the major differences between 2008 and 2009 in regards to appraisals? In addition to this question: I have heard that appraisers not giving sq. ft. value for basements (even finished basements) Is this true? I know of at least 2 appraisals that were completed with out consideration to the basement sq. ft. This dramatically affected the overall value of the properties.

  14. Jerry Ball

    You did a very good job of sidestepping the following question – or just plain ignored the issue: The code seems to drive the choice of appraiser into the heretofore non-existent AMC business. The AMC’s of course will skim off some of the appraiser’s fee and anyone who does not agree with that will be stricken from their LIST….
    The KEY ISSUE IS THEY TAKE MONEY OFF THE TOP OF THE APPRAISAL FEE AND IF WE DISAGREE WE’RE REMOVED FROM THE APPROVED LIST. (And their fees are not low.) PLUS they use “Market-based” pricing – fees based upon “their pre-determined value” and “Their determination of if the property is Urban, Surburban or Rural……

  15. Justin Morton

    The code seems to drive the choice of appraiser into the heretofore non-existent AMC business. The AMC’s of course will skim off some of the appraiser’s fee and anyone who does not agree with that will be stricken from their LIST….
    I agree. AMC’s are a problem. But I think it’s a problem that appraisers can deal with and ultimately I think appraisers can come out ahead.

  16. Terrance D Finnell

    The question was asked about whether AMC’s will skim off appraisal fees but you didn’t give an answer.

  17. Justin Morton

    The question was asked about whether AMC’s will skim off appraisal fees but you didn’t give an answer.

    Oh, okay. I guess I missed that.
    The issue of “fees” isn’t addressed in the HVCC. So, my answer is, “I don’t really know.” I suspect it will vary among the different AMC’s.

  18. Justin Morton

    Also, to answer Carl Moody’s question above regarding the definition of a “correspondent” lender, here is Fannie Mae’s repsonse:
    What is the definition of a “correspondent” lender?
    A “correspondent” is a third-party entity that may originate and underwrite the mortgage. The correspondent closes the mortgage in its own name with its own funds, and sells it to the lender. The mortgage is sold to Fannie Mae by the lender.

  19. Justin Morton

    I just read through Fannie’s document again, looking for any reference to AMC fee structure, and didn’t find anything addressing that issue specifically. However, here is what Fannie’s FAQ says about AMC’s:
    Is a lender required to use an appraisal management company for ordering appraisals?
    No. A lender may order appraisals directly from an individual appraiser.
    May an appraisal management company affiliated with, or that owns or is owned in whole or in part by the lender or a lender-affiliate, order appraisals?
    Yes, an appraisal management company affiliated with, or that owns or is owned in whole or in part by the lender or a lender-affiliate, may order appraisals if the appraisal management company meets the criteria of Section IV.B. of the Code.
    When a lender uses an appraisal management company, the appraisal management company is responsible for retaining and paying the appraiser. Is it likewise permissible for a mortgage broker to use an appraisal management company, since the mortgage broker does not technically retain or pay the appraiser?
    No. The Code prohibits lenders from relying on an appraisal where the broker had a role in selecting, retaining, or compensating the appraiser.
    May a mortgage broker provide the lender with an approved appraiser list for the lender to use when ordering appraisals for that particular broker?

  20. Robert Fulton

    I think this is giving the appraisers to much power. The banks want to hold the buyer responsable for the loan and if the buyer in the home becomes upside down in a down market the banks reduse to refi the loan to lower interest. Yet the buyer has to rely on the banks appraiser.
    Either let the buyer hire the appraiser or force banks to honor that apprasail and refi the loans regardless of value in the future. Banks want buyers to have skin in the game then banks should to and the appraiser is working for who hires them (the banks so the bank and the appraiser should both have skin in this) There are to many appraisers that do not buy access to inofrmation needed to properly judge values there is no process to insure qaulity of work.

