HVCC Morphs Into Appraiser Independence

HVCC Morphs into Appraiser Independence

Karen Deis. Publisher, www.Mortgage Currentcy.com

The new Appraiser Independence rule and the sunset of HVCC doesn’t change a thing. There are some publications out there stating that the Interim Rule doesn’t prohibit production staff from ordering, paying for, or participating in the appraisal process directly with appraisers – but we’re here to tell you differently. The link to the Federal Reserve gives you access to the actual Federal Register – it states that Lenders are required to ensure Appraiser Independence from production staff – essentially continuing the HVCC rules regarding ordering, payment, & process. Mortgage Brokers, LO’s, & other production staff are prohibited from selecting, influencing, paying, or having substantive communications with appraisers.

Portability – Reps & Warrants are still required for use of another Lender’s appraisal. Since this is now Federal Law and all Lenders will now be adhering to the Appraiser Independence Requirements, the portability should become easier. What was the problem before? Not all Lenders were selling to Fannie and Freddie and therefore did not need to comply with HVCC – since no one could ever guarantee the compliance across the board, the portability of appraisals was just not happening. If you noticed, there was never an issue with appraisal portability for Government Loans – that’s because ALL Lenders played by the same rules with clear guidance from HUD.

Fannie (SEL 2010-14) and Freddie (2010-23) issued their own interpretations—which are basically the same, HOWEVER, Freddie goes into much more detail—with added instructions on how appraisers are supposed to appraisal REO’s and Short Sales. Fannie’s interpretation leaves a lot to be desired! Can you say buy-backs anyone?

Realtors & Builders are not prohibited from having contact with or providing information to the appraiser – they are however prohibited from inappropriate or illegal behavior – coercion, extortion, collusion, compensation, inducement, intimidation, bribery, etc.

Interim Final Rule – the rule is out for comment for 60 days…a few tweaks are likely, but this was developed with all the HVCC problems in mind and all the players having input – I do not expect much will change.

Confused by all of the Reg, Leg and Industry Noise!

My friend Jason Klaskin just emailed this regulatory rant for me to post on Lenderama

I’ll do my best to update this post with links to related articles, videos or online resources.

Please feel free to let us know what you think, as well suggest other topics of interest in the comment section below.




I have been so barraged with so many mortgage / financial legislative updates and calls to action lately that I’m not sure which issue I need to get involved with to make the most impact.

There just isn’t enough time to research everything, share my voice and work as a full-time mortgage originator.

Below is a list of some of the more important items you may have heard about or should be hearing about shortly.

This list is NOT exhaustive, and I am NOT an expert in any of these areas….  just a Loan Officer trying to have an impact on the industry’s future in my own small way.

Merkley Amendment to Financial Reform Bill (SA 3962)

Limits compensation based on terms of the loan (other than principal amount) and mandates ability to repay analysis. This is a Senate Amendment to the Dodd’s Financial Reform Bill (3217).

This amendment was snuck in after hours on Tuesday May 11, 2010 and was voted on, and accepted on May 12.

Now the main Bill (3217) will have this attached when it goes to conference to determine what stays and what goes for passage of a House version and then it’s final version.

(Barbara Boxer proposed a similar amendment the week prior but signed on to this amendment so it is likely that her amendment will not be pursued at this time).

Dodd’s Financial Stability Act of 2010 (Senate Bill 3217)

Sweeping reform for many areas of our financial system. You can read the full text here: http://www.opencongress.org/bill/111-s3217/text .

Too much to mention in a short paragraph, but there are a LOT of amendments being proposed and ‘snuck’ in as legislators are trying to get their names attached and, likely, known for the upcoming elections in November. Merkley’s amendment is a great example.


Casey (PA) will reportedly be offering an amendment to SB 3217 that will eliminate HVCC. This one we want to support for passage! Go to NAIHP.org and learn about the call to action and any updated news about this.


Proposal to eliminate multiple state auditing requirements by having one consistent audit mechanism across the NMLS system.

