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

FREDDIE MAC UPDATES HVCC PAGE

According to folks at Freddie Mac, their Home Valuation Code of Conduct Questions and Answers Page has been updated. The link to the left leads to the updated page.

I don't have a printed copy of the old Q and A page handy. As a result, it's difficult to determine the additions or deletions. These are among the ones we find to be interesting:

Q 2. Does the Code apply to non-origination valuation activities such as appraisals performed for loss mitigation activities?


A 2. No. The Code only applies to the loan origination process. It does not apply to a lender’s foreclosure/REO process, workouts, or any other type of loss mitigation activity.

Hmmm.

Q 5. Does the Code apply to Freddie Mac purchases of private-label securities backed by mortgage loans that do not meet the requirements of the Code?


A 5. No. The Code only applies to 1- to 4-unit single-family loans sold to Freddie Mac by mortgage originators; it does not extend to Freddie Mac’s investments in mortgage-related securities.

Wondering why Fannie and Freddie are not interested in a Code of Conduct for rating agencies.

Q 6. How will you handle issues and concerns raised by customers as the Code is implemented?


A 6. Freddie Mac will work with our customers to address any issues or concerns regarding implementation of the Code. We will maintain ongoing contact through our various communications channels including newsletter articles and Web content. If customers have immediate questions, they should contact their Freddie Mac account representative, 800 – FREDDIE, or e-mail us using our Home Valuation Code of Conduct Inquiry Form.

Great! A form. Notice that the form is for sellers only. Where do borrowers, appraisers and others bitch?

Q 8. Does the Code apply to other valuation methods (i.e., automated valuation models, broker price opinions, tax assessments, etc.)?


A 8. No. The Code applies only to appraisals.

There are too many reasons to comment on this question and answer. How about you all have at it in the comments.

Q 39. May an appraiser update an appraisal for another lender?



A 39. Yes. The Code does not prevent an appraiser from performing an update of an appraisal for another lender.

Maybe the HVCC does not prevent it, but that does not mean it can be done easily. Consult your 2010 - 2011 Edition of the Uniform Standards of Professional Appraisal Practice.

Q 61. Can an appraiser’s information be omitted from the appraisal report prior to sending it to the borrower?



A 61. No. A complete, unaltered copy of the appraisal report must be provided to the borrower.

No comment.

Q 62. If two appraisals are obtained as part of the underwriting process, does a lender have to provide copies of both appraisal reports to the borrower or only a copy of the appraisal used to determine value?


A 62. Section II of the Code requires that the borrower be provided with a copy of "any" appraisal report; therefore, copies of all appraisal reports obtained must be provided to the borrower.

And how, exactly, is that being enforced?

Q 65. If I am permitted to use an AVM such as Home Value Explorer® to estimate property value, am I required to meet the Code requirements in Section II and provide the borrower with a copy of the AVM result three days before closing.

A 65. No.The Code does not require lenders to provide borrowers a copy of an AVM result.

Why not?

Independent Valuation Protection Institute

Q 82. When will the Independent Valuation Protection Institute be established?

A 82. We are working with the New York State Attorney General, FHFA, and Fannie Mae regarding establishment of the Institute. Because the Institute has not yet been established, the provisions regarding it in the Code are not yet effective.

Question 82 and the answer do not present any change from prior Q and A lists. In my never so humble opinion, that is the most important question. It's telling that the answer is the same. It's also telling that the LINK to the IVPI has been removed from their answer!

How is it that other parts of the HVCC are deemed to be more important than the Independent Valuation Protection Institute? Why is it acceptable to implement only parts of the HVCC?

There is QUESTION #83. How about an answer to that one, FREDDIE?

IVPI Promises = Vaporware

We're just counting the days. It's been 7 months (215 days) since the implementation of the Home Valuation Code of Conduct (minus the Independent Valuation Protection Institute) and 2 months (62 days) since Freddie Mac updated their Home Valuation Code of Conduct Q & A Page with the Home Valuation Code of Conduct Interim Complaint form and it's announcement the IVPI Website would be up and running in November. Today is December 1, 2009.

