Fannie - Freddie UAD Update

In an August 27, 2013 release, Fannie Mae and Freddie Mac notify mortgage sellers, services, originators, and appraisers of impending changes to the Uniform Mortgage Data Program.

Fannie Mae and Freddie Mac (the GSEs) will continue to convert several of the current Uniform Appraisal Dataset (UAD) compliance warning edits to fatal UAD edits in the Uniform Collateral Data Portal® (UCDP®). Phase one was implemented on June 22, 2013. The second phase will be implemented in early 2014, with warning edits for the following data fields converting to fatal UAD edits:

• Quality of Construction Rating (subject and comparables)

• Location Rating (subject and comparables)

• View Rating (subject and comparables)

• Condition Rating (subject and comparables)

Each of the data fields above has associated UAD edits that will be returned in the UCDP if the data provided is incomplete or the format is invalid as defined in the Fannie Mae and Freddie Mac UAD Technical Specifications. When these warning edits are converted to fatal UAD edits, if one or more of these edits is issued it will result in Hard Stop 401 (UAD Compliance Check Failure) and a “Not Successful” status will be issued in the UCDP. If the lender or appraisal vendor receives a “Not Successful” status in the UCDP, the lender or vendor must resubmit a corrected appraisal with the required data in the correct format to ensure a “Successful” status. If the UCDP issues a “Not Successful” status for an appraisal, the loan will not be eligible for delivery to either GSE.

The full release is available at the link above or after the jump. For those of you involved in mortgage lending appraisal assignments, make sure you do not miss this paragraph:

As communicated in the January UAD update, the GSEs intend to discontinue accepting appraisals in PDF and other alternative appraisal formats, and to accept only the MISMO file format in the UCDP. Our goal is to retire UCDP acceptance of the ACI XML and AIReady formats, and the PDF extraction services in 2014. We will provide at least six months’ notice of the retirement date once it has been determined. We continue to work closely with lenders and vendors using these formats to ensure a smooth migration path.

My condolences to everyone required to deal with this mess. Full release after the jump.

CLICK to Read More

Fannie Mae - Appraiser Independence Requirements Announced

As expected, Fannie Mae has issued an Announcement, SEL-2010-14, with their new Appraiser Independence Requirments.

After H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law, many folks cheered the sunset of the Home Valuation Code of Conduct (HVCC). Appraiser Active took a more cynical view. It looks like we were right on the money. Here's what Fannie has to say in their release:

The Appraiser Independence Requirements replace the Home Valuation Code of Conduct (HVCC). These updated requirements maintain the spirit and intent of the HVCC and continue to provide important protections for mortgage investors, home buyers, and the housing market.

The HVCC is being replaced by the Appraiser Independence Requirements; however, all conventional, single-family mortgage loans with application dates on or after May 1, 2009, must additionally comply with the HVCC until the earlier of the release of the Interim Final Rules by the Federal Reserve as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or November 1, 2010.

For those with an interest, the Fannie Mae Appraiser Independence Requirements:

Fannie Mae Appraiser Independence Requirements 10-15-2010

Fannie Mae Announcement! - More of the Same

In a breathtaking SELLING POLICY UPDATE, Fannie Mae announces:

"Selling Notice: New Appraiser Independence Requirements Being Developed"

Fannie Mae has issued the following Notice (the entire text of the Notice is included in this e-mail):

Fannie Mae is working with the Federal Housing Finance Agency (FHFA) to develop and adopt appraiser independence requirements that will replace the Home Valuation Code of Conduct (HVCC). Until the revised requirements are released, the existing HVCC provisions in the Fannie Mae Selling Guide continue to apply. Updated requirements are expected to be substantially similar to the current provisions.

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, HVCC will sunset when interim final regulations are released to implement the appraisal independence-related provisions of the Act, which is expected to occur on or about October 21, 2010.

Fannie Mae is committed to supporting strong appraiser independence requirements. The revised requirements will maintain the spirit and intent of HVCC, and continue to provide important protections for mortgage investors, home buyers, and the housing market.

The revised appraiser independence requirements will be based on Fannie Mae's experience under the HVCC and will continue to support the integrity of the appraisal process. As part of the process to develop the revised requirements, Fannie Mae has received input from key industry participants.

Fannie Mae expects to announce the revised appraiser independence requirements in an upcoming Selling Guide announcement.

No surprise in this release. About a month ago, in a post providing my view of H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, this prediction was made:

Modifications to the TILA include the appraisal independence standards, portability of appraisals, customary and reasonable appraisal fees and sunset of the HVCC. Although it may appear as though appraisers will benefit from this section of the new law, it’s a bit early to get our hopes up. In all likelihood, the new rules for selection and retention of appraisers will look much like the HVCC.

Let's see if my low expectations for the balance of the "reforms" are on target.

Two Favorites: Fannie Mae and Countrywide

It's rare to post a video here on Appraiser Active, but CBS News has a story that WILL NOT make you feel all warm and fuzzy.

Now, what we need is to get a look at the appraisals used to value the collateral for those loans. It would also be interesting to take a long, leisurely look at the workfiles; particularly the communication between the loan origination staff and the appraiser. Do you reckon there may have been a little bit of pressure?

Are you as curious as I am?

More on Fannie Mae Update to Appraisal Policies

Just a little over a week ago, Appraiser Active POSTED about Fannie Mae updating their Selling Guide and Appraisal Policies. We linked to the June 30, 2010 Fannie Mae Announcement and offered a few comments about items of interest.

