HVCC….Huh?

The latest in the home mortgage alphabet soup of letters is HVCC. HVCC stands for Home Valuation Code of Conduct, and is the “New AND Improved” method that the feds have legislated to try and protect lenders from inaccurate home appraisals, which leads to over-lending on real estate. The idea behind this legislation is to take the appraisal side of the home lending process away from the mortgage broker and put it in the hands of a third party. The justification was the mortgage broker had too much influence on the appraisal process, and somehow “forced” the appraiser to hit the number needed to make the home loan work. The force used, according to the big banks (oops I mean the feds), was that if the appraisers didn’t appraise the property for enough money then the appraiser wouldn’t get any more business from the broker. They further claim this breakdown in the loan process was the root cause of the current housing meltdown and huge taxpayer paid bailouts for these lenders.
How does this affect the home owner/borrower? Now the appraisal must be paid for before the appraisal is ordered, must be paid to the initial lender whom the broker is intending to send the loan, and is ordered by an employee by the lender who isn’t paid by the results of the loan (no commission or loss of job if the transaction isn’t completed due to a low appraisal) through an Appraisal Management Company (AMC) who then assigns it to an appraiser who has signed up to work for them. This appraiser may or may not be familiar with the area or neighborhood and may or may not have been doing appraisals for any length of time. The appraisals cost will now increase to $400 to as high as $750 depending on the AMC chosen. (The AMC now takes a cut of the fee, and the appraiser assigned to actually do the work is chosen by who will give the AMC the highest profit.) The broker, and therefore the borrower, won’t have had professional input on property value prior to the appraisal being performed and paid for.
This new appraisal process was just introduced on May 1st, so as with most things like this, it will be a process before an end result emerges that is of benefit to everyone involved. Personally, I still call my experienced appraisers for an unofficial estimate before there is any waste of time or money by anyone.
Fixed Rates for Conforming Loans under $417,000 s as of 05/22/09 (p.m.) remain in the upper 4% range for 30 year terms at 1 point.