Check the LINK provided by Freddie Mac for the IVPI site. You didn't really expect anything, did you?

Well, if Freddie has not created the promised IVPI, what have they been up to?

There has been a claim by Freddie Mac the HVCC has improved appraisal quality. Of course, the claim is supported only by anecdotal evidence that 15% more appraisals have come acceptably close to the automated valuation model it runs as a check.

Freddie has hired a new CFO.

The government-controlled mortgage finance company is giving CFO Ross Kari compensation worth as much as $5.5 million. That includes an almost $2 million cash signing bonus and a generous salary that could top $2.3 million.

Freddie announced on November 6th, it had posted a $5,000,000,000 loss.

Freddie Mac, the second largest provider of U.S. residential mortgage funding, on Friday posted a loss of $5 billion in the third quarter and predicted it would need more government support amid a "prolonged deterioration" in housing.

In more "good" news, Freddie warned their losses related to the bankruptcy of lender Taylor, Bean & Whitaker may increase.

The claim could add to the fallout from the Taylor Bean bankruptcy, which came after the government suspended its relationship with the firm. Freddie Mac has previously said its exposure to Taylor Bean's obligations to repurchase loans was about $500 million as of Sept. 30.

While total exposures to Taylor Bean are unknown, "the amount of additional losses related to such exposures could be significant," the McLean, Virginia-based company said in a filing with the Securities and Exchange Commission.

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?

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.

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?

New Appraisal Rules Lack Enforcement

The Center for Public Integrity Reports:

Nine days before new rules radically changing the appraisal industry are set to take effect, appraisers, lenders and real estate agents are asking the same question — who will enforce them?

The rules, intended to prevent lenders from pressuring appraisers to falsely inflate housing values to justify higher mortgages, would ban loan originators from communicating directly with appraisers. The new rules would thus carve out a bigger role for appraisal management firms, which serve as middlemen between lenders and appraisers.

The post mentions the letters sent by NAR President Charles McMillan to the heads of Fannie and Freddie (posted previously), and goes on to say:

Perhaps most significant, the letter notes the lack of a clear enforcement policy. “The HVCC does not clearly delineate which agency or organization will be responsible for enforcement of all or part of the agreement,” wrote Charles McMillan, president of the National Association of Realtors. “There are multiple stakeholders affected by the agreement and none have clear responsibility to see that it is enforced. There is no accountability if there is no organization for enforcement.”

As part of the original agreement, Fannie Mae and Freddie Mac agreed to pay $24 million to set up an “Independent Valuation Protection Institute” to field appraiser complaints about pressure to inflate values and police the rules. But the institute is not yet functioning, and its fate is unclear.

.......and then, the clincher

A Freddie Mac spokesman declined to comment on how his organization would enforce the rules. A Fannie Mae representative did not immediately return calls for comment. Andrew Cuomo’s office has failed to respond to repeated requests by the Center for comment on the HVCC.

Read the Article

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

NAR Seeks One Year Delay in HVCC

In letters to Michael J. Williams, President and Chief Executive Officer of Fannie Mae, and John A. Koskinen, Interim Chief Executive Officer of Freddie Mac, National Association of Realtors President, Charles McMillan urges a one year delay in the implementation of the Home Valuation Code of Conduct (HVCC).

Freddie Letter

Fannie Letter

McMillan notes that "There are many benefits for consumers and real estate practitioners to delaying the effective date of the HVCC until May 1, 2010. Stakeholders across the country will be granted sufficient time to prepare for changes to the appraisal process brought forth by the HVCC. He asks that the implementation be delayed to allow for several outstanding issues to be addressed.