Three items on that list are worth more discussion:

• Lender changes to the appraised value and guidance on addressing appraisal deficiencies
• Appraiser selection criteria
• Market Conditions Addendum to the Appraisal Report (Form 1004MC)

In this week's The Nation's Housing column, Ken Harney lets consumers know about some of the shenanigans going on behind the scenes while borrowers are gnawing their fingernails, waiting for their mortgage loan to be underwritten and approved.

Picture this: You've signed a contract to sell your house. Your buyers say they have nailed down the right mortgage. All is well. But then the appraisal comes in low -- $25,000 to $50,000 under what was agreed upon in the contract.

The lender insists on cutting the mortgage amount to reflect the lower appraised value. You refuse to negotiate anywhere near the price indicated by the appraisal, and suddenly -- poof! The whole deal is off. You, the buyers and the agents involved are all left sputtering over the appraisal that scuttled the transaction.
This scenario is not unusual in many markets across the country, say home builders, brokers and appraisers.

Here's one little-publicized reason why: Lenders unilaterally may be lowering the numbers on the appraisals submitted to them, in order to avoid accusations that the loans they sell to giant investors Fannie Mae or Freddie Mac are based on inflated appraisals -- even slightly inflated.

Fannie Mae, in their Announcement, links to language in the Selling Guide to make it clear that such actions by the lender or underwriter are NOT PERMITTED.

Changes to the Appraised Value

The lender is responsible for ensuring that appraisal reports are complete and that any changes to the report are made by the appraiser who originally completed the report. If the lender has concerns with any aspect of the appraisal that result in questions about the reliability of the opinion of market value, the lender must attempt to resolve its concerns with the appraiser who originally prepared the report. If the lender is unable to resolve its concerns with the appraiser, the lender must obtain a replacement report prior to making a final underwriting decision on the loan. Any request for a change in the opinion of market value must be based on material and substantive issues and must not be made solely on the basis that the opinion of market value as indicated in the appraisal report does not support the proposed loan amount. For information concerning the process lenders must follow to address a change of the opinion of market value, see Guidance on Addressing Appraisal Deficiencies, below.

Lenders must pay particular attention and institute extra due diligence for those loans in which the appraised value is believed to be excessive or where the value of the property has experienced significant appreciation in a short time period since the prior sale. Fannie Mae believes that one of the best ways lenders can reduce the risk associated with excessive values and/or rapid appreciation is by receiving accurate appraisals from knowledgeable, experienced appraisers.

That guidance certainly differs from reports we've heard from the field and relayed to Ken:

In other situations, we have seen out of state reviewers and "Chief Appraisers" for certain lenders contact appraisers with their concerns about value, suggest alternative comparable sales and "more credible" value estimates. These comments are based on first hand, personal experience.

Typically, Gregoire says, the lender orders a low-cost electronic valuation -- based on publicly available statistical data, with no onsite inspections -- to review the accuracy of what was submitted by the appraiser. If there's a discrepancy between what the computer says and what the appraiser reports, the lender's underwriters sometimes simply cut the number -- even if this means knocking the real estate transaction off track. Or they demand an immediate explanation from the appraiser.

The fact that Fannie decided to specifically address this in the Selling Guide seems to indicate the practice of arbitrarily changing the opinion of value must be fairly widespread.

Ken also addresses the Fannie guidance on Appraiser Selection Criteria:

Fannie also makes it clear that the use of an Appraisal Management Company is not required to comply with the HVCC.

Fannie's new guidelines also attempt to clarify other issues that have arisen during the past year, including the widespread use of inexperienced appraisers who are unfamiliar with local market conditions. Real estate agents, builders and mortgage brokers have complained to Congress that rules adopted by Fannie and Freddie last year encouraged lenders to use "appraisal management" companies to value properties.


Those companies, in turn, often pay appraisers deeply discounted fees -- half off traditional prevailing rates in some cases -- and require them to complete their assignments far faster than normal turnaround times. Critics have said that low-budget appraisers working for management companies frequently travel long distances to do their valuations, have minimal access to local data, and make excessive use of foreclosures and short sales as comparables


Fannie's letter attempts to clarify its "appraiser selection" standards. Top on the list: Appraisers should be experienced, "have the requisite knowledge" about local market conditions and have access to all local data sources. Fannie also emphasized that the demonstrated experience of an appraiser should always trump fees or turnaround times -- a clear swipe at management companies that bid out their work on the latter two criteria.

Specific guidance is in the Selling Guide, page 476

• neither the Home Valuation Code of Conduct (HVCC) nor Fannie Mae requires the use of a third-party vendor;
• lenders are ultimately responsible for representations and warranties related to the value, condition, and marketability of the subject property; and
• lenders must hold the AMC responsible for complying with Fannie Mae’s requirements.

The clarification about the lender's use of AMCs is welcome. More than likely, many lenders believed the use of an appraisal broker absolved them of any responsibility for the appraisal report, or assuring the qualifications of the appraiser. It's nice to see Fannie actually mention "qualified" in reference to appraisers working for AMCs.

There is still a BIG question about the use of Review Appraisers. This section of the Selling Guide requires an inspection of the subject property by the appraiser signing the report. The section of the Selling Guide that addresses lender/underwriter changes to value opinions outlines the procedures the lender must follow if they do not have faith in the original appraisal. One of those is an Appraisal Review.

Although Fannie has not spelled it out, in reading all the sections together, I believe the Review Appraiser would have to meet the same, "USPAP Plus", Competency Standard the new language makes clear.

That leaves the Fannie Mae 1004MC. There's plenty to discuss about the "new" guidance. My concern is that it will result in a misleading report, or misleading information about the condition of the current market. It's worth a post of its own.

