What is HVCC? HVCC is where the federal government is requiring there be a "break" between the person working the loan and the person doing the appraisal. In theory this is a good idea because it makes it difficult for a lender and an appraiser to be working together to commit loan fraud. It also, in theory, serves to eliminate any undo pressure from the lender to the appraiser to hit a certain value. Unfortunately, as with much the government does, "theory" and "practical application" isn't always the same.
How are appraisals changing today? Appraisals for conventional loans have to be requested through a third party appraisal company. They in turn then contact a local (sometimes, but not always) appraiser to do the appraisal. When the appraisal is sent to them they review it for accuracy and forward it to the lender. Because of that review process appraisers find themselves having to "justify" the values they give properties to people who are not knowledgeable in the local market that the property is located in. In addition, they are being forced to only use comps (comparable sales) within certain restrictive guidelines regardless of the situation. All that leads to appraisers coming up with what we are being told (by the appraisers themselves) are "safe" values...values that simply cannot be questioned. A "safe" value is usually on the lower end of what a home might be worth...that way there is no way the value can be questioned by anyone. Unfortunately, in a market where values might actually be starting to increase, this is likely to have the unintended effect of stifling growth. Why? Because the availability of comps in an increasing market is limited. In addition, when you artificially limit those values due to this process it compounds the problem of values trying to rebound. There is also the issue of consumers having to pay for the appraisal whether or not it can be utilized to do their loan. And appraisals don't come cheap. Fees run about $100 to $150 more. In the past if an appraiser felt the value was not there, they would simply let the customer know and the deal would be cancelled. No harm, no foul. But today the appraisals are done regardless and the consumer is simply out the money. As if consumers these days have an extra $400 to just throw away on something they can't use!
In theory these new HVCC guidelines sound good, however I believe they don't apply in the real world and are actually having the unintended but very real effect of exacerbating our housing problems.
Hi, and welcome to our Madison real estate blog. Whether you're a consumer, journalist or Realtor, we encourage you to share your thoughts by leaving a comment. Here you'll find relevant local and national real estate information, as well as market statistics, insight, and information about a variety of neighborhoods and real estate listings. If you'd like more information about anything in particular, please use the contact form and I'll be happy to help.
Jolenta Averill, Principal
Lake & City Homes Realty