These include:

• Lack of Guidance
• State Regulating AMCs
• HVCC does not Apply to FHA
• HVCC May Increase the Cost of Real Estate Transaction
• Lenders are not Prepared for HVCC
• No Clear Enforcement Agency
• IVPI is not Yet Functioning

With respect to the Independent Value Protection Institute, President McMillan states: "The Independent Valuation Protection Institute (IVPI) was announced as part of the HVCC to receive complaints from appraisers and users of appraisal services on the improper influence or attempted improper influence of appraisers. In the original agreement between the GSEs and the New York State Attorney General, Andrew Cuomo, $5 million was to be paid by Fannie Mae and Freddie Mac to fund the first 5 years of the Institute’s existence. The final agreement includes the IVPI but makes no mention of funding. It’s not clear whether the GSEs will provide the upfront funding and long-term funding was never addressed in the HVCC.

In our comments provided on April 30, 2008, we recommended the Independent Valuation Protection Institute be affiliated with an already existing appraisal organization. This will help to ensure that the code is implemented to add value to the appraisal process rather than becoming a duplicative layer of bureaucracy. Under the final agreement of the HVCC, the lender, rather than the IVPI, is responsible for establishing a telephone hotline to receive complaints from appraisers, individuals, or any entity concerned with the improper influencing of appraisers or the appraisal process. Lenders report any improper activity to the IVPI and the state regulating agency. If properly implemented, the code will complement, rather than duplicate or contradict, already existing appraisal codes such as the Uniform Standards of Professional Appraisal Practice (USPAP). Further, the IVPI will be better positioned to work with appraisal organizations and state regulatory agencies to ensure the independence of appraisers and the integrity of the appraisal process.

Readers of Appraiser Active have heard all the reasons cited in the NAR letter. Kudos to the National Association of Realtors and President Charles McMillan for stepping into the fray.

Your letters to Congress, the FHFA and the decision makers and Fannie and Freddie may help the cause.

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

Lenders Not Yet Ready for HVCC

UPDATE#1 - Fannie HVCC FAQs Below

UPDATE #2 - Freddie HVCC FAQs Added Below

........no kidding, and few if any are ready for the May 1, 2009 deadline.

From HousingWire.com:

Survey: Lenders Not Yet Ready for HVCC

It’s not garnering as much press as it perhaps should, but new appraisal guidelines set forth in the Home Valuation Code of Conduct are set to go into effect on May 1 — and a recent study suggests that while U.S. mortgage lenders are confident their systems will be ready, few say they have actually completed system upgrades designed to ensure compliance.

That’s the finding from a recent survey distributed to more than 1,000 key industry personnel by mortgage technology company FNC, Inc. — the company’s client base includes major mortgage banks as well as regional and community banking outfits.

As the result of legal action almost a year ago, New York Attorney General Andrew Cuomo announced an agreement with Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency (formerly OFHEO) to establish a Home Valuation Protection Program. The program demands significant changes to the real estate appraisal process for residential mortgage transactions and includes the Code of Conduct.

FULL STORY



Since the National Association of Mortgage Brokers (NAMB) has withdrawn their lawsuit against against Federal Housing Finance Agency (FHFA) Director James B. Lockhart over the Home Valuation Code of Conduct (HVCC), there are rumors of some groups seeking a delay in the implementation scheduled for May 1, 2009.



For a number of reasons, I agree with a delay in the implementation of the Home Valuation Code of Conduct. There are just too many unsettled procedural matters with the HVCC

• 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)

There’s more, but it should be clear that a delay would benefit real estate brokers, appraisers, mortgage brokers and consumers.

UPDATE #1 - Fannie believes they're ready. Fannie HVCC FAQs

My favorite:

Independent Valuation Protection Institute (IVPI)

Q55. What is the status of the IVPI?

The structure of the IVPI has not yet been determined and the IVPI has not yet been established. Therefore, the provisions in the Code regarding the IVPI are not yet effective.

Appraiser Active Question #1

Given the financial condition of Fannie Mae and Freddie Mac, when is the IVPI expected to be funded?

Appraiser Active Question #2

When is the IVPI expected to be created?

Update #2 - Freddie believes they're ready. Freddie HVCC FAQs