Stay tuned.

UPDATE - Thanks to Jonathan Miller (MATRIX) for the mention and link!

Fannie Mae Updates Selling Guide and Appraisal Policies

Fannie Mae has issued an Announcement, dated June 30, 2010, titled Selling Guide Updates and Additional Guidance on Appraisal-Related Policies. The Announcement includes:

• Appraisal-related policies that update the Selling Guide
• Miscellaneous appraisal-related guidance (no impact on the Selling Guide)
• Miscellaneous Selling Guide updates
• Updates to Special Feature Codes
• Updates to Mortgage Insurance Codes

The last 3 will not be of much interest to appraisers, but the first two include information of interest and importance. As a result of these changes, the online Fannie Mae Selling Guide has been updated, and now carries a June 30, 2010 date. Use this LINK or the Fannie Mae Selling Guide Link in the Links Section.

You will be interested in:

• Inclusion of interior photographs in the appraisal report
• Lender changes to the appraised value and guidance on addressing appraisal deficiencies
• Appraiser selection criteria
• Sources of comparable market data
• Selection of comparable sales
• Communication under the HVCC
• Seller concessions
• Treatment of personal property
• Market Conditions Addendum to the Appraisal Report (Form 1004MC)

IT'S OFFICIAL! - IVPI is Vaporware

According to a story posted on RealEstateRama, in a letter from FHFA Acting Director Edward J. DeMarco to New York Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac, now in conservatorship, will not be funding the Independent Valuation Protection Institute (IVPI).

Back in December, Appraiser Active said:

If you were inclined to give Freddie Mac (and Fannie Mae) the benefit of the doubt, our suggestion is to avoid holding your breath waiting for the IVPI. Why don't these folks come clean and admit wishful thinking will not make it happen?

Instead,we get this:

“As conservator of Fannie Mae and Freddie Mac, our priority is to keep the Enterprises focused on the important role they play in supporting the mortgage market,” said DeMarco. “The need for a complaint process is being addressed in a way that we believe is more practical than with the Institute.”


Fannie Mae and Freddie Mac will deploy a complaint process to address suspected code violations including a mechanism for providing pertinent information to state and federal regulatory and enforcement departments. The process will be put in place within the next few weeks.

Press Release and Letter HERE.

In my opinion, it's LATE, it's LAME, not in compliance with the agreement signed among the New York Attorney General, Fannie Mae and Freddie Mac, fails to address the role of Appraisal Management Companies and DOES NOT provide a means for appraisers to complain about non-compliant tactics and actions by AMCs.

IVPI = VAPORWARE

AARO - Association of Appraiser Regulatory Officials

The ASSOCIATION OF APPRAISER REGULATORY OFFICIALS (AARO) will be meeting October 10 - 13, 2009 in Washington, D.C. for the Annual Conference. This is the second of two meetings AARO has each year.

According to their bylaws, their MISSION is to improve the administration and enforcement of real estate appraisal laws in member jurisdictions. The agenda for the Fall, 2009 program reveals the effort to meet that mission. In addition to regular meetings of their committees on AQB Oversight, ASB Oversight, Investigator Training and Education, several panel discussions and guest speakers are scheduled. These include:

Consistent Enforcement - Enforcing USPAP

• Joe Traynor - Chair, The Appraisal Foundation Consistent Enforcement Task Force
• Jenny Tidwell - Appraisal Policy Manager, Appraisal Subcommittee

Updates

• Jim Park - Executive Director, Appraisal Subcommittee
• David Bunton - President, The Appraisal Foundation
• Sandy Guilfoil - Chair, Appraisal Standards Board
• Gary Taylor - Chair, Appraiser Qualifications Board

The Changing Face of the Appraisal Profession

• Joan Trice - Appraisal Buzz
• Jim Amorin - President, Appraisal Institute (AI)
• Richard Edmunds -President-Elect, American Society of Farm Managers and Rural Appraisers (ASFMRA)
• John Marazzo - President, National Association of Independent Fee Appraisers (NAIFA)

HVCC - Appraisal Management Companies and Broker Price Opinion Issues

• Jeff Dickstein - National Association of Broker Price Opinion Professionals (NABPOP)
• Frank Gregoire - National Association of Realtors® NOTE: I am appearing as a representative of the National Association of Realtors® Appraisal Committee
• David Feldman - Real Estate Valuation Advocacy Association (REVAA) and Title/Appraiser Vendor Management Association (TAVMA)

Lender Policy Updates and Issues

• Peter Gillispie - Federal Housing Administration / Department of Housing and Urban Development
• Robert Murphy - Fannie Mae
• Jacqueline Doty - Freddie Mac
• Gerry Keifer - Veterans Administration

From 2000 through 2008, when I was a member and Chairman of the Florida Real Estate Appraisal Board, I attended nearly every meeting of AARO. Each provided great opportunities to meet with other state regulators as well as individuals involved in appraisal policy development, appraisal standards development and enforcement and refinement of appraiser qualifications.

Although I won't be able to attend the entire meeting, each of the above discussions is on my calendar. I'll try to live blog a bit from the AARO meetings next weekend and provide a full update after returning to the Sunshine State.

FWIW, you can catch my article about the HVCC on page 4 of the latest AARO Newsletter.

NYT - Lotsa Love for AMCs and the HVCC - NOT!

Yesterday it was the Wall Street Journal. Today, it's the New York Times! It's nice to see all the love going to the Home Valuation Code of Conduct (HVCC) and Appraisal Management Companies. In this article the NYT even throws a dig in at Andrew Cuomo.

