Seldom-Heard Appraisals Of Home Valuation Code
After all you've heard and read, it may be hard to believe, but the Home Valuation Code of Conduct does have some fans in the mortgage industry.
We're not talking about the appraisal management companies that gained business as the code effectively forced lenders to remove their loan officers from appraiser selection. Nor do we mean the regulators and government-sponsored enterprises that helped craft the code. Both groups would be expected to tout the standards' benefits, as they've done.
A more compelling case for the code comes from executives at a small group of lenders that kept the ordering of appraisals in-house. Instead of hiring AMCs, they gave the job to employees, such as underwriters, who were firewalled off from the sales force.
The results, these lenders say, are the opposite of what critics of the code, and of AMCs, usually report.
"Our appraisal quality and timeliness has gone up, not down, and our appraisers get paid the same amount of money that they were paid prior to HVCC," said Kevin Marconi, the chief operating officer at United Fidelity Funding, a wholesale and retail lender in Kansas City, Mo.
The code reflects negotiations a few years ago between New York attorney general Andrew Cuomo, Fannie Mae and Freddie Mac and their regulator, the Federal Housing Finance Agency. Cuomo had subpoenaed the GSEs as part of his probe of the former Washington Mutual.
For single-family loans headed to Fannie or Freddie, the code forbids commissioned loan officers or mortgage brokers from ordering appraisals or influencing an appraiser about a home's value.
When it took effect a year ago, "lenders basically had two choices: either do the work themselves or outsource to an AMC," said Jeff Schurman, the executive director of the Title/Appraisal Vendor Management Association. "And many chose that route because it was more convenient for them."
He estimated that AMCs have processed two-thirds of all appraisals so far this year, up from 20% before the HVCC went into effect.
The change "indicates that lenders like the separation of the appraiser from the originator," Schurman said.
Most readers are probably familiar with the claims made by appraisers, mortgage brokers and others who don't like what's happened. Among other things, these critics have said that the AMCs, by squeezing the fees paid to appraisers, are driving seasoned ones out of the profession, and thus making the quality of appraisals worse than before.
Schurman and others in the AMC camp have rebutted those claims, arguing, for example, that to get on a management company's roster, an appraiser must have a minimum number of years' experience.
But Marconi and other lenders who have taken over the appraisal process themselves say the code has improved the quality of appraisals simply by removing interested parties from the equation.
Matt Hackett, an underwriting manager at Equity NowInc., a New York lender, said it has been easy for a lender to take control of appraisal lists and remove from the process any employee whose pay is tied to loan production. "In that sense, my interests are always aligned with the idea of getting the most accurate value possible," Hackett said. "If the value of the collateral is not sufficient to support the loan, I don't want to put my name on the loan."