Proposal is to have a quarterly audit. Most in the industry see that as onerous and would like to see an annual audit system so the burden is lessened.

http://mortgage.nationwidelicensingsystem.org/news/Pages/ProposalsforComment.aspx proposal is number 2010-2.


Looks like there is widespread support on ‘The Hill’ for a Bill allowing conditional commitments for USDA funds once the funds are exhausted for this year (expected to be right around May 12). There appears to be widespread support for this bill.

Department of Labor Memo – The Administrator of the Dept. of Labor has stated that it is his interpretation that the duties of a Loan Officer does not qualify them to be exempt from overtime.

In other words – support for some form of hourly compensation mode.

(Conspiracy theory?  Just putting this in context with the proposed compensation issues for Originators proposed by the FRB and Merkley’s amendment – something to consider).

Federal Reserve Board Proposal to Amend Reg. Z

Otherwise known as the Originator compensation limitations. This proposal includes many items but the most pressing is Loan Originator compensation and the inability to earn based on the terms of a loan.

Comment period ended Dec. 24, 2009 but less than 5,000 comments were submitted (less than 5% of the Originators in our country!).

IMMAAG and NAIHP held a call to action conference call with the industry and we were able to get a meeting with the FRB to discuss alternatives and present our position that the proposed rule is based on flawed information.

It appears that the FRB is moving forward with some form of this proposal and they do NOT require any legislative oversight to implement the change. Our only hope to impact this may be legal action.

IMMAAG and NAIHP are trying to determine what the cost of such action would be and if they can generate enough industry support to make it happen.

The Merkley Amendment closely mirrors this proposal so it is uncertain if both would be instituted or one or the other but it is clear that there is a lack of information available to legislators and the FRB alike and both seem bent on limiting Originator compensation one way or the other.


Now is the time to get involved and increase your Political Competency.

Again, I am not an expert on any of these matters, but I hope this little summary is helpful.

It only took me about an hour to do a little research, find some links and read a few different points of view.

If we can all just spend at least an hour a week keeping each other in the loop by having open discussions about important regulatory updates and legislation, then our clients and industry may have a more positive outlook on a true economic recovery.

We need all industry hands on deck.

Open Industry Resources / Blogs:

Related Articles:

Photo Credit: Gapper Blog

What Do Appraisers Look For When Determining A Property’s Value?

Most people are surprised to learn what appraisers actually look at when determining the value of a real estate property.

A common misconception homeowners generally have is that the value of their home is determined after the appraiser has completed their physical property inspection.

However, the appraiser actually already has a good idea of the property’s value by the time they have scheduled an appointment to stop by the property.

The good news is that you don’t have to worry so much about pushing back an appointment a few days just to “clean things up” in order to help influence the value of your property.

While a clean house will certainly make it easier for the appraiser to notice improvements, the only time you should be concerned about “clutter” is if it is damaging to the dwelling.

The Key Components Addressed In An Appraisal

The Site:

Location, view, topography, lot size, utilities, zoning, external factors, highest and best use, landscaping features…


Quality of construction, finish work, fixed appliances and any defining features


Age, deterioration, renovations, upgrades, added features

Health & Safety:

Structural integrity, code compliance


Above grade and below grade improvements


Is the property conforming to the neighborhood?

Functional Utility:

Is the property functional as built – style and use?


Garages, Carports, Shops, etc..


Curb appeal, lot size, & conforming to the neighborhood are obvious to the appraiser when they drive down into the neighborhood pull up in front of your home.

When entering your home, they are going to look at the overall design, condition, finish work, upgrades, any defining features, functional utility, square footage, number of rooms and health and safety items.

Be sure to have all carbon monoxide and smoke detectors in working condition.

Since the appraisal provides half the weight in any credit decision involving the security of real estate, the appraisal should be done by a qualified, licensed appraiser whom is familiar with your neighborhood, and the type of home you are buying, selling or refinancing.

If you’re interested in what specifically appraisers are looking for, here is a copy of the blank 1040 URAR form that is used by every appraiser in the country.

