Gov Regulation Clogs Pipes w/ Home Valuation Code of Conduct #HVCC #realestate

It’s no secret that many facets of lending and real estate have changed as a result of the credit crisis. In addition to tightened lending practices that resulted from rising mortgage delinquencies, Washington has been heavily involved in altering the way lenders do business today.

Two individual pieces of legislation impacting our business need to be taken into account when determining closing dates for purchase transactions.

Home Valuation Code of Conduct – The Home Valuation Code of Conduct (HVCC) went into effect May 1, 2009. Intended to shield appraisers from undue influence from loan officers and lenders, this legislation installed a “firewall” between those individuals directly involved in the origination of the loan from the selection of and contact with appraisers.

HVCC also requires that borrowers receive a copy of the appraisal a minimum of three days in advance of closing. Part of the kicker here is that “received” is considered, in effect, three business days after the appraisal has been mailed to the borrower.As HVCC requires a firewall between the originator and the appraiser, the time to receive an appraisal has increased, in some cases by as much as two weeks or more. While this may not always be the case, it is important to take into consideration when considering closing dates. Today, conservative closing dates are mandatory to properly manage expectations of all parties.

Housing and Economic Recovery Act – The Housing and Economic Recovery Act (HERA) amends and impacts several aspects of obtaining a mortgage, the disclosures required for borrowers, and the timing of their delivery. This impacts the minimum time required to close, and should any changes be made to a loan application that could impact the Annual Percentage Rate (APR), this could impact the closing date.

Other than paying for a credit report, lenders may not accept any additional fees from a borrower until four business days after disclosures have been provided to or mailed to a borrower. This has the potential to delay several aspects of the application process.

Finally, upon making application, a borrower is provided a Truth in Lending (TIL) statement, detailing the total expected costs that could be incurred over the life of the loan. Should anything change in the loan application that could change the APR by more than .125%, a new TIL must be reissued to the borrower a minimum of 3 business days before closing. Items impacting the APR could include a borrower accepting a higher interest rate than initially qualified by floating their rate at application, a change to the loan amount, a change in product, a change in closing date, and any changes to fees.

What Now? – While there is more we can discuss on the specifics of these legislative implications, I felt it important enough to let you know now that I would not recommend you write purchase contracts with short closing time frames.

This video can provide both my buyers and sellers the rationale behind not scheduling closing dates in advance of 30 days at a minimum and ideally not less than 45 days. If you want to see some Pres and Media on HVCC look here and if you wish to just sign the petition against it click here. You can also view signatures here.

This whole matter is a knee jerk reaction to abuses in the system, causing too much regulation and hence the clog, besides being generally impractical. Thanks for reading and commenting and, please pick up the phone and call me if you have more questions.

Sincerely,
Carlo

Endorse the Request For Reconsideration of HVCC Petition to the NY Attorney General, Fannie Mae, Freddie Mac, and the Office of Federal Housing Enterprise Oversight.

19,693 Signatures Total at the time of this Post.

For anyone interested in helping the vital Housing Market rebound to all our betterment then please electronically sign this petition.

We the undersigned understand that the intentions of the Home Valuation Code of Conduct (“HVCC”) were to help curb the potential for fraud with respect to the valuation of residential properties. We must however bring to your attention the reality of the situation that HVCC has already caused.

1. Since “Appraisal Management Companies (AMC’s)” are taking up to 40% of the total appraisal fee, and are not being regulated to ensure that their appraisers are licensed and competent, we are seeing unlicensed and inexperienced individuals performing property inspections with grave data entry errors. These inferior appraisals are then being “signed-off” by other parties that NEVER INSPECTED THE PROPERTY and are creating unnecessary financial hardship for buyers and sellers.
2. With mortgage loans being denied due to inaccurate appraisals, borrowers are being forced to apply with other lenders who in turn have to charge the consumer ANOTHER APPRAISAL FEE to proceed with the transaction. This vicious cycle can go on endlessly costing well intended clients a great deal of money and time.
3. Under HVCC, no one involved in the transaction is allowed to communicate these major issues (EVEN LICENCED LOAN ORIGINATORS) directly to their appraisers. So countless real estate transactions that would have otherwise closed are now failing, resulting in continued property devaluation and offering NO stimulus to our economy with the exception of the unregulated AMC’s who are making unjustified profits at the expense of home loan applicants and licensed, qualified appraisers.
4. Licensed appraisers have legal and ethical standards in place already. The emphasis should be on making appraisers abide by these, rather than frustrating the ordering and communication process. This well intended legislation is severely misguided.

Although HVCC has good intentions, its flaws are severely hurting our housing industry, the consumer and our economy. We are requesting that HVCC be discontinued or thought through thoroughly and retooled in order to stop the devastation it has caused and will continue to cause on our housing industry and our economy.

Sincerely,
Please sign HERE

Revised FHA Appraisal Guidelines in Effect for Appraisals Done after April 1, 2009

Image by Getty Images via Daylife

We are writing to keep you informed of some revised federal guidelines that outline 10 things that appraisers must do or provide for all FHA appraisals done after April 1, 2009:

1. The Market Conditions Addendum (Fannie Form 1004MC/Freddie Form 71).

2. At least two (2) comparable sales within 90 days of appraisal date.

3. A minimum of two (2) active listings or pending sales in addition to the three (3) closed comparables.

4. Bracketed listings using both dwelling size and sales price when possible.

5. Adjust active listings to reflect the List To Sales Price Ratio.

6. Adjust pending sales to reflect contract sales price when possible.

7. Include original list price and any revised list prices.

8. Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales.

9. Absorption Rate Analysis.

10. Known or reported sales concessions on active and pending sales.

This update issued by FHA includes the often stated warning that…”Direct Endorsement Lenders are reminded that if the appraiser they selected provides a poor or fraudulent appraisal that leads FHA to insure a mortgage at an inflated amount, the lender is held responsible equally with the appraiser for the integrity, accuracy and thoroughness of an appraisal submitted to FHA.”

If the above appraisal guidelines look foreign to you, that’s okay, because this update is intended for Appraisers and Underwriters. I sent this to you so you can take the following actions below to make yourself an FHA resource in your market.

Watch the Fannie Mae video presentation on using the Market Conditions Addendum.

Want to see the Appraisal FAQS?

Sincerely,
The Visionary Agents

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