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                                          Elected Official's in Washington Look the Other Way While NY
                                           Attorney General Enacts National Policy

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While  the economic meltdown and our presidential election garnered all the attention in Washington this past year, a little known policy adopted by Fannie Mae and Freddie Mac know as HVCC or Home Valuation Code of Conduct transitioned quietly from a mere proposal into concrete national policy altering the core aspects of virtually all real estate transactions, with devastating effects.

Today, the complications of the HVCC are killing real estate sales and stopping qualified homeowners from refinancing all across the country. Buyers and homeowners are paying higher closing costs while receiving less service, while market value decisions are being referred to unfettered and often clueless appraisal management companies located thousands of miles away.  Worse, sales and refinances, in your town, are many times being derailed by night shift hourly workers parading as “appraisal reviewers” in call centers half a world away.  That’s not appraisal independence – that’s appraisal insanity, and it’s hurting every one that owns a home or wants to own a home.

It all started when one man, Andrew Cuomo, the Attorney General of New York was investigating the relationship between an Appraisal Management Company owned by First American Corp and Washington Mutual.  The investigation revolved around loan officers influencing value by selecting appraisers that could “hit the needed value.” The investigation expanded when Cuomo determined that Fannie Mae and Freddie Mac had purchased loans from Washington Mutual.

Last year, when Fannie and Freddie’s financial woes were in the media and under scrutinty, the NY Attorney General hammered out a “solution” called HVCC. Fannie and Freddie agreed adopt new changes to how appraisals are processed in the mortgage industry in exchange for an end to the investigation.  It turns out the cure is worse than the disease.  And the irony is that now appraisals must be ordered through unregulated Appraisal Management Companies and loan officers are not permitted to have any contact with the appraiser.

Wait a minute, didn’t this all start with an Appraisal Management Company? …indeed it did….an guess who owns many of the appraisal management firms?  Would you believe many of these unregulated AMC’s, as they are called, are owned by banks in the mortgage business.

So now independent appraisers licensed and regulated by the state must work for AMC’s who will charge more and pay the appraisers less…do you think that might mean less qualified appraisers will be willing to work for less?  HVCC has only been in effect since May 1 and already it is taking a heavy toll on real estate sales and refinances, plus costing consumers more.  You see, previously an appraisal performed by an independent appraiser could be used by more than one lender.  Now, if you want to change lenders to get a better deal you will need to order another appraisal…will that lead to more or less competition????…Your right, less!!!!…less competition  won’t help you, the consumer.

Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank (Washington Mutual) and an AMC owned by First American Corp. . HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo's investigation.

 What it means to consumers:           

No Portability!  Consumers are "trapped" with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.

Higher Costs!   If there is a need to change lenders or brokers as a new appraisal will be necessary.

Increased time!  As brokers and loan officers lose control of choosing and managing appraisals consumers will pay the cost for longer rate locks or extensions of existing locks. In the case that a new lender or broker is chosen, a new appraisal will be necessitated, increasing time to funding.

Decrease incentive to change lenders or brokers if they are not getting the service they deserve due to increased costs and time involved.

Here's your chance to act!

Russ Boyd and his team professionally assist buyers, sellers and homeowners in the Peninsula Communities of the San Francisco Bay Area. They have served clients in San Mateo, San Francisco, Santa Clara, Alameda and Contra Costa counties. Licensed as a Real Estate Broker by the California Department of Real Estate, 01264240.