In Appraisal Shift, Lenders Gain Power and Critics

Mike Kennedy, a real estate appraiser in Monroe, N.Y., was examining a suburban house a few years ago when he discovered five feet of water in the basement. The mortgage broker arranging the owner’s refinancing asked him to pretend it was not there.

Kudos, Mike! By the way, what's a basement?

The Home Valuation Code of Conduct is setting off a bitter battle. Mortgage brokers, lenders, real estate agents, regulators and appraisers are all arguing over whether an effort to fix one problem has created many new ones.

The agents, maintaining that the changes are effectively blocking home sales by encouraging the use of inexperienced appraisers, are asking Washington to suspend the code until 2011. For their part, appraisers acknowledge that the change may have been well intentioned but contend that it has no teeth and is undermining the economics of their profession.

There's more!

Appraisal management companies and lenders say the agents’ charges are not true. “We’re an easy scapegoat,” said Donald Blanchard, chief compliance officer of Lender Processing Services Inc., which works with 20,000 appraisers. “We’ve yet to see any quantifiable proof as to the problems that management companies are supposedly causing.”

The real source of trouble for independent appraisers, he suggested, is not the code but a changing economy.

“Appraisers want to go back to the way it used to be,” Mr. Blanchard said. “But it’s good business for us to demand more for less.”

CLASSIC!!

Appraisers might be earning less, but consumers are being asked to pay more. The cost of an appraisal is now about $500, up from $400, appraisers say, because of the management companies’ share.

Moreover, if the goal of the code is to lessen pressure on appraisers, it is not clear that is happening.

A memo from U.S.Bancorp, which is based in Minneapolis, was posted recently on Appraisers’ Forum, an online discussion group. The memo bluntly urged the lender’s appraisers to “try and get the value we need the first time.” (A U.S. Bancorp spokeswoman said the memo was “not an official document.”)

There's even mention of the phantom Independent Valuation Protection Institute!

Under the code, the role of deciding what is pressure is assigned to a new entity called the Independent Valuation Protection Institute. If appraiser complaints are deemed valid, the institute is supposed to forward them to regulators.
Seventeen months after it was announced, the institute has no staff and no appraiser complaint hotline. All that exists is a single Web page.

Read the whole thing

My comment posted to the NYT site:

The comments from the AMC folks are telling -“Appraisers want to go back to the way it used to be,” Mr. Blanchard said. “But it’s good business for us to demand more for less.” This line of thinking is exactly why credentialed, designated, and experienced professionals refuse to accept work from meddling middlemen.

Many of the Appraisal Management Company assignments are accepted by recently licensed, inexperienced folks that often travel a significant distance to provide their supposedly "expert" service in areas where the buyer has examined more of the market than the appraiser is allowed to in order to meet the AMC mandated 48 hour turnaround time.

Mr. Blanchard will soon see the "quantifiable proof as to the problems that management companies are supposedly causing.” It will come in the form of complaints to state regulatory agencies due to poorly developed and incomprehensibly reported baloney prepared by their rookie independent contractors.

The source of the pressure, claimed by Mr. Cuomo to be eliminated, has shifted to the AMC. Although value pressure still exists, the real culprit is fee and turn time pressure. Their panel of appraisers will tend to deliver a product and service commensurate with the price paid, and the AMC will charge the borrower a premium.

When consumers, borrowers, and the public at large get the full story, attitude and demands may change. Folks will learn that the largest banks all have a piece of one or more Appraisal Management Company. The fact that Appraisal Management Companies are, for the most part, unregulated will not go over well with consumers. Borrowers will be surprised that these invisible middlemen often take a larger part of the borrower's appraisal fee than the appraiser, and that the AMC portion of the payment and their relationship with the bank is not disclosed at any point in the transaction.

Homeowners trying to refinance will be shocked to learn that the AMC appraiser was provided with an Automated Valuation Model generated value indication with the appraisal assignment; ostensibly to "assist" the appraiser. Without a doubt, the borrower will be pleased to learn the appraiser's opinion of value duplicates the computer generated number.

There are many more stories to be told and much more investigation needed of the Cuomo generated deal. It will be interesting to sit back and watch it develop.

FHFA - Lame Support for HVCC

On Wednesday, July 22, 2009, the Federal Housing Finance Agency (FHFA), released a NOTICE with the title "Strengthening Appraiser Independence and Improving the Valuation Process - Update on Enterprise Implementation of Home Valuation Code of Conduct".

Apparently the release is in response to the drubbing the HVCC has been receiving from nearly every segment of the real estate industry. It's a lame response that glosses over many of the legitimate concerns expressed about the HVCC and the manner of implementation. The FHFA conveniently absolves the GSEs of any responsibility and pats them on the back for their recent actions in issuing alerts to mortgage lenders advocating the use of qualified and experienced real estate appraisers. Appraiser Active is not buying it.

Where was the GSE concern about qualified and experienced appraisers prior to May 1, 2009? As is often mentioned in defense of the HVCC, Fannie Mae, Freddie Mac, the OCC, the FED, the Comptroller of Currency, the FDIC and the NCUA and the OTS all have standards for appraisals, appraisers and maintaining appraiser independence. Who has been asleep at the switch for all these years? Have any heads rolled? We must have missed that.

Completely ignored in the HVCC and any communication from the FHFA, Fannie Mae, Freddie Mac or the New York Attorney General since the announcement of the agreement is any discussion of penalties for the alleged wrongdoers (WAMU, eAppraiseIT) that prompted the investigation and lawsuit. What's up with that?

