HUD recently announced in Mortgagee Letter 2009-28 dated September 18, 2009 that they are implementing “Appraiser Independence” which is very similar to HVCC.
Prohibition of mortgage brokers and commission based lender staff from the appraisal process…. To ensure appraiser independence, FHA-approved lenders are now prohibited from accepting appraisals prepared by FHA Roster appraisers who were selected, retained or compensated in any manner by a mortgage broker or any member of a lender’s staff who is compensated on a commission basis tied to the successful completion of a loan….
FHA does not require the use of AMCs or other third party organizations for appraisal ordering, but does recognize that some lenders use AMCs and/or other third party organizations to help ensure appraiser independence.
Mortgagee Letter 2009-28 goes on to “affirm existing requirements” with regards to preventing improper influencing of appraisers. And states that:
“A lender must not assume, simply because an appraiser is state-certified that the appraiser is qualifed and knowledgeable in a specific market area. It is incumbent upon the lender to determine whether an appraisers’ quaifications, as evidenced by educational training and actual field experience are sufficient to enable the appraiser to competently perform appraisals before assigning an appraisal to them.”
AMCs (and the banks who own them) will have extra reason to party-on this New Year’s Eve. This new requirement goes into effect on all FHA case numbers assigned on or after January 1, 2010 February 15, 2010. [Update: HUD has extended the time period before the new guidelines in the above referenced mortgagee letter goes into effect…I corrected the title of this post too!]
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Rhonda,
does this apply to all commission LOs wherever they work (broker, banker, consumer loan company, credit union) or just broker LOs?
Thanks.
Jillayne, I can’t imagine that mortgage bankers would be excluded. What do you think when you read the mortgagee letter? (sorry I couldn’t attach it…I’m working from my netbook at a mortgage conference in AZ today).
The FHA rule only excludes Mortgage Brokers from ordering dierectly – much like HVCC, Mortgage Bankers, banks, and correspondent lenders can still manage an approved appraiser list and can order appraisals as long as the loan production staff and anyone who is paid from the commission of the loan is not involved in engaging the appraiser in the assignment. So as long as a Mortgage Bankers office has a separate department for ordering appraisals or use a delivery platform / AMC to handle ordering and delivery.
I don’t read it that way, Michael. The ML says: “mortgage brokers and commission based lender staff” most mortgage originators are paid commission.
As long as the staff ordering the appraisal is not tied to the commission of the loan or involved in loan production, then the office of a correspondent lender can ordeer the appraisal – mortgage brokers are excluded completely, but correspondent lenders are not. From HUD: “FHA-approved lenders are now prohibited from accepting appraisals prepared by FHA Roster appraisers who are selected, retained or compensated in any manner by a mortgage broker or any member of a lender’s staff who is compensated on a commission basis tied to the successful completion of a loan”
The FHA letter clarifies loan officiers, or loan production staff are not to be involved in the appraisal process – ordering the appraisal. The main difference with the FHA change is they make it clear the appraisal fee and the AMC fees are separate and each must be a market fee. In addition the AMC fees must also be disclosed as part of the closing documents.
Under the HVCC the AMC’s are keeping up to 50% of the borrower paid appraisal fee which leaves little financial incentive for experienced, quality minded appraisers to pursue AMC work.
John, you’re referring to this section:
What I’m concerned about is the word “customary”…isn’t now “customary” for AMC’s to take half of the appraisers fee (even though we all know it doesn’t cost $200-$250 to order one appraisal)?
If the fee for the appraisal may not include the AMC fee, does this mean that consumers will now pay more for their appraisal? For example, $500 for an FHA appraisal + (what ever the AMC will charge–let’s hope it’s not $250).
I just added the link to the Mortgagee Letter to the post (and I’ll add it here). For some reason, I wasn’t able to do this from my tiny netbook when I wrote this post from Scottsdale.
The AMC is nothing more than a “delivery system” – there are several delivery system “AMC” platforms that currently charge $10-25 per appraisal file download – I would say that should be the top of the “normal customary service fee” for an AMC. I am told by several Mortgage brokers that current “appraisal plus AMC” fees are costing a borrower $475 to $675, depending on the home value. For one: appraisal fees are not allowed to be tied to a home’s value (this would be admitting a predetermined value range by an appraiser, which is prohibited) – for two: if a loan orginator (using the bank and AMC I have been told about that are charging these high fees) estimates the value is above a certain amount, the consumer is charged the higher appraisal fee even if the final appraisal comes in less than the expected value threshold. So – consumers are ALREADY paying more than what was customary prior to the HVCC and/or these new FHA rules; three: the HVCC and the new FHA rules are written for the lending industry – Not for appraisers (although there is language to support appraiser independence, but that is already covered in FIRREA and USPAP, so it is more like a reminder to the lending industry that this is a goal) – so why then is the cost of these new rules being placed on the backs of the appraisers? – Because the big banks (most that own their own AMC) see it as another source of revenue within the loan process; simply, an additional revenue center…. Let’s hope FHA actually has the means to police this new system – the HVCC has a provision for oversight called the Independent Valuation Protection Agency (IVPA); unfortunately, this agency has not been established and there is still no timeline for implementation – appraisers have been calling it the “Imaginary Valuation Protection Agency” because it simply does not exist. Are the FHA rules simply gas in the wind like the HVCC (without any oversight)? Funny how new rules with so-called safeguards for appraiser independence have only resulted in the largest hand-over of power to the banking industry than we have ever seen in our lifetime.
Michael, it’s on the backs of appraisers AND consumers.
AMCs (many owned by banks/title co’s) are still unregulated as far as I know. It stinks.
I agree, Rhonda…
AMC’s make their money by paying a fraction of the normal fee of an appraisal to the appraiser doing the work – they keep the rest for doing nothing but delivering an appraisal; so far, the overall cost for an appraisal paid by the consumer has been relatively close to that in the past – only because the AMC takes 35-55% of the fee passed to the consumer and does not disclose that the appraiser was only paid the 35-55%…. if I was the consumer, I would be outraged that I paid for a $450 product and really received a $300 appraisal. How do they do it? By hiring only the appraisers that will do it cheapest and quickest. Like most things in life: “you get what you pay for” – but in this case, the consumer is never told that they are paying for a “fast food” solution; the consumer thinks they are getting a $450-500 appraisal, when in fact they are getting a $275-310 appraisal.
— the bulk of the immediate monetary cost has been to the appraisers as the AMC’s take nearly half of the fee that is passed to the consumer (and the cost appears as a “customary-looking” fee); after all , the AMC keeps the appraisal fee looking “standard” by only hiring those appraisers that work for nearly half of the customary fee (or less sometimes); the AMC charges up to $500 (or more) but pays the apraiser $270-$310 and the AMC keeps the rest…. Appraisals in this area have been $400 or more for over 15 years without much price fluctuation- so yes, I agree that the cost is also to the consumer, but, mostly in the form of sub-standard appraisals due to the low fee that AMCs pay the appraisers to keep the fee appearing somewhat competitive (and the time involved that is typically much longer than in the past, causing some loans to not go through) – this leads to those AMCs that are owned by the big banks to shop for the lowest cost and fastest appraisal turn times regardless of quality… so the cost to the consumer may be greater after all once the cost of a bad appraisal is taken into consideration. But, in the mean time – all of the good honest and ethical appraisers are being forced out of work due to these rules and lack of regulation on AMCs. At least FHA has made it a point to try to protect standard “customary and fair” fees paid to appraiser and try to expose the AMCs for the price-gouging that has been occurring by making them dislose wat they charge in addition to the appraisal. Will it be enough? I hope it helps.