Related Update on HVCC:

Appraisers hired for a mortgage transaction on a conforming loan are chosen from a pool of qualified appraisers at random. Neither you nor your lender has the flexibility of deciding which appraiser will inspect your home.

This recent change was brought on with the Home Valuation Code of Conduct HVCC, and is effective with conventional loans originated on or after May 1, 2009.


Related Appraisal Articles:

Emergency State of the Union with NAMB Prez Jim Pair – Oct 1st at 12noon EST, 9am PST

Jim Pair

Jim Pair

I try very hard to read all the blogs, watch the TBWS Daily Show, follow NAMB’s regulatory updates, etc.  Still, I have to admit that I’m more confused by what’s coming down the pike than ever.  How bout you?

  • YSP is going away come January 2010 – or isn’t it?
  • FHA lending will become more accessible for third party originators – or won’t it?
  •  Congress is seriously considering an 18-month moratorium on HVCC – or aren’t they?
  • Register Now Button

    I’m hosting an Emergency State of the Union interview with NAMB President Jim Pair on Thursday at noon EST (9am PST).  We’re opening up to everyone – NAMB members, non-members, brokers, bankers, appraisers… everyone who’s livlihood is at stake during these chaotic times.

    When you register, you’ll see a spot where you can ask Jim a question that’s been on your mind.  We’re going to do our best to get to every single question, either during the live session or by email afterwards.

    Work With Your Real Estate Agents To Fight HVCC

    Even though we’ve still got work to do, I want to give props to all of the loan officers who have created some noise online about HVCC.

    Since our real estate agents are impacted by the Home Valuation Code of Conduct (HVCC) as well, I’d like to share an example of how loan officers can work with your referral partners to spread the word.

    One of my tasks as a full-time mortgage blogger is to syndicate relevant content on other high traffic platforms for the purpose of reaching my target audience online.

    Simply spamming the web with links back to my mortgage blog doesn’t always generate the qualified traffic that I need in order to accomplish a specific goal for raising awareness about certain messages.

    However, my Las Vegas real estate agents command a much larger reach of home buyers and sellers than I can on my own.

    One of my strategies to connect with agents to be seen, heard and appreciated is to post valuable content on their blogs.

    How is this a win win?

    1.  Real estate bloggers need content…. and a lot of it.

    2.  Mortgage related content about the $8,000 tax credit, FHA appraisal guidelines, and First-Time Homebuyer info is best written by an experienced loan officer.

    3.  Great content = more visitors = more contacts for the agent.

    4.  Great mortgage content = a different type of traffic from a more targeted online search.  (see Long Tail)

    5.  By the time the agents are ready to refer the new borrowers over to an LO for qualification, they’re already familiar with you.

    How does this apply to HVCC?

    I wrote an article on my agent’s blog about the impact HVCC will have on Las Vegas real estate.

    Due to the strength of the real estate blog, I was found in the search engines within 24 hours and contacted by a local reporter for a story he was writing about appraisers low balling values.

    By luck, his story was featured on Realtor.org and Trulia, as well as several other high traffic news and media platforms.

    Since I’ve been writing about HVCC for a month or so now, I was more qualified to write it on the real estate blog than the agent was.

    End result:

    His team of 150 agents have printed or emailed my article to all of their people.

    I even left a comment in the online version of the newspaper’s article with a link back to a follow up post on HVCC that I did which explained my quotes in more detail.

    How much business did we get out of it?  A bunch, but that wasn’t my primary agenda.

    How do you follow this model and find agents to provide HVCC content to?

    If you don’t have an agent with a blog, start at www.mybloglog.com and search for local agents.  www.whostalkin.com and search.twitter are other great places to start.

    If you use Google Reader, then put together a custom folder for all of the agents in your town.

    Do you need a mortgage blog to post an article on first?

    No.  If you don’t have a blog, don’t worry about spending the time setting one up just to show agents that you can write.  Instead, put the content together in an email and start looking for agents in your area who will post the content for you.

