Danny Salas

HVCC – What’s It All About?

Due to the Mortgage Credit Crisis

…there have been many changes regarding Real Estate Finance, however, the Home Valuation Code Of Conduct (HVCC) will be one of the most important changes that will have a direct effect on the consumer.

While in theory, it’s a wonderful concept;  unfortunately, in reality, it’s another red-tapped blunder that could damage the housing market, even further. 

Changes as of May 2009

HVCC requires lenders to order an appraisal through an Appraisal Management Company (AMC) when using conventional financing (FHA financing has no HVCC appraisal changes).   So, imagine the AMC.  Let’s assume a home buyer wants to buy a nice $300,000 home, here in Chico.  Let’s also assume that the client is putting 20% down, and has high credit risk scores with great income, so they’re a solid buyer.  In the past, you might receive an appraisal waiver, or a drive-by appraisal.  Now, you MUST order a full Uniform Residential Appraisal Report (URAR).  Not only that, however, in the past, an appraiser would only need three sales to help with the value of your home.  Now they need six comps containing at least two currently listed properties. 

Twice The Work…1/2 The Pay

So, with the other listings, and extra forms that the appraiser must provide for each appraisal, they are completing twice the work, however, receiving half of the fee that they used to.  So…what happens to the quality of the appraisals?  Unfortunately, the best appraisers, in the nation, have refused to join AMC’s.  So, that quality has deminished. 

The Lottery

Here’s what happens when you order a convention loan appraisal.  AMC’s will not order the appraisal until they have been paid.  So, now, a credit card, or a credit card/debit card is used to order it.  Once the fee clears, the AMC will call an appraiser on their list.  Their list of appraisers that appraise Butte County may consist of an appraiser in Gridley.  But do you think he knows values in Magalia?  Mortgage professionals are not allowed to contact the appraiser, directly, at all.  So, all correspondence must go through the AMC.  Once the appraisal is completed, the AMC e-mail’s the borrower, the mortgage professional, and the lender.  If the value is too low, than you may file a complaint with the AMC, however, the AMC must let the appraiser know that you disagree with value.  Getting an appraiser to admit that they are wrong, or may have made a mistake on value, is more difficult than it has ever been.  Particularly once they’ve been paid.  You think they get paid for correcting mistakes? 

Quick Answer

The best answer is FHA Financing.  I can still order the appraisal from my favorite appraiser, Barbara Robinson with Valley Oak Appraisals.  I have been in this industry since 1988, and she is the best appraiser in the business.  So, FHA is king!  3.5% down and other flexible guidelines makes this loan the most popular loan since the Mortgage Credit Crisis. 

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