I hope that banks will have to disclose their profits from their ownership interest in AMCs… how ironic they’re developed because of the abuses by a bank (WAMU) and now the banks are rolling in AMC fees.
Perhaps the NAMB association could start a non-profit AMC for their members.
John, I think that’s a great idea…and if they only charged a nominal fee — I bet the appraisal industry would back this too.
John- That would be great – the problem is that there is no incentive for the big banks to use any AMC other than the ones they own and profit from. Creating more AMCs without implementing regulation is not the answer; the big banks do not accept appraisals unless they are ordered through their owned AMCs. The HVCC went through several drafts before its adoption; one of the drafts would have limited a banks ownership of an AMC to under 20%; the banking industry (lobbyists) fought tooth and nail to have that clause removed – and they succeeded. The unfortunate truth is that the HVCC went into effect without any meaningful safeguards and opened up too many unintended consequences that should have been avoided. Our state (Washington) does not have any legislation or regulation in place or planned for AMCs; funny how agents, appraisers, and even loan originators are required to be licensed in our state, but the AMCs can be located in Montana or California or even Canada and are not required to be licensed in Washington – this is local and state tax revenue leaking out the door. The AMC could be a high school student start-up because there are no rules. What we really need is AMC regulation, meaningful safeguards implemented, and a limit of AMC ownership by the big banks. It would also be great to capture the revenue of loans being generated within our state to be sure it is going back into our economy – not feeding Canada’s or Montana’s or California’s economy.
I would think that when the bank owned AMC’s are forced to disclose their AMC fees in line with the FHA mandate they will need to change.
Let’s hope so. But that will only apply to FHA. More likely than not, the big banks will have two AMC divisions: one that continues business as usual for conventional lending (not required to disclose AMC fees versus fees paid to an appraiser) – and the other that handles only FHA (and complies to the FHA guidelines). I can also see some of these banks saying “resonable and customry fees were established over the past six months and are $275-310” – ignoring the “customary and established” appraisal fees that go back nearly 20 years…. call me a pessimist, but I don’t think this one FHA rule is going make any big banks change their ways.
Does ANYONE else find it duplicitous that only a month ago Commissioner David Stevens of the FHA said there were NO plans to adopt HVCC.
Google it.
“FHA Commissioner David Stevens recently said that they have no plans to implement the HVCC”
How is this NOT the HVCC? How do you release a plan a month later, that CLEARLY had to be in the planning stage when the press release was made, and say there is no plan.
Man, I am SO disappointed by this administration. They HAVE to do better at standing up for the people, instead kissin’ banker’s backsides.
Just another group of lying, self-serving, crooks…, only from the other side of the same coin.
Well if our administration stops “kissin’ banker’s backsides”; how will they ever get elected?
The staements made by the FHA commissioner stated they were not going to adopt the HVCC – this is still a true statement – they are not adopting it the way Fannie, Freddie, and Cuomo have it implemented; instead, they are adopting only a portion – the concept that stops Mortgage Brokers from directly ordering appraisals with an appraiser – BUT, at least they see some consumer protection is a good thing by adding the necessity of full fee disclosure, which the HVCC lacks. Right now, the AMCs can shop for the least experienced appraisers and pay them $275-310 for a full appriasal, charge the consumer $475, keep the difference and say nothing to anyone about it. If I was the consumer, I’d be outraged that I paid $475 for a $300 product. I agree, it is sad that Mortgage Brokers cannot order directly – but fraud protection has to start somewhere and if Mr Mortgage Broker and Mr Appraiser are working together to make any deal work (even if there is no market support at all for the appraised value made ONLY to support a loan process), then the housing debacle will never end. Is it the right frst step? I guess time will tell… but at least FHA had some (if only a little) wisdom to recognise the predatory behavior of the AMC industry. There is now a puch to try to get a system-wide reform among Fannie and Freddie to include similar fee disclosure to the consumer – so, what FHA did may help the whole industry “enchilada”.
Michael, how will the banks/lenders implement this?
Banks can set up a separate appraisal ordering department and maintain a list of approved appraisers without the use of a third party / AMC – the same goes for mortgage bankers and correspondent lenders; in those cases, an AMC is not involved, so no fee disclosure necessary. Mortgage brokers would have to use an AMC or appraisal ordering platform (typically the lender they are brokering to will dictate they use the bank’s AMC system). As far as the fee disclosures go, I think it would be a simple disclosure (like on the HUD1 statement) that breaks down all fees and shows what the appraiser was paid and what the AMC was paid (if an AMC is involved). It would be (I suppose) up to the AMC to disclose the fees to the lender – You bring up a good point, Rhonda, because AMC’s are currently unregulated and can operate however they wish – Loan Originators, Appraisers, and Real Estate Agents are all regulated and require licensing and education – but the AMC is not regulated and can operate from out of state / country and can be operated by uneducated people (not saying they are). I think then, the lender would have to “police” the system a bit to be sure the fees being paid to the appraiser are indeed “fair and customary” for the area and to be sure the AMC fee includes only fees tied to the appraisal (eliminating the “bundled” service like title, flood, appraisal, etc). Let’s remember: the HVCC was written as a code of conduct for lenders (not appraisers or agents); appraisers only need to adhere to the Uniform Standards of Professional Appraisal Practice (USPAP). The HVCC has appraisal implications (in the form of the rising AMC), but does not contain any new rules for appraisers to follow – simply put, it is up to the lender to be sure each loan process is compliant with the HVCC (and/or FHA).
Michael:
Universal disclosure may help get more dollars to the appraiser, and less to the AMCs. That would be a good thing, and I would support that.
But why would you assume Mr Mortgage Broker is colluding with Mr Appraiser? I never have, and I haven’t met anyone yet who has. I’m not suggesting it has never happened, in fact I’m sure that it has somewhere.
Why not assume Mr Banker is colluding with Mr Appraiser, since they both have incentive to complete the deal? That WAS what happened according to Mr Cuomo, with WAMU and their AMC.
These days it is rare that an appraisal isn’t reviewed by the lender’s appraisal review dept., well before it gets to approval. Pushing value doesn’t work. Appraisers know it, LO’s know it, and for the most part, borrowers now know it.
All that HVCC does is tilt the playing field to the advantage of the banks, and away from the borrower, the broker and the appraiser.
Now, they are doing the same to FHA appraisals. They adopted the majority of HVCC, and changed a small piece.
I cannot see that as a good thing.
Michael:
Universal disclosure may help get more dollars to the appraiser, and less to the AMCs. That would be a good thing, and I would support that.
But why would you assume Mr Mortgage Broker is colluding with Mr Appraiser? I never have, and I haven’t met anyone yet who has. I’m not suggesting it has never happened, in fact I’m sure that it has somewhere.