  21. Steve Timper

    Chase Bank wants all lender to start using their AMCs by January 19th, 2009. In anticipation of this I tried to sign up for one of their approved AMC firms, LSI. LSI told me in an email, that they take 50% of the appraiser fees. I am glad they told me before I filled out their package. I will NOT work for half price. Most of the approved AMC firms are huge corporations that have found a way (lobbied) to rape the appraiser and the appraisal profession.
    Steve Timper
    Owner/operator of small appraisal firm for 15 years, leaving that field…

  22. AJ Hollman

    I am an appraiser and owner of an appraisal firm in Southeast Florida as well as a licensed real estate sales agent and member of the National Association of Realtors. I’m writing this letter to media outlets and government representatives as a plea for action. This letter reflects an appraiser’s opinion of the new Home Valuation Code of Conduct (HVCC) rules which have been previously announced and have been recently revised with implementation set for May 1st of this year.
    Our appraisal company has strived in earnest to provide accurate and professional appraisal services to the lending industry. During my years as an appraiser people have tried to bribe, threaten, harass, and punish me for providing impartial and accurate work. I consider this to be a necessary part of the job as we are typically one of the only parties to a real estate finance transaction who’s pay is not dependant on the outcome of a loan. If you are buying a home or refinancing your home we are the people that are expected to give you and your lender an informed, honest, and independent opinion as to your home’s worth.
    My colleagues and I take the job very seriously as we understand that the majority of the time we are working with people that are making the largest investment of their lives. I wish that the new Home Valuation Code of Conduct rules reflected the same sense of responsibility to consumer interests exhibited by my staff and colleagues. Unfortunately this legislation will allow corporate banker control of one of the few remaining independent steps in the loan process. The recent changes are yet another example of special interests tipping the scales towards the benefit of a few and in direct contrast to the interests of the many. I believe the American people are tired of government officials that support special interests over public interests. I have been looking for a change in the business as usual model of Washington. I do not see that change reflected in this new legislation.
    My primary concern with the Home Valuation Code of Conduct is that title companies and banks will be allowed to own their own Appraisal Management Companies (AMCs) which is a reversal of the earlier legislation position on this issue. The original proposal from Mr. Cuomo’s office (he has been the main sponsor of these rules) had wisely indicated that Appraisal Management Companies could not be owned by lending institutions or title companies because the banks they represent have a vested interest in the outcome of the appraisal portion of the loan process. This industry does not need to break free from the relatively light bonds of independent scrutiny remaining in the loan process. What the industry needs is stricter regulation with oversight by independent sources. The Home Valuation Code of Conduct requires the vast majority of appraisals to be ordered through Appraisal Management Companies, while at the same time it allows ownership of those companies by the banks underwriting loans utilizing those appraisals.
    The HVCC encourages a virtual monopoly due to control of the vast majority of appraisal assignments which are placed in the hands of a few management companies. These AMCs are guaranteed to receive all business from their parent company. Providing services to these organizations will be (and for the most part already is) a necessity for any appraisal firm to survive due to the volume of work that they control. Banks will demand use of their subsidiary Appraisal Management Company for all loans underwritten by their corporation, which is already beginning to happen (at lightening speed) as the implementation date of these rules draws near. At this time these bank owned AMCs control a large percentage of the total appraisal assignments, and with the HVCC rules being proposed they will control the vast majority of all assignments in the country.
    Historically appraisers received orders directly from lenders or loan originators at a local office such as the appraisal firm which I own and operate. Firms were able to establish a reputation as fair and competent professionals and could reasonably expect to receive increased work volume as a result. Because the appraisal process demands in depth knowledge of local market conditions, appraisal firms have typically been small offices with territories consisting of a few Counties in their established local market. Some of the larger national appraisal firms are actually networks of these small appraisal offices. These smaller appraisal firms fall into the category of the “small businesses” we heard so much about during the election, and which I’m told form the backbone of the US economy.
    In recent years the appraisal assignment process has shifted to a new industry system which primarily utilizes a handful of Appraisal Management Companies to distribute orders for appraisals throughout the country. In the new model, these companies operate on a national scale to distribute orders through a primary processing hub or hubs which can be located up to thousands of miles away from the property being appraised. In some cases they are even staffed through India, further reducing the number of American service jobs performed by Americans. There are benefits to centralized organization and processing, and all innovative suppliers in our changing industry should expect to evolve if they want to succeed. Unfortunately, bank owned Appraisal Management Companies are taking advantage of their virtual monopoly by skimming an unreasonable majority of the borrower’s fee making it almost impossible to survive as a professional appraisal firm.
