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.
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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!
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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. Posted by Jolenta Averill on
Jolenta, I wrote about this a couple of weeks ago when I couldn't take it anymore!
Posted by jay seville on Wednesday, June 24th, 2009 at 6:26amCheck it out and the photoshopped image :) Your piece is dead on.
http://www.justnewlistings.com/arlington-virginia-blog/buyers-get-slapped-around-with-terrible-new-appraisal-rules-and-amcs.html
And here's that petition:
Posted by jay seville on Wednesday, June 24th, 2009 at 11:21amhttp://www.hvccpetition.com/
I know a few cases where appraisers has killed the deal because they were unfamiliar with the micro markets here. If you have three offers near $450,000 and the appraiser says it's worth $400,000 , something is wrong. I understand it in theory but it has some big kinks to work out.
Posted by Bruce Wagg on Thursday, June 25th, 2009 at 11:23pmIt is all another example of the federal govertment telling states what to do and it is a big mistate and will certainly hurt not only sellers but also buyers. But out Uncle Sam.
Posted by Mary on Saturday, June 27th, 2009 at 10:55amI think you are right, this is another case of good intentions in theory but bad policy in reality. This is not what we need right now. The days of the over-inflated appraisal are and were over IMHO. We don't need any more road blocks or hazards to selling homes right now.
Posted by Mike Taylor on Saturday, June 27th, 2009 at 1:42pmI agree with Mary and Mike Taylor. While I think the intentions behind it were good, this is a case where the Feds need to step out and let the states handle their own business.
Posted by Cary NC Real Estate on Sunday, June 28th, 2009 at 11:58pmBad appraisals were a HUGE contributing factor to the current housing situation. Sure, all those 2 and 3-year subprime ARM's eventually adjusted. But not having the equity to refinance when they did begin to adjust was the crux of the problem.
Posted by Anthony @ Indianapolis Real Estate on Friday, May 7th, 2010 at 10:11amLeave A Comment