Why not assume Mr Banker is colluding with Mr Appraiser, since they both have incentive to complete the deal? That WAS what happened according to Mr Cuomo, with WAMU and their AMC.
These days it is rare that an appraisal isn’t reviewed by the lender’s appraisal review dept., well before it gets to approval. Pushing value doesn’t work. Appraisers know it, LO’s know it, and for the most part, borrowers now know it.
All that HVCC does is tilt the playing field to the advantage of the banks, and away from the borrower, the broker and the appraiser.
Now, they are doing the same to FHA appraisals. They adopted the majority of HVCC, and changed a small piece.
I cannot see that as a good thing.
Rhonda:
Of course, I know politicians need to kiss up to bankers, and anyone else with wheelbarrows full of cash.
It’s just that I had higher expectations for the new administration…how naive of me…
Cynics rule the day again.
This is also why mortgage brokers are getting slapped around–lack of political power as compared to the bankers and NAR.
Rhonda and Roger,
I have a situation where a lender is denying the buyer’s loan because they can’t find a permit for an interior improvement that was done sometime in the past, prior to this seller’s ownership history. Is that something new?
Ardell, I just had this (permits for work done in the past) come up on a refi. First time ever in the 9+ years I’ve been a mortgage originator. I’m told that the lender I’m sending the loan to considers this a “red flag”. I’m lucky the homeowner had his documentation.
Can the seller contact the city to obtain copies of the permit?
Appraiser noted there were no permits on file. I don’t even know if the work required a permit at the time it was done…and don’t know when it was done by one of the previous owners. This can’t mean no one can ever sell it….
If the property is in Seattle try this link:
http://web1.seattle.gov/DPD/permitstatus/
If there were permits, you should be able to find it there… best of luck. (if not in Seattle – let me know I have soime other tracking sites up my sleeve) 🙂
Roger,
“Why not assume Mr Banker is colluding with Mr Appraiser, since they both have incentive to complete the deal?”
WRONG! an appraiser never has incentive to “complete a deal” – the appraiser provides an UNBIASED profesisonal opinion of value and the fee collected for an appraisal has NEVER been contingent upon a loan closing or a deal being “completed”.
“why would you assume Mr Mortgage Broker is colluding with Mr Appraiser?”
I am glad to hear you haven’t – I never have either, but this is the main reason for the language included in the HVCC that is meant to promote appraiser independence and help eliminate undue pressure on appraisers to hit a number or help “make a deal work”… I know of several instances where collusion has taken place (can’t name names, but I have seen it). Beleive it or not, there are some appraisers out there who are still trying to game the system and still talking to loan originators to try and hit a predetermined number and “make the deal work” – how do I know? Because when I review an appraisal is that so obviously pushed to the highest end of probable value (or above), there really is no other explanation in this this current market and lending climate (as you pointed out). There are plenty of small Mortgage Banker companies that still maintain a small list of appraisers that they have worked with over the past 15-20 years (or more)… Those relationships have not changed – in many cases an “ordering platform” is used (an online third party for ordering and delivering appraisals), but there is still nothing stopping a Loan Originator from calling the appraiser and pushing for a number – or – an appraiser from calling the Loan Originator and asking what the “magic number” is. There is still a “good old boy’s club” alive and well in the industry and these rules do nothing to change that.
The FHA only adopted a small portion of the language used in the HVCC: the part that excludes Mortgage Brokers from ordering an appraisal directly. The FHA added new language that clears up the “capped appraisal fee” problems not addressed in the HVCC. And, the FHA clarified that lenders do not have to use an AMC or third party ordering system, a myth that was perpetuated by the big banks who own and force Mortgage Brokers and other loan originators (inlcuding correspondent lenders) to use their AMC that acts as an additional revenue center within the bank while squeezing appraisal fees smaller and rewarding thise who are cheapest and quickest (and more often than not less experienced).
I am not saying all of this is good or bad, but I do believe the system had been broken for years – so, at the very least it is an attempt to clean up the system and bring more safeguards into the mix…. good or bad – better get used to it. It is not going away, especially now that FHA had chosen a similar stance as the HVCC. I do like the fact that these changes are supporting independent valuation, free of pressure (or at least in theory).
I agree that the administration should have taken a good long look at the HVCC once Fanie and Freddie went into conservatorship of the US Government (prevously they were GSE’s – government sponsored entities). You’d think that the administration would have at least studied the agreement (HVCC) and recognized some unintended consequences and then made meaningful changes once they took over Fannie and Freddie… I wish they would have. I am still hopeful of system-wide reform among Fannie and Freddie to include similar fee disclosure to the consumer as FHA has so clearly laid out.
Roger,
“Why not assume Mr Banker is colluding with Mr Appraiser, since they both have incentive to complete the deal?”
WRONG! an appraiser never has incentive to “complete a deal” – the appraiser provides an UNBIASED profesisonal opinion of value and the fee collected for an appraisal has NEVER been contingent upon a loan closing or a deal being “completed”.
“why would you assume Mr Mortgage Broker is colluding with Mr Appraiser?”
I am glad to hear you haven’t – I never have either, but this is the main reason for the language included in the HVCC that is meant to promote appraiser independence and help eliminate undue pressure on appraisers to hit a number or help “make a deal work”… I know of several instances where collusion has taken place (can’t name names, but I have seen it). Beleive it or not, there are some appraisers out there who are still trying to game the system and still talking to loan originators to try and hit a predetermined number and “make the deal work” – how do I know? Because when I review an appraisal is that so obviously pushed to the highest end of probable value (or above), there really is no other explanation in this this current market and lending climate (as you pointed out). There are plenty of small Mortgage Banker companies that still maintain a small list of appraisers that they have worked with over the past 15-20 years (or more)… Those relationships have not changed – in many cases an “ordering platform” is used (an online third party for ordering and delivering appraisals), but there is still nothing stopping a Loan Originator from calling the appraiser and pushing for a number – or – an appraiser from calling the Loan Originator and asking what the “magic number” is. There is still a “good old boy’s club” alive and well in the industry and these rules do nothing to change that.
The FHA only adopted a small portion of the language used in the HVCC: the part that excludes Mortgage Brokers from ordering an appraisal directly. The FHA added new language that clears up the “capped appraisal fee” problems not addressed in the HVCC. And, the FHA clarified that lenders do not have to use an AMC or third party ordering system, a myth that was perpetuated by the big banks who own and force Mortgage Brokers and other loan originators (inlcuding correspondent lenders) to use their AMC that acts as an additional revenue center within the bank while squeezing appraisal fees smaller and rewarding thise who are cheapest and quickest (and more often than not less experienced).
I am not saying all of this is good or bad, but I do believe the system had been broken for years – so, at the very least it is an attempt to clean up the system and bring more safeguards into the mix…. good or bad – better get used to it. It is not going away, especially now that FHA had chosen a similar stance as the HVCC. I do like the fact that these changes are supporting independent valuation, free of pressure (or at least in theory).
