By David Brauner, Editor Working RE
Editor’s Note: According to our survey, HVCC does not appear to be the panacea for appraiser independence many had hoped. Rather, many appraisers say it is the final straw that will break their backs because it bans them from doing business with their clients. You’ll find survey results to date including how pressure on turn times and fees effect appraisal quality, and much more in the upcoming print edition of Working RE.
AMC Pressure
The Home Valuation Code of Conduct (HVCC) is intended to support appraiser independence and thwart coercion and inflated values by removing mortgage brokers from the appraisal ordering process. As a result, we now see orders flowing from Appraisal Management Companies (AMCs). FHA loans are not effected by HVCC.
You may recall that HVCC is part of a private agreement between New York Attorney, General Andrew Coumo, and Fannie Mae and Freddie Mac. (In an ironic postscript, U.S. officials seized Fannie and Freddie last fall and put them into Federal Conservatorship.) Another irony is Cuomo’s investigation began with scrutiny of a vendor management company- eAppraiseIT. The complaint issued by Cuomo accused the company of inflating the values of home loans under pressure from Washington Mutual Inc. Both companies deny the accusations (Premium Content: eAppraiseIT, WAMU Blow Up, Fannie, Freddie). The investigation by Cuomo included subpoenas of Fannie Mae and Freddie Mac for details about WAMU’s loans and their due diligence practices related to the appraisals. As a result of the agreement which includes HVCC, Cuomo terminated the inquiry into Fannie and Freddie.
So, what is the effect of the agreement so far on appraiser independence, now that orders flow through AMCs? Here is how appraisers responding to the OREP/Working RE HVCC Appraiser Talkback Survey answer the following question: “With the AMCs you work with, are you asked to re-examine reports with the intention of trying to ‘make the deal work’?”
- Always: 3%
- Often 12%
- Sometimes: 39%
- Never: 46%
Fifty-four percent (54%) then, say they experience this type of pressure from AMCs at least some of the time. What do you say? Your responses matter, whatever they may be: complete the survey today and be heard. Find links to the survey and blog at left.
HVCC Fallout
Many appraisers report how badly HVCC is hurting their livelihoods many say it’s catastrophic. To see what regulators think, you will find posted at WorkingRE.com a response from the Federal Housing Financing Agency (FHFA) to an inquiry made on behalf of an appraiser by Peter J. Visclosky (D - IN) from the U.S. House of Representatives (Sidebar: FHFA Letter Regarding HVCC). The response letter from FHFA states in part: “The Code (HVCC) does not alter the fundamental business models that exist in the appraisal industry, nor does it alter the fees or charges of any participants in the valuation system.”
The following comments, from the OREP/Working RE Appraiser Talkback Blog, are representative of many.
“I have had it with government intervention in the name of helping appraisers not succumb to pressure from mortgage lenders. I have run my own business for seven years. I picked and chose who I worked with in order to keep my license clean, so I could trust who I was working with and they, in turn, could trust me to keep them out of trouble. Since HVCC, I have lost every one of my clients! What happened to free enterprise? I believe HVCC is unconstitutional! I am being helped right out of the business. What other business in the U.S. is told they can no longer work with, talk to, or have a relationship with their current clients? I don’t need a mediator to run my business, especially one that seemingly has no rules of engagement.”
And this comment:
“I don’t think there is any other job where you can’t put your name out there, do a great job and expect your good product and service to be good advertising for you. In fact, there is no point to advertise at all. We have no freedom to run our business. We are at the mercy of being picked out of a hat. I think the issue here is bigger and worse than we can imagine. We have lost all control and have no freedom to be INDEPENDENT FEE APPRAISERS, as the name suggests. All the work and effort….It is extremely hard to get an appraiser’s license in this state (CT) with all the classes, finding a supervisory appraiser and actually getting enough assignments for your hours needed (not to mention your split will be ridiculously small now), and now you have to have a college degree and the state exam is very difficult with a very low pass rate. Who is going to be stupid enough to enter this field now?”
The summer issue of Working RE (mailing in early August) will have much more survey results. Judging by the blog and comments left by survey takers, the following survey results is more fallout from HVCC:
While 74 percent (74%) of survey takers answer that “yes” they are “generally satisfied with appraising,” just over half (51%) say they don’t expect to be appraising full time five years from now.
Petition to Reconsider HVCC
Find a link at WorkingRE.com to a petition to reconsider HVCC (Sidebar: HVCC Petition). So far, over 23,000 persons have signed.
From our survey; Question: “Are you in favor of the HVCC as written?”
Answer: 93 percent (93%) say “No.”
Diversifying with BPOs?
