I have blogged about appraisal problems many times in the past. I am not going to repeat those posts. Maybe the data below will carry more weight than my opinion, because it is fresh out of a thorough and expensive study that I have cited on this blog recently. I will cut and past comments directly from the study that quotes Realtors, and I will let their comments speak for themselves. As a mortgage consumer, the below should be plenty to tell you where you need to go for a mortgage. Mortgage brokers, large banks, online lenders and credit unions, many of whom the consumer thinks is working in their best interest are actually setup to fail the consumer by design. Just because you bank at a big bank or a credit union does not mean they are setup to provide you the best service. I worked at a big bank before, and unless you had millions of dollars
Blog Category: hvcc
What Is An Appraisal?
An appraisal is thought by most consumers to be an exact valuation of the home they are purchasing or refinancing. The reality is that there is no such thing as exactly valuing a home, since a home is worth what someone is willing to pay for it. And since different people are willing to pay different prices, the real value is hard to pin down, or even impossible.
I blogged just a few days ago about how a client went with an online lender, and that lender sent an appraiser to the client’s home who was not local to the marketplace, and the appraised value ended up coming in low enough that the client had to pay $45,000 out of pocket to pay the loan down. I am not sure how spending $45,000 in cash
I am working on an interesting loan that will make for a good case study someday, and I think homebuyers and Realtors will find it interesting too.
I am doing a loan for a homebuyer to buy a single family detached home in Falls Church, Virginia. The sales price was a little over $500,000 and the new loan is a Conventional Fixed rate 80% loan-to-value loan, which of course means we are subject to the HVCC rules. So I ordered the appraisal from the bank’s Appraisal Management Company (AMC).
For once, the appraiser was local, from Falls Church, VA so we all figured this appraiser would know the local marketplace and that we would be getting an accurate and fair appraisal. But the appraisal came in several weeks later at a price approximately $35,000 lower than the sales price. The seller was angry, the Realtors were upset, and the buyer was confused.
HVCC, the acronym for “Home Valuation Code of Conduct”, is the result of a legal settlement between NY attorney general Andrew Cuomo and Fannie Mae & Freddie Mac to assure that appraisers would not be unduly influenced by lenders in the appraisal process. Before this ruling, mortgage brokers and bank loan officers would order the appraisal for a new home loan from any licensed appraiser, usually one they knew professionally for many years. After this ruling, appraisals are not allowed to be ordered by the mortgage broker or loan officer, the bank now orders them from an “Appraisal Management Company” (AMC). Mortgage brokers and loan officers are no longer allowed to have any direct contact with the appraiser. Appraisers are supposedly being more scrutinized by the AMC’s. The law became effective on May 1st 2009 and has been causing problems ever since for buyers, sellers, and industry professionals across the country.
With evidence of mismanagement and fraud in the industry in the past, the attempt to ensure that residential properties are not appraised for more than their true worth is understandable. The intention was to stop lenders from pushing appraisers for higher values to help “make the deal work.” The belief was that this, in part, is what drove property values to unrealistic levels. The process under the new law takes ordering the appraisal away from anyone with a vested interest in getting the loan done.