I agree that the administration should have taken a good long look at the HVCC once Fanie and Freddie went into conservatorship of the US Government (prevously they were GSE’s – government sponsored entities). You’d think that the administration would have at least studied the agreement (HVCC) and recognized some unintended consequences and then made meaningful changes once they took over Fannie and Freddie… I wish they would have. I am still hopeful of system-wide reform among Fannie and Freddie to include similar fee disclosure to the consumer as FHA has so clearly laid out.
How it “should be” is that the consumer should be able to chose their own appraiser and take their appraisal to any lender they choose. Period. HVCC solved!
And the consumer can ask his/her brother, the appraiser, to come out and do it.. or the consumer can tell the appraiser of choice that the value has to come in at “x amount”… like there is no conflict of interest there? The lending industry would never go for that…. nice thought though.
Good points… I thought my idea was too simple! 🙁
Too All,
Yet again people always have to point a finger…I can sum this all up in a few sentences. It is a lenders responsibilty to determine if there is sufficent collateral in place to lend. I do not care who does the appraisal it is my responsibilty as I am lending “my money” to determine if the appraisal itself is fair. There are more than enough tools to determine the ligitimacy of any appraisal in any area in the continetall United States. All this does is give certain lenders who do not pay any attention to their third party origination and in my opinion should not even have the ability to accept TPO’s because of shear incompitance and stupidity more control in a volutile market. In all honesty it creates more room for couersion. I am Mr Lender I have my approved appraisers I want all my approved appraisers to denote a 5-10% decrease on all evaluations so that I know for a fact that my money is safe, becasue I am a moron and have no idea what true market value is. We must keep in mind the housing crisis has nothing to do with appraisal couersion. The problem is simple there was not and there is still not any regulation of the rating system in the bond market.
Matt,
“I am Mr Lender I have my approved appraisers I want all my approved appraisers to denote a 5-10% decrease on all evaluations so that I know for a fact that my money is safe”
I understand your desire to play it safe, but telling your appraisers to come in 5-10% low is considered “undue influence” on the appraiser. If you are indeed “Mr Lender”, then you can make your own banking rules to loan 5-10% less as an internal safeguard. Influencing an appraiser’s value (whether high or low) is considered coercion / undue influence. Your method of devaluation could be seen as harming the consumer.
I agree that the use of Third Party Organizations (TPOs) does not guarantee that there will not be coercion or fraud involved in the process.
I don’t believe anyone on any of the threads of this post has taken the stance that appraiser-lender coercion is the one and only reason for the housing crisis; I think we all recognise that there were many factors that contributed and recognize lender-appraiser coercion played a role (as evidenced by the Cuomo investigation that uncovered such activity). The fact is – it happended, this is where we are, and we would all like to turn the housing crisis around and see it recover sooner rather than later. We are all simply hoping the new rules don’t cause more harm than good.
Michael:
Thanks for the research. I agree with most of your points.
However, there must have been some incentive for appraisers to collude with banks, or it wouldn’t have been made the focal point of the triggering of HVCC (E Appraise it and WAMU). THe incentive could have been as simple as continuing to get business from WAMU.
Your response made me do what I should have done in the first place…read the darn thing! I am humbly corrected…, no excuses professor. J
OK, here’s my “somewhat
Great dialogue, Roger – thanks… 🙂
” incentive could have been as simple as continuing to get business” – BULLSEYE! That is exactly the incentive that existed – and, yes, many LO’s were playing that card… another incentive was just to simply get paid – some LO’s and processors would take forever to close a loan and wait until a loan funded to pay the appraiser; this resulted in the LO’s/processors
“There is no safeguards for LO, lenders and borrowers when an appraiser is wrong.” – the lender typically has a review department and/or orders an appraisal review with another appraiser if the appraisal is suspect. Also, many of the banks now have a “valuation rebuttal” process that the borrower can fill out to try to get an appraisal revision… I also find it interesting to say “when an appraiser is wrong” – an appraisal is nothing more than an opinion – is there a right or wrong opinion?
some big banks still order apraisals directly with their approved appraisers, especially when it is a difficult appraisal assignment or a “rush” appraisal request… few and far in between, but there are some.
“On refis, LO’s can no longer suggest what the borrower opinion of value might be” – true. Even though “value checks” are forbidden, the Appraisal Institute has made it clear that (following copied frm AI): ‘Lenders may engage appraisers in appraisal assignments that involve a scope of work that is significantly narrow. For example, the appraiser could provide an answer to the question “is the property worth at least $XX
Roger,
Regarding “appraisal portability” – yes, the FHA did address this as well in Mortgagee Letter 09-29: “In cases where a borrower has switched lenders, the first lender must, at the borrower’s request, transfer the case to the second lender. FHA does not require that the client name on the appraisal be changed when it is transferred to another lender.” Full doc can be found here: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-29ml.doc
All in all, the FHA has done more to safeguard the whole process (lenders, appraisers, and consumers) than the HVCC – and is better suited to regulate the process as well (the HVCC still has not implemented the Independent Valuation Protection Agency – recently announced to be implemented in November 2009).
One more point, Roger,
re: AMCs – “Efficiency will rule the day” (??) If you talk to any of the LO’s that are currently forced to use any of the AMCs owned by the (5-7) biggest banks, I’d bet my arssse that they will say “efficient” is NOT part of the equation. In fact, many are complaining that the fees are higher than “normal and customary” and that the time-line is longer than “normal” too. I recently spoke with a buyer who had an income property appraisal done about a week prior to his recent purchase – he said the appraiser (working for a big bank-owned AMC) took a week and a half to come out to his property…. There is no guarantee of efficient just because an AMC is involved. In fact, the AMC system sometimes takes much longer just to engage an apraiser willing to do the job for 1/3 less than “standard and customary”, so days are lost while the AMC “shops around” for the cheapest deal.
Hey i was reading your comments about the new regulations for FHA’s. I have to due a report for my real estate class at the university of wisconsin-whitewater about the new HVCC regulations that were enacted this past spring and i was wondering if someone could supply me with some good resources about this matter. I have been hearing from both sides about this issues and i would like to make sense of this topic for my class.
Jared, You can go to the Appraisal Institute’s web site for numerous HVCC and FHA issues impacting the market. Go Packers.
Thanks for the clarifications Michael, forums like this are doing exactly what is needed…furthering education and understanding. Remarkable lack of shouting at RCG….
Missed that part about portability, that is good news, adding the word MUST is a key element.
Regarding efficiency…I am NOT arguing that AMC’s are efficient, quite the opposite. However, it IS efficient for a bank/mortgage bank/lender to have ONE process and department, rather than multiple processes. If ALL FMA and FMC loans are going thru the captive AMC, or AMC-like entity, then it is more efficient for a bank to force the lower volume of FHA through the same process.
Thanks for engaging…we are both the wiser for the effort!
Good luck with your paper Jared…
Perfect, the final nail driven into the coffin. Prior to the full burial of the appraisal industry being a respectfull and well paid profession. The group of individuals who bare the the greatest percentage of responsibility for the mortgage crisis are being rewarded handsomely.
I went from owning a well respected appraisal company that serviced 5 counties with a great staff of well trained licensed appraisers who were experts in thier areas to letting all my people go, doing BPO’s for realtors, an occasional FHA file or an under paid order from an amc ($125-$175).