    If you’re looking for an interesting article to write about on your agent’s blogs, listen to this podcast that Tim Davis did with Marc Savitt about HVCC.

    The Big Picture, Barry Ritholtz Calls NAMB, NAR Efforts Against HVCC Corrupt

    The Big Picture

    The Big Picture

    Okay folks it is time to get in the fight again…

    Time to make you voices and arguments heard. Barry Ritholtz, of the Big Picture, thinks that the NAMB and NAR efforts to fight against the consumer and industry impacts of ill-conceived HVCC legislation, “corrupt.”

    Here is a brief excerpt from his post:

    I called that a thinly veiled hint for “friendly” i.e., “corruptible” appraisals. I did some more digging, and I quickly discovered what this contemptible suggestion was all about: It is part of a broader lobbying effort by the The National Association of Mortgage Brokers (NAMB) and The National Association of Realtors (NAR) against honest appraisals.

    Ironically, he uses the whole unsupported post to shill his new book:

    Appraisal fraud was a huge contributor to the unsustainable run up in prices during the boom period. Realtors. Let’s go to the big book of real estate fraud, Bailout Nation

    Here is what I would suggest:

    I am not sure Mr. Ritholtz is going to allow a good honest debate in the comments, but I would sure try turning his flippant post into an honest debate – leave a comment on his blog post. I would say we could generate about a 100+!

    Regardless, definitely below. Let’s show some action folks!

    HVCC Immediate Call To Action

    Attention all Mortgage Brokers, Real Estate Agents, Appraisers, Lenders, Home Builders, Title Agents, and Consumers:

    After more than a year of exhaustive negotiations with Fannie Mae, Freddie Mac, James Lockhart, Director of FHFA (GSE Regulator), and NY Attorney General Andrew Cuomo, NAMB believes the time has come for your individual voice to be heard.

    In order for this “Call to Action” to be effective, we ask that you fully participate, encourage others to join the action and continue calling and emailing everyday, until advised to stop by NAMB. This will NOT be a one day action!

    Who will you be contacting?

    NY Attorney General Andrew Cuomo’s Office:
    (212) 416-8000, Internet Complaint

    Federal Housing Finance Agency (FHFA)
    (866) 796-5595 or director@fhfa.gov

    Fannie Mae
    (202) 752-7000 or headquarters@fanniemae.com

    Freddie Mac:
    (703) 903-2000, Internet Complaint

    Senators, Representatives and Governors:
    Click here for contact information.

    Also, please contact your local TV and Newspaper outlets.

    Below are talking points and background information to assist in your conversations.  Please remember we are all professionals and should conduct ourselves accordingly in any communication with the above parties.  For the most successful and influential calls, it is important to concisely quantify how the HVCC is affecting your consumer and your business.

    Talking Points:

    1)   NAMB conservatively estimates (breakdown below) that the HVCC is costing consumers over $2.8 BILLION a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.

    2)  Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC.  The original Cuomo investigation involved a federally chartered bank and an AMC.

    3) AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue.  The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.

    4) HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo’s investigation.

    5) No Portability! Consumers are “trapped” with a specific lender.  If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.


    I.  Lack of Portability

    A.  Lenders are not allowing borrowers to transfer appraisals, regardless of the reason.

    B.  Forces the borrower to pay for another appraisal and wait for a new appraiser to be assigned and complete it, increasing the total cost and time needed for obtaining a home. Delays in turnaround times also cause the borrower to miss rate lock deadlines and possibly face penalties charged by the lender.

    C.  In a poll conducted by NAMB, 75.8% of respondents said that 0% of their appraisals are portable since the enactment of the HVCC.

    II.  Lack of Quality

    A.   AMCs are assigning appraisers from a different municipality, county, or even state to appraise the target house, therefore unfamiliar with the neighborhood and unable to produce an accurate appraisal.

    i.  Because of this, the HVCC is forcing appraisers to be in direct violation of the Uniform Standards of Professional Appraisal Practice (USPAP) for jurisdictional competence.