There is much more to be said. Unfortunately, it's Friday and I've got to get an appraisal out the door TODAY.

Check back for an update to this post.

HVCC Update - NAR President Charles McMillan

On July 21, 2009, Charles McMillan, president of the National Association of Realtors®, provided an update to members via podcast. A couple of topics were covered, but first on the list was the Home Valuation Code of Conduct (HVCC). Correcting the negative effects of the HVCC are high on the list of NAR priorities.

Earlier this month, I blogged about my meetings with the New York Attorney General’s office and Federal Housing Finance Agency Director James Lockhart.

Since that time, we surveyed members about this issue, and more than 30,000 of you responded. The results tell us that the problems are worse than we thought. Out-of-town appraisers are being used much more frequently; consumers are paying higher costs; and, REALTORS are losing sales.

During the July 4th recess, we asked our federal political coordinators to ask their members of Congress to sign onto a bill that would place a moratorium on the HVCC for 18 months. So far, 22 members of Congress have co-sponsored H.R. 3304. During the August recess, we will ask the FPCs to to do another strong push.

In the meantime, we will be having a special webinar for all State Association Executives on July 27th at 2:00 p.m. Eastern time. We also will be giving AEs a letter that they can ask their own state Attorneys General to sign and send along to the New York Attorney General. It, too, asks for a moratorium on the HVCC.

NAR will continue to press Congress and Regulators on this issue. For the latest information, just go to Realtor.org/HVCC.

Links to the podcast and HVCC information from NAR is available right HERE.

Another effort to seek a moratorium on the HVCC is being initiated by the Washington Association of Realtors®. WAR president, Greg Wright, is working with the state Attorney General to generate support from other states in a direct appeal to Attorney General Andrew Cuomo. They're looking for help is securing signatures from other state Attorneys General on the letter, or generating similar letters from other states. Contact information for WAR leaders and staff available HERE.

In related news, H.R. 3044 has 37 co-sponsors. This is up from just 30 yesterday! Congress will be in recess soon. It might be time to pay a visit to your member of Congress and let them know the detrimental effects of the HVCC and how important a moratorium is to you and your business.

UPDATE - July 28, 2009 - H.R. 3044 has 46 co-sponsors!

Ken Harney on the HVCC

Once again, syndicated columnist, Ken Harney, gives consumers the details about how well-intentioned initiatives have negative consequences. His column in today's Washington Post, (and papers across the nation) illustrates the realities of the poorly crafted Home Valuation Code of Conduct (HVCC).

Lowball Appraisals Spark Uproar

It's by far the hottest controversy in real estate this summer, and it could directly affect the value of your house -- probably negatively -- by tens of thousands of dollars.

The issue involves lowballed appraisals and the new rules guiding appraisers in both price-depressed and rebounding markets. Consider these snapshots:

In San Diego, Steve Doyle, division president for Brookfield Homes, is trying to close out the final 20 houses of a 120-unit single-family subdivision. Prices range from $340,000 to $350,000. But recently there's been a major hitch: Appraisers assigned by banks are coming in with valuations of $60,000 or more under Doyle's selling prices. The appraisers, who Doyle says are inexperienced, unfamiliar with local market trends or both, are using distressed sales -- foreclosures and short sales of existing houses -- as their "comparables." Some of the distressed properties are in poor condition, and all of them offer fewer amenities, Doyle says.

and

But when the bank sent in an appraiser with little local knowledge, he chose as comparables two short-sale properties that had both closed in the mid-$140,000 range and one inheritance sale around $155,000. The last property was "in horrible condition," Skeens said. "I'd call it dog meat." The deal-paralyzing appraised value that came in for the slam-dunk refi: $149,000.

and

Complaints about lowballed appraisals -- from builders, real estate agents, consumers and mortgage companies -- have erupted since May 1, when government-backed Fannie Mae and Freddie Mac put their new appraisal rules into effect nationwide. Critics charge that the new system fosters the use of appraisers willing to work for low fees -- sometimes 50 percent below previous standards -- and who are willing to conduct home appraisals far outside their typical areas of activity.

and

Under the code, appraisers are now routinely assigned by appraisal management companies rather than local mortgage companies or loan officers. The management companies pocket as much as 40 percent to 50 percent of the appraisal fee paid by the consumer.

Two congressmen -- Travis W. Childers (D-Miss.) and Gary G. Miller (R-Calif.) -- have introduced legislation calling for an 18-month moratorium on the appraisal code. In identical letters to Cuomo and to James B. Lockhart III, the top regulator of Fannie Mae and Freddie Mac, the National Association of Realtors also requested a moratorium and complained that the code is raising consumer costs, distorting property values and killing sales.

Asked for comment, Lockhart said through a spokesperson that his agency is "monitoring" the situation, and considers "the views of market participants important."

Well, Mr. Lockhart, "market participants" and warned you about the consequences of the HVCC. For months, "market participants" and Congress have been alerting you to pay attention to the very real problems with the 'agreement". It's time to act on the information.

In addition to the disaster that is the HVCC, there is mounting evidence that the source of pressure on appraisers (what the HVCC was supposed to prevent) has shifted from loan originators to Appraisal Management Companies. Here in the Sunshine State there is also evidence of banks violating appraiser independence standards and pressuring appraisers to lower value estimates.

Stay tuned.

