HVCC (Home Valuation Code of Conduct) is a work in progress. HVCC is the new legislation that went into effect on May 1^st, 2009 for the appraisal process which forbids loan originators (that’s fancy talk for loan officers) and loan processors from having any direct communication to the appraiser. The original intent of the program sounded good on paper. Unfortunately, the implementation of this program leaves much to be desired. Of course, this is coming at the worse time for our industry as real estate sales are extremely sluggish and credit is already tight.

When appraisals are ordered for a refinance, the loan amount and estimated value are not furnished to the appraiser. A contract is submitted to the appraiser for a purchase transaction. Appraisals are obtained from appraisal management companies which can potentially add extra expense to the cost and quality of an appraisal. For example, some appraisal management companies charge borrowers a flat fee, such as $400 and then pay the appraiser only $200. These appraisers were receiving $325 for the same work prior to HVCC and they may decide to opt out of certain appraisal management companies leaving behind less experienced appraisers that are willing to work for reduced fees plus the quality is potentially worse thanks to inexperience. Ultimately, the consumer suffers. The program is only a few weeks old and we are already experiencing delays and lower values than expected. A borrower can try to get a second appraisal if they are unhappy with the results, however the appraisal management company may assign the same appraiser to the property or the value could be even worse from different appraiser! If the borrower wants to switch to another mortgage company for their loan, the appraisal in not transferable which means an additional expense for the consumer.

Check out this article by Kenneth Harney for more information on this subject: http://realtytimes.com/rtpages/20090511_washingtonreport.htm

Hopefully the program will be tweaked and improved. If you are unhappy, an email or phone call to your senator or congress person could help.

If I can assist you with your mortgage needs, please contact me, David Wolsky at 520-977-3300. My email address is david@davidwolsky.com.

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