    The result of this new model is the degradation of accurate quality work as experienced appraisers find it harder and harder to remain in business. In the new appraisal model, the large management companies are operating as profit centers for the bank or title company as they often take as much as 70% of the fee paid by the borrower. Since they control such a vast quantity of appraisal orders, and since their parent companies can specify the management company as a sole supplier of appraisal services for their loans, these large AMC’s are able to essentially (and some times quite literally) auction off appraisal assignments. This system virtually guarantees a minimum amount of time will be spent by the lowest bidding appraiser performing each assignment if he/she wishes to make enough money to survive.
    Given that appraisers have historically been paid 90-100% of the end user’s appraisal fee, they have been able to provide relatively accurate values by spending the time necessary to property research and write their reports. Lately, since the AMC industry has begun to take over the industry, we have seen a profound drop in quality as appraisers rush to provide enough low dollar low quality reports to survive. Whether or not this has contributed to the poor equity positions of loans written by these lenders, it undoubtedly has not helped.
    Although all management companies demand timely reports that do not have obvious errors, there are many considerations that are lost in the new contract appraiser selection model. Primarily due to lack of concern over experience and lack of risk involved, the assignment of appraisals by management companies is often based on the contractor’s ability to charge the lowest possible fee. As long as a supplier meets the minimum requirements and can provide assignments on time, they are placed on a level playing field with long term industry professionals with 10 times the level of experience. In fact, by spending a minimal amount of time working on the appraisal suppliers can reduce their turn time making them the most preferred suppliers. The primary concerns that are usually expressed include working for the lowest bid price, providing fast delivery, and providing a report which lacks technical errors. The actual “quality” of the appraised value is not usually discussed and is not easily measured. Since the bank ordering the appraisal is not going to keep the property as an asset (typically the loan is resold), there is little or no risk for the lender associated with the actual equity of the property long term. The goal for these lenders is to get an appraisal that meets minimum Fannie Mae guidelines so that someone else can take on the risk. This process is efficient, quick, easy, and cheap (representing all of the new industry ideals). Quality appraisals are cumbersome, take longer to produce, are more expensive, and result in the most accurate value which may “kill the loan”.
    The current system rewards those lowest bidding contractors available without sufficient regard to the substantive quality of the appraisal or experience level of the supplier’s staff. As long as the management company can extract the maximum profit level, the actual quality of the final number produced is basically irrelevant. Does this sound familiar? Does anyone remember the definition of insanity? Have we learned anything in the past two years? I propose that we try a different approach and take some regulation control back from the corporations, not reward them with more.
    In a free market society, the risky lending practices displayed over recent years would have been punished by falling stock prices of the most irresponsible banks and subsequent takeovers by the most responsible lending institutions that were able to show prudence in their lending practices. What is taking place looks like the opposite scenario from where I’m sitting! Many of my colleagues and I had assumed that quality appraisers would be sought out following the recent mortgage melt down, but we have learned that quality is not among the concerns typically discussed by potential clients. I have bail out fatigue as an insider watching money flow to a number of these corporations without sufficient regulation planned or implemented. I do not see what risk is left for these banks related to quality of the appraised value since they continue to resell the vast majority of loans and most recently have seen their cash positions “infused” by the tax payers.
    Apparently the lending industry agrees, and we now can see that the quality professional appraiser is no longer in demand. The best example of the professional appraiser’s future that I can provide is the story of the World Savings appraisal staff. This was a lender that did not resell their loans, and therefore had a strict selection & training process to ensure quality appraisers and accurate results. Their team of employee and sub contract appraisers had a reputation as being among the best in the industry. Their relatively strong loan portfolio certainly contributed to their worth as the company itself was valuated before being sold off. World Savings was purchased by Wachovia in 2008 and Wachovia was then purchased by Wells Fargo (with assistance of a now famous tax break), and now the World Savings stock of highly qualified appraisers around the country have been told to go home and find new careers or work for the AMCs at a greatly reduced rate of pay.
    The lowest bidders are not the professionals of the industry; they are the most minimally qualified suppliers available. Quality appraising requires perspective of events over time and years of experience or access to other professionals with experience for guidance. There are skills and knowledge that can only be obtained over time or through collaboration of a group to handle due to the unique attributes of a given home, community, sub market, etc. Running an office of professional appraisers has associated overhead costs and they cannot remain competitive with appraisers working alone from their homes.
