HVCC Update – from Boston, MA

Sam Schneiderman writes in Boston.com on his opinion of the Home Valuation Code of Conduct (HVCC) six months after it was implemented. In his review, Mr. Schneiderman discusses many of the concerns expressed by the National Association of Realtors (NAR): increased costs to the consumer, pressure on appraisers to complete reports in less time, quality control (specifically geographic competency). Much of this stemming from the use of appraisal management companies (AMC) by lenders. More information on NAR’s HVCC activities can be found here.

From what I have seen, the cost of many appraisals has increased about twenty to twenty-five percent (presumably to cover the cost of the AMCs involvement)…Some AMCs email all appraisers in a given area and the first one that responds gets the job, provided that the appraiser agrees to complete the appraisal around within 24-hours of the property inspection…By far the biggest complaint that I’ve heard is that most of the appraisers do not know the territory they are appraising in very well.”

  1. David

    Congratulations to everyone who helped get the HVCC sunset provision through the House Of Representatives last week. A major victory for homeowners, Realtors, appraisers, & mortgage brokers. A major blow to Cuomo, FNMA, Freddie Mac, & AMCs. Now it’s on to the U.S. Senate for our last fight (Cuomo’s Last Stand).

  2. Hal

    The HVCC had an 18 month sunset provision in it from the beginning. Please read the original document.

  3. Homer J.Kershner

    I am a realtor forover 40 years.Realestate appraiser for about 25 years my appraisal business cut in half.For the good of buyers and good for our bussiness we must remove HCCC.The NAR must make an all out effort.

  4. Patrick

    Just wanted to make a quick comment regarding the “assumed” reason for the appraisal cost increase. First I would like to preface this by saying not all management companies are guilty of price gouging the public and appraiser. That being said, for most management companies the additional cost is just “pork” added to the amount that can already extort from the Appraiser. For simplicity sake I will use what is considered a reasonable single family appraisal fee in my area. Example: Say the median appraisal fee prior to HVCC was $350.00. That is what the Borrower should have been paying, period, end of story. With the implementation of HVCC the $350. fee is now reduced by $200. paid the appraiser by the management company which means they immediately make $150. off the Appraiser. Now the management company adds $150. dollars to the normal $350 fee (notice not what they pay the appraiser). This means the Appraiser gets paid $200. with the “added” bonus the management companies charge sighting compensation for their services they add on $150. to the $350. appraisal fee resulting in a cost to the consumer of $500. for something that should cost the consumer $350. That means the Appraiser who has done all the work) makes $200. for the assignment, the management company makes $300. and the appraiser and consumer are each bilked out of $150. It is akin to legal extortion and under different circumstances I am sure it would be a criminal offense. Nice gig if you can get it but I guess that is just business when you are unregulated. If that makes sense to our esteemed elected officials or anyone else for that matter please explain the logic. And pleeeease, don’t even mention a more secure product. Just as with any profession or job, there are good people and bad people, not all bad people. The Appraisers I know are far more ethical and honest than many politicians we have elected to office.

  5. There is definitely a lot of power that an AMC can wield. They can put pressure on the appraisers by not sending work their way unless they play by the AMC rules, whether that is price gouging, or back to the days of pre-set valuations — the main thing they are meant to resolve. See the Housing Watch dot com story likening the industry to organized crime — or the potential, anyway.

  6. Ron

    The intent of HVCC was basically good, to remove any pressure on appraisers to obtain a value. For over 20 years, I dealt with this issue daily, but I, like most of my peers, realized that the ultimate accountability rested with me, so I would not cave to the pressure, and produced a credible appraisal which passed the scrutiny of any underwriting or desk/field review. And through all of it I managed to sustain a very lucrative and enjoyable business.

    The unintended consequences of HVCC was to place a profit center (AKA appraisal management company) between my (former) clients and me. For all I know, this may have been the intent all along. The banks sure don’t mind, as they are allowed to partially or wholly own their AMC (originally not allowed under the first drafts of HVCC). Imagine collecting $450 to $500 to take an order, then pay the appraiser $225-250 for the work. Presto – $250 in your pocket. Multiply that about 20,000 times a month, and you now understand why large banks will vociferously protest any removal of HVCC in the future. Is this exploitation? The worst kind. And worse yet, it has created a new breed of appraiser….the low fee, quick turn services, any job within 200 miles of the office….ultimately giving our profession a blacker eye each day.

    I no longer have the ability to attract new clients, unless they are not under the HVCC guidelines (attorneys, accountants, some credit unions). I no longer talk with my exsiting clients, because I don’t do know if I do work for them anymore. Even the direct lenders I still deal with are prohibited by their in-house rules to speak to me about anything related to an appraisal. Ever wonder what it must have been like to be on a leper colony on Molokai?

    The appraisal “profession” is fast losing its credibility and value to the traditional mortgage lending process. HVCC was the first step. As soon as lenders can figure out a way to produce a reliable computer generated valuation without sacrificing risk, a substitute for the 1004 or 1073, there will be no need for our services within the lending industry. Then the entire fee goes to the bank.