Appraiser Talkback Blog

With HVCC implementation only days away, anger is turning to resignation and determination as appraisers seek ways to cope. One positive development is recently enacted legislation in three states regulating appraisal management companies (AMCs). Similar legislation is under consideration in 14 states. Find more below. 

If you are still formulating your position on HVCC (Home Valuation Code of Conduct), you will find a critique of the Code from the National Association of Realtors (NAR) at WorkingRE.com. In a letter to Fannie Mae, NAR President Charles M. McMillan, CIPS, GRI , requests that implementation of the Code be delayed for several reasons, including what he sees as a lack of guidance by Fannie/Freddie on how to implement the Code. “Neither of the government sponsored enterprises (GSE), Fannie Mae or Freddie Mac, provided substantive guidance on implementation until weeks before the effective date of the agreement. The Federal Housing Finance Agency (FHFA) has been silent on the agreement since the announcement late last year,” McMillan said.

The letter sites other grounds for delaying implementation, including that HVCC does not apply to FHA transactions; AMC regulation is underway in many states already; HVCC may increase the cost of real estate transactions; lenders are not prepared for HVCC and the proposed enforcement agency set up by the Code is not functioning yet (Independent Valuation Protection Institute). Find the letter at WorkingRE.com, Sidebar: NAR’s Letter to Delay HVCC.

HVCC Talkback Blog
Speaking out on the OREP/WRE Talkback Blog, appraisers continue to rail against what many see as an unfair intrusion into their businesses and point out that the “fix” - increased prominence of AMCs, may worsen the problem HVCC set out to improve- appraisal quality. Some appraisers, of course, say they like working with AMCs and support the Code because the unrelenting pressure had to stop. Some point out that the HVCC is not law but only a private agreement between the New York State Attorney General and Fannie/Freddie. Others remind us that appraisers are still eligible for direct assignments from brokers and non-lenders for FHA assignments.

There is also activity on the “Appraiser Rater” section of the Blog, where appraisers provide feedback on working with specific AMCs. The staff of several defend their companies, insisting that not every AMC considers low fees first in appraiser selection and not every one disregards or diminishes the role of appraisers; it’s unfair to paint every AMC with the same brush, they say.

Many appraisers continue to call for cohesion in the ranks and suggest a nationwide “walk out” to demonstrate the importance of appraisers in the process. Most continue to insist that they can not and will not work for half fees. Find a link to the Talkblock Blog and Survey below. We encourage every appraiser to make his or her voice heard by participating in the survey. It is the only way to find out what is really going on. 

Unreasonable User Agreements
To make hard times harder, appraisers are facing new, more unreasonable user agreements that attempt to shift liability from the AMC/entity to the appraiser if anything goes wrong with the loan, no matter who is at fault. Appraisers must sign these agreements to continue working with the AMC.

One agreement contains a “buyback” provision where the appraiser: “agrees that if a mortgage lender is required to repurchase a mortgage loan for any reason in any way related to [among other things] . . . any appraisal report submitted by Appraiser pursuant to this Agreement, Appraiser shall pay [AMC/Entity] an amount equal to the repurchase price paid by such mortgage lender to repurchase such mortgage loan.” The appraiser is further required to “pay the reasonable attorney’s fees of [AMC/Entity] incurred in enforcing Appraiser’s obligations hereunder, including, with [sic] limitation, the obligation of Appraiser to pay [AMC/Entity] an amount equal to the repurchase price of a mortgage loan as set forth above.”

Not much has changed since WRE broke this story last Fall: signing these agreements does not abrogate an appraiser’s own E&O insurance coverage; it remains in place. However, E&O insurance does not typically provide coverage for third parties, such as an AMC. If an appraiser agrees to hold an AMC harmless, they will be bearing the cost out of their own pocket. This makes any such agreement a (very difficult) business decision; is the continued work from the AMC worth the increased liability burden? Many appraisers say it is not; agreements such as this one are potentially “game enders” for appraisers should they be held to the terms. Even the most careful appraisers say they will not sign because it holds them accountable even if they are not at fault. See FNC-Appraiser Firestorm (Again) at WorkingRE.com, Library, Volume 20. 

Industry Fights Back: AMC Regulation
Legislation to regulate appraiser management companies has been signed into law in three states (UT, AR, NM), including two Bills recently passed in Arkansas. The legislation in all three states are similar in intent (more in the next print edition of WRE).

The Arkansas legislation requires that AMCs register and put up a bond to ensure that appraisers are paid (Act 628 of 2009). There also is language prohibiting Broker Price Opinions and making the coercion of appraisers illegal (Act 413 of 2009). According to Tom M. Ferstl, MAI, SRA, Executive Secretary of the Arkansas Appraisers Association, there is strength in numbers, at least in Arkansas.

“With the growth of the Arkansans Appraisers Coalition, we were able to hire an experienced lobbyist who was able to get the support of key legislators and point us in the direction we needed,” Ferstl said. “Thus, with passage of legislation outlawing the use of BPOs in lieu of real appraisals, we are in a position to reverse the trend of recent years against the independence of professional appraisers. If you read the Act closely you will see that we gave the Licensing Board the option of filing criminal charges against real estate brokers who even advertise to perform BPOs in the area of mortgage lending.”

Ferstl says his group fought hard to ensure that the Arkansas Bill fell under the authority of the Appraiser’s Board and not another entity that might not have appraisers’ best interests in mind. Find Arkansas Acts 413 (Appraiser Independence) and 628 (AMC Registration and Regulation) at WorkingRE.com, Sidebars.

In Appraisers Fighting Back (WorkingRE.com, Library, Volume 17) you can read more about a previous AR bill which restricts Broker Price Opinions (BPOs) from being “treated like appraisals.”