Perhaps I should have considered a career in banking rather than r.e. appraisal. Matters could not be worse for our industry. In my full year of experience with multiple amc’s, they push value just like mortgage brokers and when you don’t comply they stop sending work and cancel your check after you’ve completed the work.
I’ve done my best to stay ethical and honest but in my experience as an appraiser it just doesn’t pay, pre or post hvcc. Perhaps the appraisers who typed up false reports, pushed value, took on 10-15 unlicensed trainees (pyramid scheme style), broke all the rules, made a killing, took the money and ran were wiser than all of us who do things right thought.
Because in the end they were just following the banking industry’s lead and at this point, what’s the difference….the noose is tightening with equal force despite your ethical diposition.
Perhaps, I will look into becoming New York State’s next attorney general. Law school here I come.
Perfect, the final nail driven into the coffin. Prior to the full burial of the appraisal industry being a respectfull and well paid profession. The group of individuals who bare the the greatest percentage of responsibility for the mortgage crisis are being rewarded handsomely.
I went from owning a well respected appraisal company that serviced 5 counties with a great staff of well trained licensed appraisers who were experts in thier areas to letting all my people go, doing BPO’s for realtors, an occasional FHA file or an under paid order from an amc ($125-$175).
Perhaps I should have considered a career in banking rather than r.e. appraisal. Matters could not be worse for our industry. In my full year of experience with multiple amc’s, they push value just like mortgage brokers and when you don’t comply they stop sending work and cancel your check after you’ve completed the work.
I’ve done my best to stay ethical and honest but in my experience as an appraiser it just doesn’t pay, pre or post hvcc. Perhaps the appraisers who typed up false reports, pushed value, took on 10-15 unlicensed trainees (pyramid scheme style), broke all the rules, made a killing, took the money and ran were wiser than all of us who do things right thought.
Because in the end they were just following the banking industry’s lead and at this point, what’s the difference….the noose is tightening with equal force despite your ethical diposition.
Perhaps, I will look into becoming New York State’s next attorney general. Law school here I come.
Rhonda/Michael/John – very good discussion.
Although I would argue that some small correspondent lenders have partnered with AMCs that are not running business the same way as the big guys. I run a small AMC for a correspondent lender. The additional fee to the consumer is about $75-100 on average. I don’t just “deliver” an appraisal…because I sure the heck would love that. Try managing 500-600 appraisal orders a month and you’ll realize that. I don’t think what I do is worth more than that to the consumer, but 75% of that is pure business expenses (merchant accounts, tech fees, taxes, licenses, insurances, data, etc.).
I personally think FHA’s guidelines are a step in the right direction to eliminate what is wrong with HVCC. Additional ideas I have:
Nationalized regulation of AMC needs to occur. The lenders licensed in each state would be required to use a Certified National AMC. The fee needs to be reasonable enough to allow for the small co-op or regional AMCs to survive. When you operate fairly and right…there’s about $10 profit to play with…too high of fees for regulation then you end up with only the “big guys” being able to play
No lender should be allowed to have a financial interest in an AMC. It should be an independent third party company.
All AMCs should have a Certified Appraiser as a member of a minimum management level staff, ideally ownership. There should be a minimum level of experience required also.
ALL AMCs should have a level of insurance and bond.
The portability is hard to solve because of USPAP and the confidentiality. I don’t have a good answer for that.
The IVPI or HUD needs a governing body for this and now. There should be no company too big or too small to be punished for egregious issues.
If I was queen for a day, all appraisals would be $400 MINIMUM…to start 🙂 And the borrowers would quit thinking that the appraiser is “ripping them off” for charging to go to their house again for the 3rd time.
HVCC has worked in the last 5 months. I’ve seen deals that in the “good ole days” would have gone through and Fannie/Freddie would have been left with an asset worth zero. But, now the appraisers can finally appraise. I’ve also seen it fail…and fail miserably. A lot of it was from a lot of miscommunication (IE it required AMCs to be used. NO IT DIDN’T. It’s just the AMC model for the regulation was a fit. Now we have to regulate the regulated fit…) or the fact that no one can talk to the appraiser – AGAIN, not true. I’ve had one person ask if the FBI would be after them for talking to the appraiser!
MORE education needs to go out. MORE needs to be done. FHA has made a step in the right direction. Personally, I believe they intended this to be what the wanted in the first place. They just allowed conventional to screw up royally so they know what not to do.
Mortgage Originated appraisals are gone. They are not coming back until probably 10 years when we decide to swing the other way. In the meantime we need to all move forward and work on getting the system back. We don’t have time not to start working together.
I’m seeing appraisers that have 10, 15, 20 years experience leaving this business in disgust. A good majority of the appraisers trained since about 1999…they are NOT what we training the next generation. If we don’t stop the destruction of the appraisal industry today, 2008 will look like a good year. We need the appraisers who learned how to APPRAISE (not just fill out a form with a value in front of them) to start training again.
Just some of my thoughts. I’m finally done with my day and it starts again about 6 tomorrow. Again, I thank you for your dialogue. It’s nice to see some constructive communication occuring somewhere. We’ve all whined about this long enough…what is…is…so let’s see how we can fix it and make it work and hopefully avoid a future crisis.
Rhonda/Michael/John – very good discussion.
Although I would argue that some small correspondent lenders have partnered with AMCs that are not running business the same way as the big guys. I run a small AMC for a correspondent lender. The additional fee to the consumer is about $75-100 on average. I don’t just “deliver” an appraisal…because I sure the heck would love that. Try managing 500-600 appraisal orders a month and you’ll realize that. I don’t think what I do is worth more than that to the consumer, but 75% of that is pure business expenses (merchant accounts, tech fees, taxes, licenses, insurances, data, etc.).
I personally think FHA’s guidelines are a step in the right direction to eliminate what is wrong with HVCC. Additional ideas I have:
Nationalized regulation of AMC needs to occur. The lenders licensed in each state would be required to use a Certified National AMC. The fee needs to be reasonable enough to allow for the small co-op or regional AMCs to survive. When you operate fairly and right…there’s about $10 profit to play with…too high of fees for regulation then you end up with only the “big guys” being able to play
No lender should be allowed to have a financial interest in an AMC. It should be an independent third party company.
All AMCs should have a Certified Appraiser as a member of a minimum management level staff, ideally ownership. There should be a minimum level of experience required also.
ALL AMCs should have a level of insurance and bond.
The portability is hard to solve because of USPAP and the confidentiality. I don’t have a good answer for that.
The IVPI or HUD needs a governing body for this and now. There should be no company too big or too small to be punished for egregious issues.
If I was queen for a day, all appraisals would be $400 MINIMUM…to start 🙂 And the borrowers would quit thinking that the appraiser is “ripping them off” for charging to go to their house again for the 3rd time.
HVCC has worked in the last 5 months. I’ve seen deals that in the “good ole days” would have gone through and Fannie/Freddie would have been left with an asset worth zero. But, now the appraisers can finally appraise. I’ve also seen it fail…and fail miserably. A lot of it was from a lot of miscommunication (IE it required AMCs to be used. NO IT DIDN’T. It’s just the AMC model for the regulation was a fit. Now we have to regulate the regulated fit…) or the fact that no one can talk to the appraiser – AGAIN, not true. I’ve had one person ask if the FBI would be after them for talking to the appraiser!
