New Appraisal System

On May 1st, the government's new Home Valuation Code of Conduct (HVCC) goes into place. If a broker needs an appraisal for a transaction, whether it be purchase or refinance, they must utilize the services of an Appraisal Management Company vs. ordering it directly from a local appraiser. The Appraisal Management Company "arbitrarily" picks an appraiser from the "area" to provide the appraisal report. The HVCC negatively affects consumers by increasing the costs to consumers for an appraisal, reducing consumer choice and adversely impacting a consumer’s ability to obtain a reliable and quality appraisal. The HVCC creates a heightened risk for consumers by requiring the use of unregulated Appraisal Management Companies (AMCs) for appraisals. The original investigation that prompted the HVCC’s creation was of an AMC and WAMU alleging that they engaged in practices of pressuring appraisers on behalf of WAMU. It increases the time to fund loans for consumers which necessitates longer rate locks or extensions of existing locks thereby increasing costs to consumers. In the case that a new lender or broker is chosen, a new appraisal will be necessitated, increasing the time to fund. It restricts the portability of an appraisal since each lender, in effect, will require a new appraisal. The need for an AMC just doesn't exist and here's why........(the following section is an excerpt from an e-mail I received from the Mortgage Broker's Association)..............

There already exists pervasive federal regulation of the mortgage lending industry's acquisition of real estate appraisals.
a) FIRREA - In 1989, following the savings and loan crisis, Congress passed the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"), which established a multi-faceted real estate appraisal regulatory system involving the federal government, the states, and The Appraisal Foundation. Since 1989, the federal agencies responsible for regulating financial institutions have promulgated regulations under FIRREA that set forth "generally acceptable appraisal standards," and have issued guidance relating to real estate appraisals, which, among other things, set forth standards for selecting qualified appraisers. These regulations and appraisal guidelines both prohibit improper influence on appraisers and work to ensure appraisal independence.
b) FRB Final Rule - In July 2008, the Federal Reserve Board ("Board") issued a final rule prohibiting all mortgage brokers, mortgage lenders and their affiliates "from coercing, influencing, or otherwise encouraging appraisers to misstate or misrepresent the value of a consumer's principal dwelling." In issuing this final rule, the Board concluded that "[no] particular procedure for ordering an appraisal necessarily promotes" fraudulent appraisals. Rather, the Board determined that the "coercion of appraisers," whether by lenders or mortgage brokers, "is an unfair practice" and the final rule should apply to lenders and mortgage brokers alike. NAMB fully supported the Board's final rule because it targets problematic practices, rather than business relationships that present no inherent problems.
c) FFIEC Interagency Guidance – On November 19, 2008, the FFIEC regulatory agencies issued proposed revisions to the “Appraisal and Evaluation Guidelines,” and requests for comment. The FFIEC regulatory agencies are currently reviewing the submitted comments and plan to issue a final rule this year.
d) H.R. 1728 – “The Mortgage and Anti-Predatory Lending Act of 2009” was introduced on March 26, 2009. TITLE VI of the bill —APPRAISAL ACTIVITIES — deals with every facet of the appraisal process that will ensure true appraisal independence and protect consumers.
4) The HVCC fails to comply with the Administrative Procedures Act.
The HVCC is a substantive rule that created de facto regulation of the entire mortgage industry in violation of the Administrative Procedure Act ("APA").
a) The FHFA is an agency and the HVCC falls within the definition of a rule under the APA. As such, the FHFA was required to utilize notice and comment rulemaking proceedings under the APA, but the agency failed to do so.
b) Because this rule regulates the entire mortgage industry and the FHFA failed to follow proper rulemaking procedures, we believe the HVCC is void, invalid, and unenforceable.

There has been significant bipartisan movement forward by Congress on the Home Valuation Code of Conduct (“HVCC”) as a result of the phone calls made to your legislators’ in-district offices last week! Key Republican and Democrat Congressmen have shown their support for our cause, and we need to keep the momentum going. We can not stop now! http://capwiz.com/namb/dbq/officials/