NAR - HVCC Update

Let's see if this helps move things along. The National Association of Realtors sent the following email to State Association Presidents and Association Executives:

TO: State Association Executive Officers

State Association Presidents

FROM: NAR Government Affairs

DATE: 19 June 2009

RE: Fly-In Head's Up

Please note this notice is going to all state executive officers and state presidents. We will be sending Fly-In details on Monday June 22, 2009 to the states who have Members of Congress and/or United States Senators on the House Financial Services Committee or Senate Banking Committee. (list of states at end of memo)

There is growing concern in the real estate industry over the implementation of the Home Valuation Code of Conduct (HVCC) and its effect on the use of appraisal management companies (AMCs) by lenders.

NAR is taking the following actions: (Target dates in bold)

1. NAR is scheduling meetings with the Director of Federal Housing Finance Agency, Jim Lockhart to raise concerns about implementation of the HVCC and problems with AMCs and ask for an immediate 18 month moratorium. Director Lockhart is the conservator over Fannie and Freddie who entered the consent order with the NY Attorney General. ( June 22, 23, 24, or 25th)

2. Government Affairs will conduct a fly in the week of June 22. Two members from each Association (State AE/State President or FPC as appropriate) to meet with members/staff of the House and Senate Banking/Financial Services Committee. The ask will be to cosponsor the bill (item 3) and to support an 18 month moratorium.

3. Our legislative team will work on getting a bill introduced in Congress asking for a 18 month moratorium. (week of June 22)

4. We will ask the Chair and Ranking Members of the House and Senate Banking [ Reps Frank and Bachus/ Senators Dodd and Shelby] Committees to write Director Lockhart asking him to grant a 18 month moratorium (week of June 22)

5. We will try and get an 18 month moratorium attached to an immediate pending appropriation bill or other similar fast track bill. (June)

6. Staff will talk to the American Bankers Association who heretofore is fine with the AMC system to see if we can negotiate support. (June 19)

NAR will engage a coalition of Appraisal Institute, MBA, Home Builders and other appropriate trade groups.

7. NAR Research is conducting a survey so we have concrete data information to bring to the regulators and the NY Attorney General’s office . The survey will also be run through the State Association. EHS will be released next week and the appraisal issue will be mentioned front and center in NAR's release. Survey release June 22

8. NAR is scheduling a meeting with NYS Attorney General Andrew Cuomo and representatives of NYSAR. (June 29. 30)

9. NAR will conduct a Call For Action if we do not get a moratorium in the next week to 10 days NAR is aware of multiple petitions calling for an end to the HVCC. NAR is taking a more tempered and thoughtful approach of asking for a moratorium during this trouble housing economy.

Three US Representatives Get It (kinda)

<<<< NOT THESE GUYS


On June 3, 2009, the House Committee on Capital Markets, Insurance, and Government Sponsored Enterprises held a Hearing on Fannie Mae and Freddie Mac. The first part of the hearing was over two hours, but three speakers stand out for their questions to James Lockhart.





HERE is the Video

If you have the time, watch/listen to the entire Hearing. Otherwise move the timer to

1:22 for Representative Juddy Biggert, (R) Illinois
1:45 for Donald Manzullo, (R) Illinois (The BEST, by far)
1:57 for Gary Miller, (R) California

NAMB - HVCC Call to Action

The National Association of Mortgage Brokers (NAMB) has distributed a Call to Action concerning the Home Valuation Code of Conduct (HVCC).

June 9, 2009

HVCC CALL TO ACTION

To: All Mortgage Brokers, Real Estate Agents, Appraisers, Lenders, Home Builders, Title Agents, and Consumers

From: Marc Savitt, President- National Association of Mortgage Brokers

After more than a year of exhaustive negotiations with Fannie Mae, Freddie Mac, James Lockhart, Director of FHFA (GSE Regulator), and NY Attorney General Andrew Cuomo, NAMB believes the time has come for your individual voice to be heard.

In order for this “Call to Action” to be effective, we ask that you fully participate, encourage others to join the action and continue calling and emailing everyday, until advised to stop by NAMB. This will NOT be a one day action!

We have received hundreds of e-mails through the hvcc@namb.org e-mail address outlining specific cases where the HVCC has created delays and additional costs to consumers. NAMB has categorized and compiled a report of the examples received, which was sent to FHFA Director James Lockhart. Please use your own examples in your conversations with legislators, regulators, or their staff. Also, please visit the NAMB HVCC Resource Center for additional information and documents on the HVCC.

Who will you be contacting?

• NY Attorney General Andrew Cuomo’s Office: (212) 416-8000, Internet Complaint
• Federal Housing Finance Agency (FHFA): (866) 796-5595, director@fhfa.gov
• Fannie Mae: (202) 752-7000, headquarters@fanniemae.com
• Freddie Mac: (703) 903-2000, Internet Complaint
• Senators, Representatives and Governors: Click here for contact information.

Also, please contact your local TV and Newspaper outlets.

Below are talking points and background information to assist in your conversations. Please remember we are all professionals and should conduct ourselves accordingly in any communication with the above parties. For the most successful and influential calls, it is important to concisely quantify how the HVCC is affecting your consumer and your business.

Talking Points:

1) NAMB conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.

2) Unregulated 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 and an AMC.

3) AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.

4) HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo’s investigation.

5) 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.

Read the entire Call to Action HERE

HVCC Costing Borrowers MORE

UPDATE - MAY 16, 2009

As usual, Washington Post columnist Ken Harney, author of the popular The Nation's Housing column, cuts to the net effect of the Home Valuation Code of Conduct (HVCC).

New appraisal rules costing more for mortgages, refinancing

WASHINGTON — How about this scenario the next time you refinance or apply for a new mortgage: The real estate appraisal that used to cost $325 now costs $450, even though the appraiser doing the work is only getting $175 or $200.