MORE education needs to go out. MORE needs to be done. FHA has made a step in the right direction. Personally, I believe they intended this to be what the wanted in the first place. They just allowed conventional to screw up royally so they know what not to do.
Mortgage Originated appraisals are gone. They are not coming back until probably 10 years when we decide to swing the other way. In the meantime we need to all move forward and work on getting the system back. We don’t have time not to start working together.
I’m seeing appraisers that have 10, 15, 20 years experience leaving this business in disgust. A good majority of the appraisers trained since about 1999…they are NOT what we training the next generation. If we don’t stop the destruction of the appraisal industry today, 2008 will look like a good year. We need the appraisers who learned how to APPRAISE (not just fill out a form with a value in front of them) to start training again.
Just some of my thoughts. I’m finally done with my day and it starts again about 6 tomorrow. Again, I thank you for your dialogue. It’s nice to see some constructive communication occuring somewhere. We’ve all whined about this long enough…what is…is…so let’s see how we can fix it and make it work and hopefully avoid a future crisis.
Well, the rants have all been delightful. Now for some real world experience. I’m in my early 50’s and have been appraising for over 20 years and in Real Estate for over 25 years. In the past 15 years since I started my own business I have performed appraisals for over 500 clients. Over the last 3 years due to the meltdown in the economy and lender contraction I have seen a steady client base of approximately 30 clients at any given time shrink to approximately 10 pre HVCC all full fee clients where I prided myself (and staff) on very quick turn times and extremely high quality reports. Additionally, not to forget, the appraisal fees were paid at the time of inspection.
Before, as an appraiser if you were getting pressure you could deflect it very easily. There was business coming in from all sides. In fact I have even fired clients due to the lack of ethics on their part and no longer accepted their business.
Along comes HVCC. My client base has shrunk to next to nothing, can barely pay the bills and the AMC’s expect me to work for nothing! Here is a scenario. Joe appraiser can barely make a living working for the AMC’s and when they due pay it is at least 30 days after the appraisal is delivered. Hmmmm, let me see, I certainly CAN NOT let this deal go south because I now have to wait over 30 days to get paid. But wait, I may not get paid or I will not get any more business (nothing different than the way it was before only worse with AMC’s) because I have no clients & I will surely go bankrupt and my spouse and kids will end up on the street. So Joe/Josephine says to him/herself, I will have to due some investigating when I talk to the home owner. Homeowner tells Joe what is needed “to make the deal work
Well, the rants have all been delightful. Now for some real world experience. I’m in my early 50’s and have been appraising for over 20 years and in Real Estate for over 25 years. In the past 15 years since I started my own business I have performed appraisals for over 500 clients. Over the last 3 years due to the meltdown in the economy and lender contraction I have seen a steady client base of approximately 30 clients at any given time shrink to approximately 10 pre HVCC all full fee clients where I prided myself (and staff) on very quick turn times and extremely high quality reports. Additionally, not to forget, the appraisal fees were paid at the time of inspection.
Before, as an appraiser if you were getting pressure you could deflect it very easily. There was business coming in from all sides. In fact I have even fired clients due to the lack of ethics on their part and no longer accepted their business.
Along comes HVCC. My client base has shrunk to next to nothing, can barely pay the bills and the AMC’s expect me to work for nothing! Here is a scenario. Joe appraiser can barely make a living working for the AMC’s and when they due pay it is at least 30 days after the appraisal is delivered. Hmmmm, let me see, I certainly CAN NOT let this deal go south because I now have to wait over 30 days to get paid. But wait, I may not get paid or I will not get any more business (nothing different than the way it was before only worse with AMC’s) because I have no clients & I will surely go bankrupt and my spouse and kids will end up on the street. So Joe/Josephine says to him/herself, I will have to due some investigating when I talk to the home owner. Homeowner tells Joe what is needed “to make the deal work
Bill you hit the nail on the head.
HVCC = Appraisal Profession handed to the cheapest newest and most incompetent appraisers = Double Dip Recession
Bill you hit the nail on the head.
HVCC = Appraisal Profession handed to the cheapest newest and most incompetent appraisers = Double Dip Recession
I understand that as the mortgage banker and loan originator I cannot specifically choose, nor directly pay the appraiser of my choice- even if they are on t the “list
So as long as a Mortgage Bankers office has a separate department for ordering appraisals or use a delivery platform / AMC to handle ordering and delivery. We’ve all whined about this long enough…what is…is…so let’s see how we can fix it and make it work and hopefully avoid a future crisis.
The HVCC in all forms is disastrous to the real estate industry. It’s very simple folks, regulation in this form means LESS ACTIVITY! So far, ever since the HVCC in May 2009, that’s exactly what has happened, LESS ACTIVITY! The HVCC needs to be abolished, not modified or tweaked!
Can everyone (except those who have at least 1 ounce of economic knowledge) please open up a book on basic economics and see for yourself why this abomination (HVCC) must be burned, every last page and never be brought back to life.
On February 15, 2010, FHA will hammer the last nail in the real estate coffin.
Luis, I’m not at all a fan of HVCC and I’m disappointed to see anything like it creep into FHA loans…but it is. I do NOT think it’s the “last nail” in the real estate coffin. It’s another bump in the real estate road.
As part of an “AMC”, I feel that so many fingers are pointed in the wrong direction. Our company provides a very important service to our clients – we hand-review every appraisal to check for errors (and there are plenty- from small typos to appraisers valuing the completely wrong property). We use mostly certified appraisers, and have a system in place to monitor whether they provide quality reports or garbage reports. I understand that pass-through AMC’s – who just act as a middle-man and have no concern about quality – should not be collecting up to 50% of a fee for doing nothing. Our company takes a much lower percentage, but works hard for both the client and the appraiser. Don’t get me wrong – I think appraisers deserve to be paid well; however, HVCC is not the monster everyone makes it out to be. I save my appraisers hours and hours of their time by acting as a liason between the lender and the appraiser. I think we should be fighting against BPO’s – these are ultimately going to be the downfall of the appraiser field.
Liz, what percentage of the appraiser’s fee does your company collect? Would you elaborate about the BPO’s and what’s wrong with them? Thanks for your comment!
The AMC model should not rely on taking any of the appraiser’s fee. The HVCC was NOT written for appraisers – appraisers only need to adhere to USPAP; the HVCC was written for the lending industry. I find it absurd that the typical AMC business model relies on taking a portion of an appraiser’s fee for an assignment. Instead, the lender should be the one to pay the AMC fee, if they find it necessary to use one to be compliant with HVCC (lenders that lend their own money need not use an AMC – also, correspondent lenders are not required to use an AMC). Appraisers have had (for years) to pay for several data services, certification renewal, mandatory continuing education, MLS dues, error and omission insurance, and typical operating expenses as a business… it is insane that the (so far) accepted AMC model pulls one more fee from the appraiser. It seems to me that the lender should pay the AMC fee, since that is the entity that is trying to remain HVCC compliant. I am an appraiser and I work with a few AMCs; most of the ones I work with do not take ANY of my fee. That is the way it should be. I agree that BPOs need to be stopped.
