We've written numerous posts over the past year about the new nightmare of home appraisals since the inception of the Home Valuation Code of Conduct (HVCC). Many transactions have gone up in smoke as a result. And now, the HVCC might be going away as well.
The HVCC was originally put in place in May 2009 to create independence between lenders and appraisers. In a nutshell, it requires that lenders cannot order appraisals from appraisers they know and have worked with in the past. Instead, all appraisals are to be ordered through an independent, third-party management company.
As good as this might sound, the HVCC has wreaked havoc on a heavily-strained real estate market, causing delays in appraisals and erring on the side of over-conservatism, thereby causing cash-strapped buyers and equity-strapped sellers to come up with additional monies to bridge the sale price and appraised price gap, or lose the sale. We've seen more fraud in appraisals in the past year than ever before.
We personally have witnessed the strain the HVCC has caused on transactions, particularly when we have seen appraisers from Zimmerman, Elk River and Orono coming down and doing appraisals on homes in Savage, Prior Lake and Shakopee. As a result, we have attempted to attend all our appraisals over the past year, to help answer as many questions as possible from appraisers with little-to-no knowledge of our local Savage marketplace.
New reform is being proposed that would scrap the HVCC and replace it with a new set of guidelines, to be written over the next 60 days. The new guidelines would allow Fannie Mae and Freddie Mac to accept appraisals completed by an appraiser selected by a lender. The new guidelines would not allow the lender to make any threats, payments or promises influencing the appraisal.
We hope the new guidelines will be better-thought-out, and like many, we feel eliminating the HVCC can only help our market on the road to recovery. Eliminating the HVCC will help sellers who have already reduced their price to the bone. It will help buyers who are striving to raise cash to buy a home in a credit-tight market. And doing so will help home values stabilize AND help show appreciation, vs. holding them down.
Comments