Plus, your appraisal-related charges may now be subject to add-on fees you have never heard of: $50 to $100 in "no show" penalties if you get stuck in traffic and miss your appointment with the appraiser, or an extra $50 to $150 tacked on if the property is worth more than $500,000.

and.....

Worse yet, the person now conducting your appraisal may be new to the field — willing to work for a cut-rate fee — and may not be as familiar with local value trends and pricing adjustments as an appraiser with more experience. If your mortgage application is denied by one lender, you could be forced to pay for a second full appraisal since the new lender may not accept the first.

and.....

After signing up with one management company, he (an appraiser) says two consumers commented to him, "Wow, you really charge a lot."

They were each being hit with $550 appraisal fees, while Facchini was getting just $250 from the management company. As he sees it, that leaves $300 of "slush" somewhere in the process — some going to the management company, but the rest probably "flowing to the lender for doing absolutely nothing."

Read the story HERE (St. Petersburg Times)

or HERE (Washington Post)

Appraiser Active has been sounding the alarm about the negative effects of the HVCC for months. Now that consumers are getting hit where it hurts, their wallets, will Fannie, Freddie, the Federal Housing Finance Agency and New York Attorney General come to their senses, be responsible, and take action to at least delay the implementation of the HVCC until they get it right?

UPDATE - MAY 16, 2009

A related article has been published on TBO.COM confirming Appraisal Managment Companies are assigning appraisals to individuals quite some distance from the property to be appraised.

Lenders, instead of contacting appraisers directly, now must deal with nationally approved firms. Crowley says: "An appraisal was supposed to be done in Tampa. It was sent to a person in Panama City. We had an appraisal in Parrish and a Miami appraiser was assigned to that."

For you non-Floridians, Panama City is 390 miles from Tampa!!

View Larger Map

and Miami is 246 miles from Parrish!


View Larger Map

HVCC Explained

Since the beginning of the year Appraiser Active has collected dozens of links to information about the Home Valuation Code of Conduct (HVCC); some of it interesting and informative, much of it otherwise. Given the dire results of the implementation of the HVCC, almost none of the links have led to anything remotely entertaining.

Today, there was a change:

Click to Play Video

Maybe we're just easily amused or suffering from HVCC overload.

The idea is to explain the HVCC to Realtors. To let folks know of some of the effects of the implementation. Most of what they say is accurate, and has been documented HERE over the past few months.

I also meant to post a link to the Jonathan Miller podcast, Home Valuation Code of Conduct: Y2K of Appraising? It turns out that Jonathan is the source of the great quote at the bottom of this post.

Listen to the podcast for some good information and TWO great quotes:

(starting around 13:35)

"We know what they are (AMCs). "they're just robotic entities that crank out documents that have numbers on them".

and this classic

" The quality of their work is just crap."

LISTEN and enjoy (or weep).

They meant for the acronym HVCC to be pronounced "havoc" right?

HVCC: Fix or FRAUD?

We're a couple of days into the HVCC (havok) and the articles keep coming. The best one recently has been this piece from CNBC, posted on May 1, 2009:

Home Valuation Code of Conduct: Fix or Fraud?

By: Diana Olick

Today is the official start of a new policy at Fannie Mae and Freddie Mac, to only buy loans that were appraised under the Home Valuation Code of Conduct. The HVCC was the outgrowth of a lawsuit filed by New York Sate Attorney General Andrew Cuomo against Washington Mutual and was designed to “improve the reliability of home appraisals,” according to FHFA, Fannie and Freddie’s regulator.

Jim Amorin, President of the Appraisal Institute was quoted:

“Yesterday, Thursday, appraisers may have had 50 or 60 clients that they could deal with, so if they were getting undue pressure from somebody they could just tell that client no, I'm not doing any more work for you,” says Jim Amorin, of the Appraisal Institute. “Today the number of players in the field have been drastically reduced to generally these appraisal management companies, so the pressure that's going to be brought to bear on appraisers we fear is going to be as strong if not stronger than it was before, the whole thing the code of conduct was trying to address.”

...and then, this, with a superb statement by Dana Bain:

But the biggest issue is something Dana, a mortgage broker, cites in a blast to the RealtyCheck:

Based on Attorney General Cuomo’s website, the appraisal fraud in the mortgage industry was due to the practices used by some of the country’s largest banks pressuring appraisers to artificially inflate the value of homes.

Why is it that some of the largest banks in the country are allowed to have partial ownership in the Appraisal Management Companies ?? Isn’t this once again the fox watching the hen house??

Read the entire ARTICLE

Don't miss the VIDEO segment

Great Job, Diana!

-------------------------------------------

Keep checking back for more on the HVCC. Appraiser Active has quite a bit of information to post, but we're trying to get some appraisals out the door (FHA, Relocation, and Private work for guardians and personal representatives), none of it for Appraisal Management Companies

HVCC - Countdown

Today is April 29, 2009 and we're just two days away from the effective date of the Home Valuation Code of Conduct (HVCC). There are quite few different points of view being expressed by folks about to be affected by the agreement between the Attorney General of New York and the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac.

The National Association of Mortgage Brokers (NAMB) is not taking the assault lightly and has ramped up their efforts. THIS ACTION ALERT went out to their members recently

Stop the HVCC! We Still Need Your Help! CRITICAL - Take Action Now!
April 24, 2009

Dear NAMB Member:

In addition to what NAMB is doing to save your business, ask yourself, "What can I do to help save it?"