    Since the appraisal process is subjective, it not difficult to provide inferior appraisal services without leaving significant clues for detection. A given report may be technically correct (having no obvious factual errors), utilize several comparable sales within close proximity and within other statistical guidelines, but still be grossly inaccurate. By spending only a few hours on research and the preparation of the report, an appraiser can turn over a larger number of orders but quality will undoubtedly suffer. An experienced quality appraiser may put 10 times as much effort (and associated time) into a report while the end product may appear relatively similar if you are not familiar with the market area being appraised. The HVCC solution to this concern is to require appraisal reviews, but is not reasonable to require a percentage of appraisals to be reviewed by a computer or from a desk in India and expect the accuracy of appraised values to improve. You might weed out the appraisers that flagrantly lie or send in technically inaccurate work, but you will not easily find the appraisers that provide technically accurate work that incorrectly values the home. Over the past few years my colleagues and I have seen an increasing number of appraisals which are poorly prepared and are grossly inaccurate due to the tendency to utilize the most conveniently available comparable sales as opposed to the most relevant sales which invariably take longer to discover and verify. A rushed appraisal using the most obvious sales is easy to write, quickly completed, hard to identify, and rarely includes a realistic value.
    Using common sense anyone can see that the lowest bidders are not the people you want watching over your assets, let alone the largest asset backed system in the entire country. You wouldn’t apply this theory to your retirement stock portfolio by hiring the financial advisor that will handle your assets for the lowest fee would you? I think you would be more likely to hire the professionals that know what they are doing and that charge reasonable fees for their services.
    The small experienced appraisal firms that know what they are doing used to prosper within the industry, but now they are being pushed out of business nationwide. In the wake of the new industry model we find isolated inexperienced appraisers that rush out their files. I hear a lot of talk about job creation, but a job lost is just one more that has to be replaced. While the proposed model does generate the largest possible profit margin to the management companies and their parent corporations, it does not serve the interest of the consumer or the country. In fact the fee charged to the consumer for appraisals has actually increased over the past several years according to the borrowers I have spoken to while over the same time period the appraiser’s pay has been typically cut in half. During one of my last appraisals performed in 2008 I was sternly questioned by a borrower who was upset that her appraisal was costing more than she paid just a few years ago, and she wanted to know why “we” were charging her more. On that particular assignment I was making nearly half the fee I would have been paid for the same job just 18 months ago.
    If the HVCC is allowed to be implemented as written, we will be forcing the vast majority of appraisal business through AMCs while at the same time we will be driving non lender/title company owned AMCs out of business. I think the American people have had enough of the banking model that puts profits before all other considerations, and I know for a fact that I have had enough. However Mr. Quomo apparently has decided that the banks have sufficiently proven their ability to self regulate to the extent that now they deserve to take over control of the appraisal industry.
    Is this really our plan to restore opportunity and prosperity to the country? Competition is the cornerstone of capitalism, and it is easily possible to operate an Appraisal Management Company by keeping a reasonable portion (30-40% or less) of the appraisal fee while paying experienced professional sub contractors enough to make a reasonable living. You don’t even have to operate offshore to be profitable. If management companies were able to compete on a level playing field we would see a multitude of new management companies enter the market competing to provide the highest levels of service and quality. Why would we not allow these companies to thrive through innovation and competition instead of creating a monopoly of lender and title company owned management companies?
    It is distressing to me that the current AMC model will allow this near monopoly to enrich their companies with 50-70% of the fees while degrading the accuracy of these appraisal reports. This should be the time to restore trust and confidence in the system, but instead we are allowing deconstruction of the most impartial gate keepers in the entire loan process. Why is it necessary to allow the banks and title companies to control the appraisal industry? What other possible interests are being served besides those of a very few mammoth corporations? What damage is being caused to the appraisal industry and how long will it take to rebuild the numbers of professional appraisers that are being lost?
    I implore those of you in government to pay attention to this legislation which is already having a major impact on these small businesses before it is too late. I implore the news media to focus on the HVCC and similar RELEVANT issues that have such a large impact on lending industry regulation. This letter only briefly addresses a small part of the larger issues involved but if anyone would like more information or more in depth comments I would be more than happy to provide further details.
    Alvin (AJ) Hollman
    Boynton Beach, Florida