Michael, I think HVCC and the windfall AMC’s is crazy. If an appraiser wants to do an appraisal for a lender who is required to abide by HVCC, then the appraiser will have to do the same.
You’re correct about correspondent lenders–we’ve taken that approach and while I’m thankful that I don’t have to go through an AMC for my appraisal, I still do not know who the appraiser will be on my transactions until I have it back in my hot little hands.
The industry has been punished for what WaMU and eAppraiseIt (a bank and a large title company owned AMC) did. And now thanks to HVCC, what we have in most cases are the banks controlling appraisers via AMCs… how ironic.
Hi Rhonda,
“If an appraiser wants to do an appraisal for a lender who is required to abide by HVCC, then the appraiser will have to do the same.”
The HVCC is not written for appraisers = it is a code of conduct for lenders. The only document an appraiser is required to follow is the Uniform Standards of Professional Appraisal Practice, which already has a “code of conduct” for appraisers. There is nothing in the HVCC that requires an appraiser to do anything other than abide by USPAP…. It is the lender’s burden to ensure the process complies to HVCC, not the appraiser’s.
Per The Appraisal Institute: “The responsibility to ensure compliance with the HVCC for all loans intended for sale to Fannie Mae or Freddie Mac rests with the lender (Section VIII of the HVCC). There is nothing in the HVCC that requires appraisers to take any “pre-engagement
Michael, I totally understand your point–my point is that if lenders are bound by HVCC and the appraiser does not meet those guidelines (or the overlays of the lender/bank), the lender cannot work with that appraiser.
Hi Rhonda,
As long as an appraiser is complying with USPAP, there is no problem. The HVCC does not add any new guidelines or requirements for appraisers.
right–not for appraisers–it does to those of us who order them. If I wanted to select you for my clients appraisal–I could not.
That is true – however, a lender and/or correspondent lender can still establish and maintain a list of “approved” appraisers to work with. Also, many AMCs also have a list of approved appraisers to work with.
Thanks for making my point that the HVCC is a document of rules for lenders / loan originators – not for appraisers. Sure, it has some appraisal implications (such as prohibiting direct engagement by loan production staff or anyone that is compensated by commission of loan closing), but that does not mean that an appraiser shuld bear the cost of the AMC service a lender chooses to use. I just find it absurd that the AMC business model relies on taking money from the aprpaiser, rather than owning up to the fact that it is the lender who needs the AMC to remain HVCC compliant in the process and, therefore, the lender should bear the cost of the AMC service. In either case, it comes dwn to the borrower having to pay for it all – and that isn’t right either (in my opinion).
Bravo Michael…
Eloquently put! It is apparent some folks here have not been in the industry for as long as others. For decades the appraisers have been complaining about lender pressure and have (albeit not successfully or as one voice) been trying to get things changed. It is impossible to change anything on Capitol Hill when the Banking Lobby is the largest lobby and the pockets are soooo deep it is disgusting our elected officials (well, we won’t go there).
For as I said decades, the banks have had the laws written to benefit themselves. They put themselves in the mess and they dragged down the rest of our Country with them! The disgusting thing is they were the ones that got bailed out by the tax payers. They (banks) always have to blame someone else for the problems they created. This time it is the poor mortgage broker. In the 80’s it was the appraiser. I am so glad to finally see someone on Capital Hill at least trying to hold some feet over the fire. The CEO of Goldman took a grilling last week on the STUPID loan instruments they thought up, borrowers did a breath test and as long as the fat cats were making money damn the torpedo’s full steam ahead!
So in closing, the banks have had the laws written to benefit themselves and where we are now is just another chapter of their legal manipulation to bolster their bottom line at the expense of the consumer. Many AMC’s are owned by lenders (this was prior to HVCC). These stupid no appraisal products are again evidence of manipulation to raise their bottom line and ultimately harm the consumer. Leave valuations for a fee to the licensed/certified appraisers.
I hope you people who do BPO’s are aware, in many States an individual who infers/creates/agrees with or forwards (etc) a value, value range or any type of conclusion which involves a value are doing so illegally and could therefore, incur the penalties associated with such fraud. I don’t use the word lightly. Many States to bolster their “bottom line
well stated, Bill – Thanks!!
Bravo Michael…
Eloquently put! It is apparent some folks here have not been in the industry for as long as others. For decades the appraisers have been complaining about lender pressure and have (albeit not successfully or as one voice) been trying to get things changed. It is impossible to change anything on Capitol Hill when the Banking Lobby is the largest lobby and the pockets are soooo deep it is disgusting our elected officials (well, we won’t go there).
For as I said decades, the banks have had the laws written to benefit themselves. They put themselves in the mess and they dragged down the rest of our Country with them! The disgusting thing is they were the ones that got bailed out by the tax payers. They (banks) always have to blame someone else for the problems they created. This time it is the poor mortgage broker. In the 80’s it was the appraiser. I am so glad to finally see someone on Capital Hill at least trying to hold some feet over the fire. The CEO of Goldman took a grilling last week on the STUPID loan instruments they thought up, borrowers did a breath test and as long as the fat cats were making money damn the torpedo’s full steam ahead!
So in closing, the banks have had the laws written to benefit themselves and where we are now is just another chapter of their legal manipulation to bolster their bottom line at the expense of the consumer. Many AMC’s are owned by lenders (this was prior to HVCC). These stupid no appraisal products are again evidence of manipulation to raise their bottom line and ultimately harm the consumer. Leave valuations for a fee to the licensed/certified appraisers.
I hope you people who do BPO’s are aware, in many States an individual who infers/creates/agrees with or forwards (etc) a value, value range or any type of conclusion which involves a value are doing so illegally and could therefore, incur the penalties associated with such fraud. I don’t use the word lightly. Many States to bolster their “bottom line
Oh, BTW, did I miss something here? As written in the HVCC nowhere does it demand a lender use an AMC! As long as you have a W-2 employee that is not associated with the loan origination, commission etc, you can order appraisals in house. Again, most of the lenders either knee jerked or used this as an excuse to send ALL/MOST of their deals through the AMC in which they in one fashion or another OWN.
True! Thanks again, Bill. I found that some of those lenders who decided to go the AMC direction did so, in part, because the AMC was grouping several services to the lender (title, flood, appraisal, etc) at a discount to the lender if each service was out-sourced separately – all the while taking the appraiser’s fee to off set the cost…. there is new AMC regulation in a few states already – ours is in the process. If passed, the legislaiton will be similar to the FHA rules to be implemented in February that state that the AMC fees can only be related to the actaul appraisal management services, so those that are currently grouping services together will not be able to do so anymore.
Bill our company does not use an AMC (we’re correspondent). However I cannot order an appraisal since I’m a mortgage originator. We have a designated person (as you have described) who orders appraisals from our list of approved appraisers. I have no idea who it will be, who’s on rotation and/or who will accept the appraisal. And…I really miss working with the appraiser that I had a great relationship with for the past 10 years.