Appraisers have long bristled at the unfairness of BPOs but perhaps this issue needs a fresh look.
As most appraisers know, BPOs are a kind of “loophole” of sorts- a lower cost and less rigorous valuation product that competes with appraisals but whose “practitioners” are not required to be licensed nor follow USPAP guidelines. BPOs have eaten into appraisal business for years because they are faster and cheaper.
Recent legislation that passed the U. S. House of Representatives last month, the Mortgage Reform and Anti-Predatory Lending Act of 2009 (H.R. 1728), contains provisions restricting BPOs as well as addressing AMC licensing and other related issues (more in the upcoming print issue of Working RE).
The understanding of most appraisers is that they are forbidden from doing BPOs because they are licensed; under licensing any “opinion of value” must meet USPAP requirements. A recent story from the Appraisal Institute puts forth the opinion that appraisers can do BPOs, as long as they are also licensed real estate agents/brokers.
The story, authored by Stephanie Coleman, MAI, SRA, Senior Manager of Ethics and Standards Counseling at the Appraisal Institute, focuses on circumstances where a lender is not required by regulation to obtain an appraisal or an evaluation. This is timely because of the huge inventory of foreclosed property. When a home is foreclosed upon and becomes real estate owned, lenders need to establish a value in order to dispose of it.
The story says that an appraiser who is also a real estate agent may provide a BPO in these cases and that when doing so, they are not bound by USPAP. The story quotes Advisory Opinion 21 USPAP Compliance, which says that USPAP applies only when one is acting as an appraiser. Appraisers providing this service as an agent/broker must make it clear that they are an appraiser, however, even though they are not acting as an appraiser when providing the service. The story opines that it would be a “misrepresentation” for an appraiser to do a broker price opinion if they were not also a real estate agent/broker.
Working RE recommends that you contact your own state licensing Board before proceeding. You can find the story, “Matter of Opinion: How and When Appraisers Can Expand into BPO Work,” at the Appraisal Institute website (Valuation Magazine, First Quarter 2009).
Free Fannie HVCC
Please visit WorkingRE.com for the link to Fannie Mae’s newest guidance on the HVCC - a recorded web seminar you can access for free (Sidebar, Fannie Mae’s Guidance on HVCC).
9 responses so far ↓
1 DAVE HAMEL // Jun 10, 2009 at 5:48 am
The local MLS has implemented a rule that allows a property to be off the market more than 30 days (read 31) and the the CDOM resets to zero.
Duh, isn’t that the very data appraisers are supposed to digging out. The data is GIGO.
2 bubba diamonds // Jun 10, 2009 at 7:33 pm
Boo hoo! Boo hoo! I am so sick of appraisers CRYING and WHINING all the time about HVCC. Listen up cry babies: If the fee is too low, don’t accept the job. If the turn time is too short, don’t accept the job. And as for ruining all of your cozy relationships with lenders that you’ve built up over the years, well… let’s just say I know how those relationships work. The HVCC has been a real blessing for me and my family. I’m getting more orders, getting paid more and getting paid on time and without the phone calls that used to inevitably start whenever my appraisal was less than sales price or estimated value. I don’t argue about values anymore or teach appraisal 101 over the phone to processors, loan officers and realtors. I don’t chase payments anymore either. I feel much more diversified these days. It is so much easier to get work than it used to be. I don’t have to compete with those large “shops” that pay kickbacks to loan officers and promise them that they will never have any problems with values if they send them the work. Good riddance to the old cozy relationships. Did you really think they were sending you all that work because you were such a good appraiser? Ha!
3 Chuck Miller // Jun 11, 2009 at 9:39 pm
To bubba diamonds…
Its obvious that you are not an appraiser more over it is also obvious that you are clueless. I for one have more crap coming back from AMC’s than before. I find myself now spending more time fielding questions because the person on the other end has not A) read the report B) understood FHA or FNMA guidelines C) have a clue about my local market. These guys are way to reliant on valuation tools who generate data from a general area usually larger than what is permitted to select sales from. So tell me how is it a good thing that appraisals cost more and you make less per appraisal. You say your making money I’ll bet you’re working your fingers to the bone. I’d like to review some of your work ,with an attitude like that I’ll bet it’s a beauty. its more than likely that you either work for an amc or your grabbing as much as you can before they yank your license and you wind up giving all that money to the lawyers to avoid jail.
What is with that remark about kick backs and promises? Wow put down the crack pipe and back away slowly eh.
