Editor’s Note: According to our survey, HVCC does not appear to be the panacea for appraiser independence many had hoped. Rather, many appraisers say it is the final straw that will break their backs because it bans them from doing business with their clients. You’ll find survey results to date including how pressure on turn times and fees effect appraisal quality, and much more in the upcoming print edition of Working RE. 

AMC Pressure, Diversifying with BPOs, HVCC Fallout, Fannie’s (free) Webinar

By David Brauner, Editor Working RE

AMC Pressure

The Home Valuation Code of Conduct (HVCC) is intended to support appraiser independence and thwart coercion and inflated values by removing mortgage brokers from the appraisal ordering process. As a result, we now see orders flowing from Appraisal Management Companies (AMCs). FHA loans are not effected by HVCC.
 

You may recall that HVCC is part of a private agreement between New York Attorney, General Andrew Coumo, and Fannie Mae and Freddie Mac. (In an ironic postscript, U.S. officials seized Fannie and Freddie last fall and put them into Federal Conservatorship.) Another irony is Cuomo’s investigation began with scrutiny of a vendor management company- eAppraiseIT. The complaint issued by Cuomo accused the company of inflating the values of home loans under pressure from Washington Mutual Inc. Both companies deny the accusations (Premium Content: eAppraiseIT, WAMU Blow Up, Fannie, Freddie). The investigation by Cuomo included subpoenas of Fannie Mae and Freddie Mac for details about WAMU's loans and their due diligence practices related to the appraisals. As a result of the agreement which includes HVCC, Cuomo terminated the inquiry into Fannie and Freddie.

The summer issue of Working RE (mailing in early August) will have much more survey results. Judging by the blog and comments left by survey takers, the following survey results is more fallout from HVCC:

While 74 percent (74%) of survey takers answer that “yes” they are “generally satisfied with appraising,” just over half (51%) say they don't expect to be appraising full time five years from now.

Petition to Reconsider HVCC
Find a link at WorkingRE.com to a petition to reconsider HVCC (Sidebar: HVCC Petition). So far, over 23,000 persons have signed.

From our survey; Question: “Are you in favor of the HVCC as written?”
Answer: 93 percent (93%) say “No.”

Diversifying with BPOs?
Appraisers have long bristled at the unfairness of BPOs but perhaps this issue needs a fresh look.

As most appraisers know, BPOs are a kind of “loophole” of sorts- a lower cost and less rigorous valuation product that competes with appraisals but whose “practitioners” are not required to be licensed nor follow USPAP guidelines. BPOs have eaten into appraisal business for years because they are faster and cheaper.

Recent legislation that passed the U. S. House of Representatives last month, the Mortgage Reform and Anti-Predatory Lending Act of 2009 (H.R. 1728), contains provisions restricting BPOs as well as addressing AMC licensing and other related issues (more in the upcoming print issue of Working RE).

The understanding of most appraisers is that they are forbidden from doing BPOs because they are licensed; under licensing any “opinion of value” must meet USPAP requirements. A recent story from the Appraisal Institute puts forth the opinion that appraisers can do BPOs, as long as they are also licensed real estate agents/brokers.

The story, authored by Stephanie Coleman, MAI, SRA, Senior Manager of Ethics and Standards Counseling at the Appraisal Institute, focuses on circumstances where a lender is not required by regulation to obtain an appraisal or an evaluation. This is timely because of the huge inventory of foreclosed property. When a home is foreclosed upon and becomes real estate owned, lenders need to establish a value in order to dispose of it.

The story says that an appraiser who is also a real estate agent may provide a BPO in these cases and that when doing so, they are not bound by USPAP. The story quotes Advisory Opinion 21 USPAP Compliance, which says that USPAP applies only when one is acting as an appraiser. Appraisers providing this service as an agent/broker must make it clear that they are an appraiser, however, even though they are not acting as an appraiser when providing the service. The story opines that it would be a “misrepresentation” for an appraiser to do a broker price opinion if they were not also a real estate agent/broker.

Working RE recommends that you contact your own state licensing Board before proceeding. You can find the story, “Matter of Opinion: How and When Appraisers Can Expand into BPO Work,” at the Appraisal Institute website (Valuation Magazine, First Quarter 2009).

Free Fannie HVCC
Please visit WorkingRE.com for the link to Fannie Mae's newest guidance on the HVCC - a recorded web seminar you can access for free (Sidebar, Fannie Mae's Guidance on HVCC).