100 Real Estate & Relocation Tips in 100 Days (Day 88)
Based on an agreement between the Federal Housing Finance Agency, the regulator of Fannie Mae/Freddie Mac, (the largest purchasers of conventional mortgage loans in the United States) and the New York Attorney General's Office, we now have the HVCC. Here are the ten things that any party associated with a home loan appraisal cannot do to influenced or direct the results of a mortgage appraisal:
- Withhold or threaten to withhold payment for an appraisal report (that seems fair and reasonable)
- Withhold or threaten to withhold future business for, or terminating or demoting and appraiser (fair again, no one should be intimated to produce anything)
- Offering express or implied future business or increased compensation (attempting to buy business is patently wrong, so we are OK with everything so far)
- Conditioning the order of an appraisal report or the payment of compensation based on a preliminary value estimate from an appraiser. ( This is the "you break it, you buy it philosophy", still a reasonable position)
- Requesting that an appraiser provide and estimated or desired valuation prior to the completion of an appraisal report, or requesting that an appraisal provide estimated values prior to the completion of an appraisal report. (obviously providing a desired value is wrong, and the second part leads to the potential of an improperly cozy relationship between an appraiser and a lender of Realtor)
- Providing to the appraiser an anticipated or desired value for a subject property, except that a copy of the sales contract may be provided. ( Ok-this one is a DUH- the contract is an agreement between the buyer and seller of value, it is the desire of both parties to obtain an appraisal equal to that agreed value, or be provided with demonstrated proof that their value judgment was incorrect. As far as the buyer and seller are concerned, that is the reason for the appraisal).
- Providing to an appraiser or appraisal Management Company, stock or other financial benefits beyond the stated and agreed compensation. (no problem here either, to offer stock or other benefits would be an inducement, which is already a RESPA violation)
- Listing or delisting an appraiser without notice and the requirement to provide evidence of misconduct in the event of delisting. (this could be extortion, a criminal act)
- Ordering a second, automated appraisal if you did not like the first one, unless there is clear evidence of flawed information. (In principal I agree with this also, except the presumption that an appraiser performs flawless work is silly on its face. The system is too broken today for abuses based on laziness and incompetence not to occur)
- In other act that impairs the appraisers ability to perform an independent valuation, including violations of Truth in Lending, Regulation Z, or any number of other state and Federal laws and regulations. (this is the catch basket clause, here just to cover anything not specified earlier)
The sum total of most of the HVCC is to take the real estate/mortgage industry back to pre-1990 conditions. Appraisers acted independently then, and I suspect that most appraisers have been acting independently since then. But silly, stupid money, bad actors, and the attendant political grandstanding have delivered this rather onerous Code of Conduct to the feet of the industry and the checkbook of the consumer. Yes, the cost of compliance, so that investors can be assured that no rules have been broken, will add to the cost of every appraisal and every loan, and increase loan processing time. In the minds of a few politicians, it is better to increase the cost of a home mortgage loan to every consumer than to prosecute the bad actors.
Be that as it may, this is the way it is, so as a buyer, be prepared to extend your closing time a few days, and expect to pay $100 to $200 more dollars to close your mortgage loan.