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.

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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.

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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?

Home Valuation Code of Conduct

The Federal Housing Finance Agency (FHFA) has announced the "final" Revised Version of the Home Valuation Code of Conduct (HVCC).

The Code is based on an agreement between the Enterprises, the New York State Attorney General Andrew Cuomo and FHFA to improve the reliability of home appraisals.

The "agreement" was originally between Fannie Mae, Freddie Mac, the Office of Federal Housing Enterprise Oversight and Cuomo. The New York Attorney General made a big splash is THIS ANNOUNCEMENT. The settlement was prompted by an investigation of mortgage and valuation fraud initiated by the New York Attorney General in response to allegations of shady dealings between an Appraisal Management Company, Washington Mutual and a group of appraisers doing contract work for the Appraisal Management Company.

"The integrity of our mortgage system depends on independent appraisers," said Cuomo. "Washington Mutual compromised the fairness of this system by illegally pressuring appraisers to provide inflated values. Every company that buys loans from Washington Mutual must be sure that the loans they purchased are not corrupted by this systemic fraud."

The lawsuit filed last week details a scheme in numerous e-mails showing First American and eAppraiseIT caved to pressure from Washington Mutual to use appraisers who provided inflated appraisals on homes.

E-mails also show that executives at First American and eAppraiseIT knew their behavior was illegal, but intentionally broke the law to secure future business with Washington Mutual. Between April 2006 and October 2007, eAppraiseIT provided over 250,000 appraisals for Washington Mutual.

Due to many problems with the original HVCC, the failure of WAMU, Fannie, Freddie and a myriad of other reasons, the agreement was revised after a comment period. However, it's far from perfect and, if implemented, will have a significant effect on your brokerage business and the relationships you have built.

Here's one take:

An Appraisal Upheaval

by Kenneth Harney

When you apply for a mortgage to buy or refinance a house, should you be concerned that your appraiser is being paid much less than the $300 to $600 you're charged, perhaps half?

Should you know who pockets the rest, or that cut-rate fees are too low to attract the most experienced appraisers?

Should you care that the appraiser might be pushed to come up with a number so quickly -- almost overnight in some cases -- that he or she doesn't have the time to do a proper inspection and accurate evaluation of comparable properties, pending sales contracts and local market trends?

This agreement is not good for consumers, real estate brokers or appraisers. Why?

• Appraisal assignments will be funnelled through an Appraisal Management Company (AMC). Regardless of the definition and explanation at the link above, the reality is many AMCs have established a priority system that looks like this:

COST

SPEED

COMPETENCY

QUALITY

• The HUD-1, Closing Statement, will contain a charge for Appraisal Fee on Line #804. It will not indicate that the fee is the amount paid to an anonymous AMC and that only a fraction of that fee is paid to the appraiser. Doesn't RESPA require transparency by requiring that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services?
• Not one state in the United States Regulates the activities of Appraisal Management Companies.

Here in Florida, a group of professional appraisal associations, appraisers and others is working to protect the public by initiating legislation to regulate the actions of Appraisal Management Companies. Watch this space for more information once the bill is filed. To protect your business and the relationships you have built with related professions, your support is necessary.