    B.  Because AMCs pay appraisers such low fees, those assigned appraisers willing to do the work are often inexperienced and fail to adequately appraise the home.

    III.  Increased Cost of Appraisals

    A.  The minimum increase we have seen in direct consumer cost is $150 per appraisal.  That, coupled with the drastically increased appraisal turnaround times that impose extended lock periods at an average expense of $561.95 per loan, is now costing consumers an estimated additional $711.95 per transaction.

    B.    Cost to Consumers Estimate:

    $150.00 – minimum increase per appraisal
    - avg loan amt of $224,778 at .25% for extended lock period
    $711.95 – average total increase per transaction
    x 3,870,552* – 2007 HMDA report of residential real estate loans originated
    $2,755,639,496 – $2.8 BILLION in increased fees to consumers!

    IV.   Articles Illustrating the Effects of the HVCC

    A.  The Appraisal Bubble – The Center for Public Integrity
    B.   The Cure is Worse than the Disease – Appraisal Press
    C.   Appraisals Roil Real Estate Deals – The Wall Street Journal

    Feel free to forward these articles and/or reference them in your conversations.

    An Unofficial NAMB Regulatory Update on HVCC – Oh, And A Call To Action For All Of Us NAMB Bashers.

    Many of us have been openly critical of NAMB over the past few years, and I’ve certainly been one of them.  I’m about to tell you something that you likely are unaware of:

    NAMB is out there busting their rear ends to keep you in business.

    Did you know that NAMB President Marc Savitt conducted a one-on-one meeting with New York Attorney General Andrew Cuomo this past week?  Neither did I until yesterday – and it was mere coincidence that I learned of his meeting.

    Are you a NAMB Basher?

    I guess you could call me a card carrying NAMB Basher.  After all, I’ve said more negative things about NAMB publicly than I’ve said positive things.  In the process, I’ve figured something out:  I am not doing anyone any favors by complaining unless I’m willing to become part of the solution.  You see, NAMB is a volunteer organization.  For it to be successful, it requires the involvement and participation of its constituents.  Here are a few quick and easy steps on how you can get involved – and become part of the solution.

    1)  Are you a Member of your Trade Association?

    It amazes me how many NAMB Bashers are out there that aren’t even dues paying members.  As far as I’m concerned, you’re part of the problem and you need to do either one of two things:

    a)  Join NAMB today or

    b)  Shut up until you’ve satisfied point a).  In my mind, you have no right to criticize an organization’s shortcomings when the greater shortcoming lies within.  And if you’re a NAMB member, maybe you can go that extra step further and find out if your supply chain are NAMB members:  appraisers, title companies, credit companies, etc.  For NAMB to succeed, it needs our funds and our participation.

    NAMB Has A Communication Problem That’s About To Be Solved.

    Put yourself in Marc Savitt’s shoes for a minute.  You’re a mortgage professional out of Martinsburg, WV with a primary responsibility to run a mortgage business and provide for your family.  Oh, and by the way, you’re also responsible for representing an industry that the mainstream media single-handedly blames for the economic crisis we’re experiencing right now.  So you spend half your life in an airplane touring the country.  You get beat up by regulators one day and your constituents the next.  And each day, you’re asked to put that smile on your face and dodge bullets.  Just think about the life of Marc Savitt right now.  Would you want his job?

    My answer:  hell no.  I feel sorry for the guy.  And today I’m officially becoming part of the solution.

    Mr. Savitt, what can I do to help you?

    Marc, welcome to the wonderful world of “Web 2.0″.  It’s intimidating at first, and it takes time to find your style.  But you won’t find a better platform to drum up awareness and support for a common cause.  I’m asking you to embrace this medium and make it a small part of your day.

    Help Me Help You!

    When I think about the life of Marc Savitt, I always come back to this classic 20-second clip from the movie Jerry Maguire.  It really says it all. If you’re out there reading this, let’s send a welcome message to Marc Savitt. Let him know you read this article and you’re appreciative of what he’s doing for you.