You can pick up the phone and act! It is undeniable that the implementation of the Home Valuation Code of Conduct ("HVCC") will have severe consequences. The deadline is just days away. Regrettably, many of you have not yet contacted your legislators, and time is running out!

THANK YOU to everyone who has contacted their Senator and/or Representatives. You are being heard! NAMB has spoken with several legislators as a result of your calls regarding the HVCC, but we still need your help! Key Republican and Democrat Congressmen have shown their support for NAMB's cause, but we need to keep the momentum going. We can not stop now!

Please contact your Senators and Representatives TODAY, and urge them to stop or delay the implementation of the final rule promulgated by the FHFA, which implements the controversial HVCC. Congressmen Gary Miller (R-CA-42) and Travis Childers (D-MS-1) are taking the lead in this fight. Please ask your legislator to contact their offices today. Every call counts! We are asking you to keep calling until notified otherwise.

FULL TEXT

The National Association of Realtors (NAR) is also seeking a one year delay in the implementation of the agreement. This was sent to their Board of Directors this week, in advance of the May meeting of the Board.

NAR: Delay Cuomo-GSE Appraisal Agreement

The Home Valuation Code of Conduct that Fannie Mae and Freddie Mac agreed to with New York Attorney General Andrew Cuomo should be delayed until May 1, 2010, NAR President Charles McMillan says in letters to the heads of the two secondary mortgage market companies. More guidance is needed, including on enforcement responsibility, and appraisers and others impacted by the changes need time to prepare.

The agreement, approved in December 2008 to reduce the potential for inaccurate appraisals, is expected to have an impact beyond New York state because of the nationwide influence of Fannie and Freddie. For more info contact Jerome Nagy, 202/383-1233.

The Appraisal Institute (AI) does not appear to be fighting the implementation. Instead, their efforts are directed towards preparing their members to compete within the new paradigm, dispelling the myths swirling around the agreement, and educating their membership. Today's Appraisal News Online says:

HVCC Effective Friday; FAQs, Telebriefing, Myths Document among Resources Available

Despite legal maneuvers and rumors of intervention and delay, the Home Valuation Code of Conduct is scheduled for implementation this Friday, May 1, 2009. According to the Code and Fannie Mae and Freddie Mac, mortgage loans originated by lenders from there on out and after must comply with the Code in order to be eligible for sale to the GSEs. Leading up to the implementation date, the Appraisal Institute has drawn appraisers' attention to a variety of resources, including recent FAQs from Fannie and Freddie; a "Myths and Realities" document the organization drafted; and promotion of its May 6 telebriefing on the HVCC with the American Bankers Association.

FULL TEXT

The AI also provides a link to their Home Valuation Code of Conduct - Myths and Realities document HERE.

Appraiser Active has a favorite:

Myth: Use of third party vendors ensures the use of competent appraisers.

Reality: Lenders traditionally have been responsible for ensuring the competency of the appraisers and reliability of the appraisals they use for credit decisions. However, the competency of an appraiser is not measured by scoring compliance with seller servicer guidelines. Processing appraisal orders is a separate function that does not specifically include a review of competency. The function of competency review is best performed by individuals with significant education in appraisal standards and theory.

Further, institutions should consider any potential reductions in quality that might result from outsourcing the appraisal function. To this point, federal bank regulatory agencies recently reminded institutions to consider an appraiser’s competency for any given appraisal assignment.

There's three options for you. Please take one, or ALL, and do something!

They meant for the acronym HVCC to be pronounced "havoc" right?

HVCC Update

Appraiser Active has provided quite a bit of information about the impending May 1, 2009 implementation of the Home Valuation Code of Conduct (HVCC). Most recent was the post describing the NAR effort to urge a one year delay of its effective date.

As of today, there has been no word from Fannie, Freddie or Attorney General Cuomo in response to the NAR letters.

However, we hear there are at least at TWO members of Congress are passing around a letter on the Hill that will also ask for a delay. It sound like NOW would be a good time to contact YOUR member of Congress to ask them to support the delay.

Use this LINK to locate your US Representative and Senators. Use your Zip+4. The contact information for each is provided along with a link to their webpage. At this stage of the game, it's best to a telephone call, fax or email to make your points.

Use whatever you like, the points made the NAR Letters or these suggestions:

• One of the pillars necessary for implementation of the HVCC is the Independent Valuation Protection Institute. Without the IVPI there is no enforcement mechanism, hotline, or means of verifying compliance. Delaying implementation would allow creation of the IVPI or establishing an alternative framework


• Many state legislatures are in the process of enacting laws to regulate Appraisal Management Companies. In other states, the regulatory agencies are in the process of promulgating rules and procedures to deal with Appraisal Management Companies. Delaying implementation would allow these states to finalize their actions


• To this day, the fact that the HVCC resulted from improper influence on appraiser independence by a Federally regulated lender and a rogue Appraisal Management Company cannot be reconciled with the apparent endorsement of unregulated Appraisal Management Companies as the “protector” of appraiser independence by the HVCC. Delay would allow a reconciliation of this glaring conflict. (See Story on New York AG Complaint and link to suit HERE)


• Fannie Mae has adopted policies that protect the brokerage fees from downward negotiation in certain transactions (short sales). Delay of implementation would permit efforts to protect appraiser’s fees from downward negotiation by Appraisal Management Companies. At the very least, it would allow time to arrange for full and transparent disclosure of valuation related fees in closing documents (AMC fee, Appraisal Fee, etc)

They meant for the acronym HVCC to be pronounced "havoc" right?