The HVCC actually takes steps backwards in appraisal quality. Now appraisals are ordered through management companies. They mostly select appraisers on who is willing to do the report for the least amount of money. There is no premium paid for being a designated member of a professional society such as the Appraisal institute or American Society of Appraisers or for how many years of experience you have in the appraisal industry. If you are willing to do it cheap you get the work. It is that simple. And who do you think owns most of the management companies? The lenders do! Chase owns Quantrix. Wells Fargo owns RELS. Etc. They now get to make a huge profit on the appraisals where before they did not. Previously an appraisal in our area would typically cost around $300 for a standard single family home. Now the borrower is charged $375- $400 and a premium if the home is worth more than $500,000. The appraiser, who used to get the full $300, is now paid on average $225 for the same report with many management companies paying significantly less. In the past a mortgage broker might call an appraiser to do a pencil check on a value for a possible loan. The media would have you think that every broker and appraiser was in some sort of collusion to just “make a value”. That communication between the two was all bad. However, experienced participants recognize that an unrealistic value will never get past the lender review process. As a result, good brokers really want a realistic preliminary value. By having the ability to communicate early in the process, all parties can save a lot of time and money on deals that have no shot at meeting the loan to value requirement to make the loan. Now, appraisers are performing appraisals on loan applications that never had a chance to close in the first place. The appraiser can’t discuss the value with anyone. Just go out, make the inspection and turn in the report. Forget the fact that many of these appraisals are being performed by appraisers who are still wet behind the ears. The lender still makes money on the appraisal fee even if the loan never closes. The borrower, who often can’t afford the cost anyway, is out upwards of $400. The process is almost criminal in my mind.

The HVCC is driving Mortgage brokers and appraisers out of business. The advantage of going to a broker is that they can shop a loan to different lenders to get the best pricing and they can cut their commissions much lower than what a large lender might be willing to negotiate. Now the broker no longer has control of the appraisal. If he finds a better deal for the borrower after the application process has started, he will need to order a second appraisal from a second management company. How can they borrower afford to keep paying for more fees? Why would they take the chance on a mortgage broker? Again, the media might tell you that the appraisals are portable, but at least 75% of the time they are not. Often when they are released too much time has elapsed for the better deal to be had. As an appraiser, the loss in fees is devastating. The HVCC is good for big business but is terrible for small business. A one man shop can not compete with a large appraisal management company. Imagine if you were an ethical hard working professional and one day, by the swipe of a pen from an either ill informed or politically motivated Attorney General (Andrew Cuomo), all of your hard earned business relationships were taken away immediately. That is what has happened in this case. It is simply amazing how these large institutions have just emasculated the little business owners. Our politicians talk about how in America there is opportunity for all and that our foundations are built on the backs of the small businesses. The reality is so different. Small retail can not compete with Wal-Mart, Target or Home Depot. Small appraisers can not compete with AMCs and mortgage Brokers can not compete with the likes of Wells Fargo and others.

Like Lereah before him (who has admitted he was a worthless lying shill), it’s not Yun’s job to make accurate predictions – it’s his job to pump housing.

As for the HVCC, it’s clear there are problems with it, but it’s also clear that the industry wants a return to the prior status quo where fraud was rampant and prices took off.

HVCC is brilliant conceptually but we are all very aware that concept and reality often never intersect. You can create rules but you cannot create ethics. The primary flaw in HVCC is that appraisers rely on a variety of sources for information regarding recent home sales. Some of that information comes from loan officers, Realtors and homeowners. Under HVCC the appraiser is forbidden from speaking with a loan officer who is the link to the Realtors and sometimes the homeowners as well.

For an appraiser to do their best work they need as much data as possible and they need that data to be as accurate as possible. Let’s face it. If the appraiser must pull from County or City records his data quality is going to be poor, at least here in Georgia where I live. Sometimes the appraiser can get really accurate data from the agent who sold a home 2-3 months ago. HVCC has made the entire process more difficult for the appraiser. In reality it is punishing homeowners for the transgressions of unscrupulous loan officers, lenders, Realtors and appraisers. Shouldn’t punishment be targeted towards the guilty instead of the innocent. You are not allowed to tell the appraiser what you think the value is as though this will force an unethical appraiser to suddenly grow a conscience. The good ones use that data to begin searching for comps before they visit the property. I recently ordered an appraisal on a $1.4 Million home. The appraiser had pulled County data on the address and though he was appraising a $60,000 Jim Walter home until he pulled up at the house. He had wasted a great deal of time on useless research.

One other thing is for sure. If you create a new rule set, unethical people will find a way around those rules and ethical ones will continue to follow the rules just as they always have. There are some definite consequences which I have seen in the last 2 months.

1. Appraisal Costs have been increased by 30-40% across the board to pay for the layer of bureaucracy created.
2. Appraisal Quality and accuracy is very inconsistent and generally much lower across the board.
3. Service delivery is abysmal with a process that in the past took 3-5 days now taking 8-15 days.
4. Getting corrections made on appraisals now takes 3-5 days instead of 3-8 hours because it must first go to the lender, then the appraisal management firm and finally to the agent and by the time you go through that many people the message gets fuzzy if your lucky and completely miscommunicated if you are not.
5. The homeowner or home buyer is the loser and the only winner is the former sub-prime mortgage lender who now runs an appraisal management company.

If you believe all loan officers are dishonest, all appraisers are corrupt easily influenced, all lenders want to loan on insufficient collateral and all borrowers want to borrow more than their home is really worth then you should be happy about HVCC. Otherwise you should punish the offenders and leave me the Hell alone.

~~~

BR: You make a number of valid points.

However, the bottom line remains: The industry, thru their corrupt appraisal practices, contributed mightily to the boom and subsequent bust. They were grossly irresponsible, and now need to be treated like the idiot children they are.

We all have to suffer because of criminals, including corrupt appraisers