  23. The HVCC will not accomplish anything but make things worse. AMC’s want appraisers to work for very little. Unfortunately there are many bad appraisers who have cut their prices in order to get work. Most good appraisers already have a steady clientel who still order appraisals due to being a lot of portfolio work. Therefore they are not interested in taking 60% or less of the fee. As an example, the rate in northern Fla is 350. for a 1004. I was contacted by an AMC and offered work if I would cut my fee to $120.
    What the HVCC helps is the bad appraisers get more work, not the good appraisers. The good appraisers get more work when loans are defaulted on and the review, foreclosure & REO reports increase.

  24. Christine Carter

    There is a statement in the new code that says only large banks have to comply. What is the definition of a “large bank” and does this mean what I think it means. That small banks do not have to comply?
    Chris Carter

  25. Has anyone thought of how and which “appraiser list” will be used for ordering appraisals? I have been trying to get on a bunch of lists and I have been told by all of them that they are not accepting any new appraisers for my areas of service but “we’ll keep your application on file”. I won’t be able to get work after May 1, 2009 and I have over 15 years experience!! I’ve read some of the reports by the guys on the lists and I can tell you they’re not very good. Where’s the quality control in that? I’ve spent years taking classes and seminars to learn to be a better appraiser but what good has that done for me now?
    I’ve taken numerous seminars offered by the Institute as well as the Appraisal Foundation. I’m an AQB Certified USPAP instructor as well as a residential appraisal instructor in Florida but what good has all that done for me? I can’t get anyone’s attention.
    I’ll bet you there are thousands of well qualified appraisers in my same boat, wondering how they’re going to make a living after May 1st.

  26. Why did Justin Morton/NAR’s Appraisal Section totally avoid answering the question: “The AMC’s of course will skim off some of the appraiser’s fee and anyone who does not agree with that will be stricken from their LIST”. The AMCs Skimming appraiser’s fees from our livelihood is a vital issue. Currently, 1 AMC I work for shaves off a whopping $100 off my local appraisal fee. And we appraisers are supposed to sit back, relax and enjoy this change? Ever thought about this? On a $240K home sale, the Realtor/Broker earns 6% or $14,400 and walks away from closing with zero liability. We appraisers walk away with a check for $250 or 2% of the Realtor’s $14,400 and we have 5 years of liability after the appraisal is turned in. And, we appraisers aren’t supposed to be upset with Federal Regulations that mandate our appraisal fees being cut by 1/3? Are you beginning to understand the appraiser’s position here yet? Part of the problem here is that organizations like the Appraisers Section of NAR aren’t fighting to preserve our fees, and then when asked about AMCs skimming fees from us, avoid the question altogether.

  27. Sara S Wettaw

    Why doesn’t Fannie and Freddie require the AMC’s to be regulated?

  28. Justin Morton

    Why doesn’t Fannie and Freddie require the AMC’s to be regulated?
    AMC’s are mentioned several times throughout the code, and they are prohibited from pressuring appraisers to reach a pre-determined value. So Fannie and Freddie are regulating AMC’s, about as much as they can.

  29. Justin Morton

    Part of the problem here is that organizations like the Appraisers Section of NAR aren’t fighting to preserve our fees, and then when asked about AMCs skimming fees from us, avoid the question altogether.
    I get the frustration, I do. Everything I’ve heard about AMC’s is that they pressure appraisers just as much as mortgage brokers, and they pay very little in the process.
    That said, appraisal associations can’t mandate high appraisal fees. If we do, the Federal Government will come after us for violating anti-trust statutes.