How do you and/or Michael interpret FHA’s mortgagee letter–we’ve been commenting on HVCC on tihs post–but the topic the post was originally addressing is FHA’s adoption of similar guidelines. Your thoughts?
I think we discussed this earlier (see posts from Oct 1st and 2nd above).
I see the FHA rules as an attempt to add a level of transparency to the process by making sure the appraiser is paid what is “customary and reasonable” and requiring that AMC fees can only be tied to actual appraisal related services. This is a good thing. I have over eleven years of appraisal experience and I can easily make a case for a “customary” and “reasonable” fee. Luckily, I do not work for any of the AMC’s that take 50% of the fee, so my fees are long established.
Of course, the down-side is that mortgage brokers will be excluded from directly engaging the appraiser – much like the HVCC.
BTW – I think I used to work in the same office as your appraiser for ten years… “S.J.” ring a bell?
I’m not sure if I’ve stated anywhere that HUD has delayed this guideline until February 15, 2010:
Enactment of ML 2009-28, Appraiser Independence, will be delayed until February 15, 2010. ML09-28 (originally planned for a January 1, 2010 implementation) has two parts: a) prohibition of mortgage brokers and commission-based lender staff from the appraisal process, and b) appraiser selection in FHA Connection. The effective date for both sections of this guidance will now take effect for all case numbers assigned on or after February 15, 2010. This extension will provide FHA and lenders additional time to adjust systems to accommodate the changes.
Detailed instructions on changes to FHA Connection will be issued in a new mortgagee letter. However, lenders should be aware that the requirement for inputting the appraiser ID and the appraisal assignment date in the FHA Connection case number assignment screen will be removed. Instead, lenders will be required to enter all appraisal data, including the appraiser ID, in the Appraisal Update Screen once the completed appraisal is received by the lender and prior to closing the loan.
I must be crazy to try writing and keeping up with the current climate of ever-changing mortgage guidelines.
I’m not sure if I’ve stated anywhere that HUD has delayed this guideline until February 15, 2010:
Enactment of ML 2009-28, Appraiser Independence, will be delayed until February 15, 2010. ML09-28 (originally planned for a January 1, 2010 implementation) has two parts: a) prohibition of mortgage brokers and commission-based lender staff from the appraisal process, and b) appraiser selection in FHA Connection. The effective date for both sections of this guidance will now take effect for all case numbers assigned on or after February 15, 2010. This extension will provide FHA and lenders additional time to adjust systems to accommodate the changes.
Detailed instructions on changes to FHA Connection will be issued in a new mortgagee letter. However, lenders should be aware that the requirement for inputting the appraiser ID and the appraisal assignment date in the FHA Connection case number assignment screen will be removed. Instead, lenders will be required to enter all appraisal data, including the appraiser ID, in the Appraisal Update Screen once the completed appraisal is received by the lender and prior to closing the loan.
I must be crazy to try writing and keeping up with the current climate of ever-changing mortgage guidelines.
True, delayed until the 15th of February. The FHA deal is the same. As long as a W-2 employee not associated with the loan origination and process orders the appraisal, everything is fine.
I will say, a number of lenders prior to HVCC had a pocket full of appraisers they were familiar with and used that they now rotate to keep HVCC compliant via a couple of different small AMC’s.
I also found out that FHA has recently clarified that the appraiser is not to begin work on an FHA appraisal assignment until after the case number is assigned to the appraiser. This is different from in previous years when FHA would alow the appraiser to complete the file, but not deliver until the case number is assigned and added to the appraisal. This clarification makes it a good practice to be sure the effective date of the appraisal is not prior to the date of the FHA case number being assigned. This also makes it tough for those “rush” assignments where we would typically try to get going on it as soon as possible, even if the case number had not been assigned – FHA lenders will now have to get the FHA case number assigned before engaging the appraiser.
True, delayed until the 15th of February. The FHA deal is the same. As long as a W-2 employee not associated with the loan origination and process orders the appraisal, everything is fine.
I will say, a number of lenders prior to HVCC had a pocket full of appraisers they were familiar with and used that they now rotate to keep HVCC compliant via a couple of different small AMC’s.
I have been seeing this for about the last 6 months. Also it only makes sense to make sure the appraiser is eligible to do the report in the first place.
Additionally, when a report is done CV and then changed to FHA, the effective date needs to be changed meaning the appraiser has to go back out with his FHA hat on. 🙂
Yes! and make sure to do at least a “head and shoulder” inspection of the attic. Bring that ladder with you! 🙂
Is there any rule that mandates the borrower MUST pay for the appraisal on a “no-cost” re-finance?
My broker says he will refund the appraisal fee upon loan closing. But, if my loan doesn’t close (maybe appraisal is too low), will the broker refund me the appraisal cost, or am I just out of luck and actually experienced a “not-so-NO cost” re-finance application?….
Note: my refi loan app is for +$1M so I was told the appraisal would cost me $900! I’m not looking forward to spending $900 if the refi doesn’t come through.
Please advise. Can/Do I negotiate some sort of appraisal fee refund if loan deal dies…
Jenny, the appraisal fee is a third party “hard” cost and if your loan does not close, the appraisal will need to be paid. Once the work is complete, it needs to be paid.
I warn my clients upfront that with a refinance, worse case scenario, they may be out the appraisal fee if the transaction does not close and the appraisal has been performed.
Typically, the mortgage originator is only paid if the transaction closes so they would not be able to pay for that cost.
It’s not uncommon to have appraisal fees higher for high cost homes too… I don’t agree with it unless more work is being done than on a standard appraisal…but it is what it is.
Do you have an idea of what your home will appraise for? It’s not going to be based on what your home is worth to you–it’s going to be based on what your neighbors have recently sold and closed their homes for.
A “no cost” refinance means that rebate pricing was used to pay for the closing costs–there are always closing cost.
Is there any rule that mandates the borrower MUST pay for the appraisal on a “no-cost” re-finance?
My broker says he will refund the appraisal fee upon loan closing. But, if my loan doesn’t close (maybe appraisal is too low), will the broker refund me the appraisal cost, or am I just out of luck and actually experienced a “not-so-NO cost” re-finance application?….
Note: my refi loan app is for +$1M so I was told the appraisal would cost me $900! I’m not looking forward to spending $900 if the refi doesn’t come through.
Please advise. Can/Do I negotiate some sort of appraisal fee refund if loan deal dies…
Jenny, the appraisal fee is a third party “hard” cost and if your loan does not close, the appraisal will need to be paid. Once the work is complete, it needs to be paid.
I warn my clients upfront that with a refinance, worse case scenario, they may be out the appraisal fee if the transaction does not close and the appraisal has been performed.
Typically, the mortgage originator is only paid if the transaction closes so they would not be able to pay for that cost.
It’s not uncommon to have appraisal fees higher for high cost homes too… I don’t agree with it unless more work is being done than on a standard appraisal…but it is what it is.
Do you have an idea of what your home will appraise for? It’s not going to be based on what your home is worth to you–it’s going to be based on what your neighbors have recently sold and closed their homes for.
A “no cost” refinance means that rebate pricing was used to pay for the closing costs–there are always closing cost.