4 brian french // Jul 8, 2009 at 11:18 pm
The only thing the HVCC should have done is take the lender pressure off the appraisers. Being black listed from doing appraisals is extortion, taking more than 1/2 our pay through AMC’s is grand theft. The only thing with the HVCC I agree with is that there shall be no value indicated by the lender for the appraisal assignment, and no more comp searches, that’s IT!. The HVCC is otherwise is entirely and utterly is digging the appraisal industry its own grave. It’s sad that AMC’s are letting appraisers make nearly as much as they could working for an appraisal company, encouraging appraisers to work no where but from home. If the AMC’s continue to flourish and invade our private practice, there is no encouragement to start one’s own business and hire appraisers to work for them as it will become economically infeasable! Do the F***ki’n math, an apprentice appraiser works for a company, making 1/2 what they used to make just 3 months ago….. One who is requrired to have a Bachelors degree and is required to apprentice for 2 years, take classes is not going to work for this new halved price wage. If it’s anybody’s should be taking a hit as far as pay, it’s gotta be the ones involved with real estate transactions that have the greatest pay.
It’s our licenses are the one’s on the line, I’ve been doing this for 7 years and I’ve never done an appraisal that I do not stand behind 100%. It’s not fair, and should be illegal to reduce one of the the lowest paid individuals in the Real Estate industy to 1/2 of what they were used to making. I’m likening this to…………O.K. Mr. Boeing engineer, guess what, we are going to regulate how to do your job, what ever it is you do in your industry, create an atmosphere where a new industry between what you do, take 1/2 of your pay, you would be happy too, Right? Ha ha freaking HA! Oh, oh, ohhhhh, how ’bout reducing the minimum wage by 1/2, wouldn’t that be great, for the economy? Amc’s are going to be the downfall of this industry, making appraisers cut corners in order to provide a product, definately not a good appraisal at that!
5 David // Jul 14, 2009 at 8:23 am
I enjoyed the reading Brian French’s comments above. He is right on the money. Need a solution? If you’re still getting work from lenders try this: Cut every imaginable corner. Steal MLS photos, guess at the square footage, throw comps without analyzing them, and write a detailed note within the appraisal stating that you are being paid 1/2 of your prior fee for the appraisal so you have given the job 1/2 of your usual effort. We’ve started doing this. The lender never bothers to read the report and the disclosure protects you if it ever comes back on you. F*** AMCs and the lenders that use them.
I honestly hope that HVCC leads to a new credit crisis that brings down the economy. If Congress (and the country in general) was stupid enough to allow this to happen we deserve a depression that makes the 1930s look like child’s play.
6 Sandra Schoenleber(Schmidt) // Aug 12, 2009 at 10:16 am
I have been a certified residential appraiser for 18 years. During all those years I have been able to earn (and I mean earn) a decent living. I enjoyed my work. I have not been an activist or really very much aware of the new legislation as I just plodded along doing my work everyday (including weekends). Now, I find I have no work! Or so little it is laughable. I have done some work for AMC’s over the years; but for the ones who paid almost as much as my normal fee and who had turn times reasonable enough to complete an assignment adequately. Now, most of those companies have reduced the fees they will pay and have required turn times which do not allow for enough time to do an adequate (not to mention good) appraisal. I spent years cultivating good clients who appreciated honest appraisals and paid a fair fee. They are now forced to utilize an appraisal ordered through an AMC w/o regard to the credentials/ethics of the assigned appraiser.
I am in a state of disbelief. Clearly, many appraisers knew this was on the horizon. I am caught w/my head in the sand. I certainly have to take responsibility for that!
Today, I wrote my senators and congressman. Tomorrow I hope I have an appraisal to work on!
7 RAAnderson // Dec 24, 2009 at 2:23 pm
I have to agree with bubba diamonds. Boo hoo!! bubba is right on all accounts. Best thing that ever happened to my business. Do the appraisal, get paid. Whats better than that. Also, their only requests that I get after appraisal is submitted is some comment left out that they requested . So what the fees are lower, they were lower when I worked for someone eles. Keep the orders coming AMC’s
8 Appraiser Inactive // Jan 7, 2010 at 5:31 pm
HVCC is a little like a cow with two udders…a cash cow if you will. AMCs feed off of one udder while banks feed off the other. Borrowers and appraisers are forced to feed the cow and shovel it’s [beep] around the clock. Any leftover milk is sent to the cheese manufacturer [Andrew Cuomo] who in turn sells it for political gain. The cash cow had it’s day but it’s time to shove a stick of dynamite up it’s [beep]. AMCs and banks are bloated, appraisers are tired, and the cheeseman needs a new job shoveling [beep] for a change.
Any appraisers out there that would be willing to join an AMC boycott for 30 days or more? April 1st (1004MC day) or May 1st (HVCC hell day would be a fitting start dates.
9 Tom Markoski // Jan 11, 2010 at 4:30 pm
That would be a good start
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