  30. The HVCC is going to force mortgage brokers and banks to either: hire new staff to independently handle appraisals or utilize a AMC for appraisal services. AMC’s force appraisers to perform appraisals for half the money typically charged while they charge the lender/borrower more for the appraisal. This will undoubtely negatively affect appraisal quality as appraisers try and make up for lost profits with more volume. This is already happening all over the US, and the HVCC will make it even worse.

  31. John F Szymanski

    Do the bankers and mortgage lenders have a similar code that they will be honest in their dealing with their clients and even if there was such a code who will be the enforcer?Any organization on paper without enforcement powers and staffing is worthless.

  32. Like many forums i have become a part of, I hear a lot of complaining but nothing in ways of solutions. The problem is not going to just go away. The appraisal industry created this problem by not properly training new appraisers….by bringing in too many appraisers, and by screaming ‘price fixing’ every time the issue of increasing fees was raised. I am sickened the most by the fact that our industry seems to have been the only one unaffected by simple economics. When demand is high, prices go up! Yet from the beginning of my career in 2000, the only price increase i saw was from an office change. Fees remained constant, it seemed, around the entire nation. Homes are different all over the nation… how can fees be the same!? Our issue is with HVCC, and i ask everyone reading, as appraisers, we have to stand strong on what we feel is a reasonable fee for a job that takes me 12-15 hours per report. Our fees should be upwards of $700 for the time it takes to do the job correctly. Too many in this industry fall victim to the games played by these management companies that prey on our numbers and always tell us that they have another appraiser who will do it for cheaper! Think about what they re saying when they say that. Why in the heck are they now calling you then if they already have someone to do it faster in cheaper…. I spent a good 3 months, losing on business only to succeed in gaining a decent fee for my work. I average $400 per appraisal files through a couple of different management companies, and do my share of review work and turning in those appraisers who skip out on doing the job right. That is part of our task and duty. Our state boards are not doing the job, and are not priviledged to what we as appraisers see in the industry. Take the time and command what you are worth. Explain what it is that takes the time. Over time they will be forced to understand. There is faint hope through this, but we cant sit here and complain about it and let them hold the strings as if we are puppets. The more we get approved to take a stand against reduced fees, the more they will see that we do have a voice in our profession. Otherwise, go work at McDonalds…you’d probably make the same for less work anyway!

  33. David

    Ralph if you really want to get sick read this:
    HVCC began with the right idea (separating brokers & lenders from appraisers). Unfortunately selfish individuals came to control the end result.
    1. Bankers and brokers should be forced to play on a level playing field
    2. Neither banks or lenders should be allowed any control or ownership in the “third party” ordering companies.
    3. The “third party” ordering company’s fee should be paid out of the borrower’s pocket rather than the appraiser’s pocket. If appraisal review is a portion of the “third party company’s services; that portion of the fee should be paid by the lender (as it was in the past).
    I did some research this week while preparing to speak with a member of the U.S. Senate about this mess. In the 17 years that I’ve been appraising I was able to raise my fee twice. I was only able to get away with it because the form changes during those years required considerably more research from us. Our fees in 1992 were $225. Today they are $300 (none AMC work). If you discount the fact those two fee increases (remember they were for increased work load) you will see that we have had no cost of living increase in 17 years. Government statistics show that the cost of living has increased 50% since 1992. Just Google “inflation calculator” if you need proof. How many appraisers out there realize that they are currently earnying 50% of what they were earning in 1992 while doing the same amount of work. After HVCC kicks in you will earn 1/2 of that (25% of what you earned in 1992).
    Now add on the form 1004MC (1-4 hours work depending on if you have MLS) and…well you see where this is going. It’s a losing profession friends. Not only will you be working for free…you’ll be paying out of your savings to pursue this ridiculous hobby.

  34. AJ

    How about this for a solution? The lender pays a fee of $50 per loan for every appraisal and it is disclosed as a line item on the HUD. The money can be used to set up a Federal enforcement agency that does nothing but review appraisals and pay for appraisal reviews on a MEANINGFUL percentage of loans/files. The agency works to get rid of the bad apples that we all know are out there and the professionals stay in business.
    Get rid of the AMC/insulation attempt and set up a National hot line to help ENFORCE rules against pressure. In other words REGULATE for a change.
    I’d rather get paid $50 less on a file than have 40-70% of my fee scammed away.