Friday, October 23, 2009

Sellers and Buyers, Lenders ask, Home Valuation Code of Conduct, what's it good for?

Since the process of obtaining an appraisal for a residential real estate transaction has changed earlier this year - it has caused some aggravation and unnecessary grief to home owners, Realtors, and some loan officers. Since the Home Valuation Code of Conduct (HVCC) now has a track record, the market is beginning to question the new policy's effectiveness.

Because of these questions that are being asked by homeowners, Realtors, and bankers - Congressional members are beginning to discuss options and if the new Home Valuation Code of Conduct (HVCC) is set up correctly. The attached link raised the questions from Congressional legislators - is the cost of obtaining an appraisal today higher and are today's appraisals less accurate under the new HVCC policies?

The current policy of the HVCC states no person tied to the real estate transaction can order or speak to (influence) the appraiser within residential real estate transactions. Therefore - the Loan Officer, Loan Processor, Loan Underwriter, etc… can not select the appraiser, speak to the appraiser regarding values or comparable properties, nor challenge directly the appraiser on the value or any errors on the report. Instead all concerns and/or errors must go through an appraisal management company - which initially accepts the order for the appraisal, selects the appraiser, and accepts the appraisal report from the appraiser.

If the initial report turned in is inaccurate, presents a low value, or has any errors - the Loan Officer and parties involved with the transaction must go through the management company to contest the appraisal report for changes. This process has been viewed to cause the appraisal reports to come back inaccurate and at a higher cost. The HVCC also prohibits the use of one appraisal report to be used by multiple lenders - which in the end may still be a good thing.

In my opinion - it's perfectly fine to have this system of checks and balances in place. But it should not cause more appraisal inaccuracies nor drive up the cost of appraisals for the consumers and lenders involved.

More importantly, impediments in the appraisal process can hurt area small business if they can't refinance, sell or acquire real estate. Not to mention, it hurts business in general for all parties involved if appraisals impede transactions.

Attached is a great article and how some Congressional legislation may come into affect to change this recent adjustment to the residential lending industry. Which will have an affect on today's Small Business community as well.

From CNBC Could HVCC Be History??

For more questions on appraisals and lending please contact Brian Cumpton of RWF Mortgage. Just click the link.

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