How Will The Home Valuation Code of Conduct (HVCC) Impact Las Vegas FHA Loans?
The new Home Valuation Code of Conduct (HVCC) regulations that went into effect on May 1, 2009 will have a significant impact on Las Vegas real estate purchase and mortgage refinance transactions.
HVCC is a new agreement between the Federal Housing Finance Agency (FHFA) and the New York Attorney General’s office to help enhance the integrity of the home appraisal process in the mortgage finance industry by implementing policies that govern the way appraisals are ordered for all single-family mortgage loans that are sold to Fannie Mae and Freddie Mac.
This does not include FHA or VA mortgage loans at this time, however, many lenders may adopt a blanket policy where they require all appraisals to be ordered through a third party (unregulated) Appraisal Management Company (AMC).
Simply put, HVCC is intended to create a communication barrier between the appraiser and those who derive their income from the successful closing of a loan.
As defined by the federal agencies, the “loan production staff” consists of those responsible for generating loan volume or approving loans, as well as their subordinates.
HVCC is the result of a 2007 lawsuit where Attorney General Andrew Cuomo sued an appraisal division of First American Corp. for alegidly inflating home values on an estimated 260,000 Washington Mutual loans between 2006 and 2007.
While there are many mixed emotions by the mortgage broker community and appraisers, here are a few main bullets for all lenders, real estate agents, appraisers, buyers, and sellers to consider before making your own determination as to whether or not the HVCC will end up costing mortgage consumers more money:
- Appraiser / Loan Officer relationships just became obsolete due to the fact that anyone who has an income based on the loan closing will not be able to speak with the appraiser.
- No more courtesy calls from an appraiser to the loan officer if they feel that the value is off.
- All appraisals will be ordered through a third party AMC that will randomly select an appraiser. This means that buyers and sellers will not have control over the quality or experience of the appraiser.
- Appraisal Management Companies may take a large fee as the middle man, as well as control who they give business to, which will put added pressure on an already underpaid appraiser industry.
- Since communication between loan officers and appraisers will not be permitted, rush files, appraisal updates, and value conflicts will prolong closings and may require extended loan lock costs.
- An increase in the cost of appraisals is a likely result, as well as extra appraisal fees if a file needs to be moved between lenders.
- Lenders have up until 3 days prior to the closing of a transaction to provide a consumer with a copy of the report.
- Instead of using an AMC, some lenders may choose to establish in-house appraisal ordering departments that follow the HVCC guidelines. This may result in a politically self-serving “Approved List” for the banks, which could affect the way values are determined or loans are underwritten and denied.
Personal Commentary:
I have been a Las Vegas Mortgage professional since 2000, and have witnessed the drastic rise and fall of real estate prices in our market.
The only benefit that I can see with the new HVCC guidelines is that my real estate agents and clients will no longer be able to blame me for not “bringing in the value” to make their deal work.
Even though my official job description as a loan officer is to find affordable mortgage programs, there has always been a tremendous about of pressure from clients and real estate agents who believe that I have some magic appraiser on pay-roll that can produce higher appraisal values.
Unfortunately, this lender / appraiser collusion has had an impact on the current foreclosure mess that we’re dealing with in Las Vegas.
Most of the banks, brokers, and speculating novice real estate investors that contributed to the false sense of equity that caused the crash are out of business. However, those of us left in the industry are paying for their actions.
Even though HVCC may not immediately impact our FHA Loans, we are prepared for the logistical chaos that our other conventional and noncomforming mortgage clients may experience.
What do you need to be aware of for future real estate / mortgage transactions?
- Allow plenty of time for closings, due diligence periods for appraisals, and rate locks.
- Update the MLS listng description with as much info that will help support your values.
- Have all of the neighborhood comps readily available to give to the AMC if there is a discrepancy.
- Be patient and confident knowing that we are in this together.
Other Resources:
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Top 5 Las Vegas Mortgage Links / Articles / Questions
- Las Vegas First-Time Home Buyer Frequently Asked Questions
- Las Vegas Mortgage – How Much Can I Borrow?
- What Are The Current Mortgage Interest Rates?
- Applying For A Las Vegas Mortgage – What Documentation Do I Need?
- How Does The Mortgage Approval and Funding Process Work?
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Raintree Mortgage (Las Vegas)
9488 West Flamingo Rd. Suite 102
Las Vegas, NV 89147 | NV LIC 2511
702-432-5626 | Email
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Comments
Good question, Tony. Some banks may adopt the same third party appraisal guidelines for all mortgage programs, including FHA.
While most of our business is FHA based, we still have a number of investor purchase loans and conventional refinances.
Either way, a traffic jam in the loan approval and funding process won’t help us move inventory any faster.
It is still too soon to determine the true impact these new logistics will have on our economy, but I can tell you that it is going to create an added level of frustration that none of us want to deal with right now.
Since you are a Las Vegas Short Sale guy, keep in mind that your closings may take a little longer if a buyer is not using an FHA or VA mortgage program to qualify.
Mark,
Great information and very timely. FYI – In Silicon Valley and the Bay Area, we have already seen a 10% to 20% rise in the costs of appraisals as of May 1st. With a new entity (AMC) taking a cut of the financial pie, the appraisers have already started to increase their fees. My favorite appraiser (or ex-appraiser? Feels like I have lost a close friend) had not raised his fees in 10 years.
I am also going to miss being able to gain knowledge from my appraiser when discussing a particular property and the reasons that the appraised value did not match the purchase price. I found this invaluable when communicating the disappointing results to the real estate agents that I work with.
And what about refinance transactions? Will the homeowner have to ante up the cost of an appraisal only to find out the value is too low to refinance? This has ramifications that we are only now going to deal with in field. I would be interested in hearing how other loan officers are dealing this issue.
Thanks! Kristen
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“The new Home Valuation Code of Conduct (HVCC) regulations that went into effect on May 1, 2009 will have a significant impact on Las Vegas real estate purchase and mortgage refinance transactions.”
Why do you feel this will have a significant impact on the Las Vegas Real Estate when majority of all closings in Las Vegas are FHA?