The California Association of Realtors puts out a weekly advisory called "Mortgage Matters" that speaks to both the challenges and the improving conditions in our market. This week the site tackled the issue of appraisals, which has become a hot button topic in our company as we suddenly have a new layer of bureaucracy to navigate in trying to close deals.
From the CAR advisory:
The Federal Housing Finance Agency (FHFA), Fannie Mae, Freddie Mac, and the New York State General Attorney have created a new agreement titled the Home Valuation Code of Conduct (HVCC), which prohibits lenders, mortgage brokers, and real estate agents from selecting and having any “substantive” communication with an appraiser.
· HVCC was created to protect consumers against fraudulent appraisals, which some industry experts believe was a contributing factor to inflated home values.
· HVCC was created to protect consumers against fraudulent appraisals, which some industry experts believe was a contributing factor to inflated home values.
· The code applies to all conventional, single-family loans that are originated on or after May 1 and are sold to Fannie Mae or Freddie Mac. It does not apply to loans backed by the Federal Housing Administration (FHA) or the Veterans Administration.
· Under HVCC, a lender’s loan production staff is prohibited from selecting an appraiser for a property or having any “substantive” communication with an appraiser or an appraisal management company about a home’s valuation. However, a non-loan production staff member may call the appraiser, or the lender can farm out the request to an appraisal management company.
· Lenders no longer can perform “value checks,” where appraisers pull comps for a house to see if the numbers are likely to work for a client, before the actual appraisal is ordered.
· Mortgage brokers and/or real estate agents cannot order or pay for an appraisal.
· Borrowers will receive, free of charge, a copy of their appraisal at least three days before closing, giving homeowners more time to contest what they view as an inaccurate appraisal.
· Because lenders are more likely to farm out requests to appraisal management companies, some appraisers believe borrowers will have to pay more out-of-pocket expenses–approximately $100 more than they would have previously.
· The appraisal process may take longer, so some housing experts recommend borrowers lock in a mortgage rate for a longer period of time. It’s important to note that the longer the lock, the more costly it is.
· Some real estate industry analysts are worried that appraisal management companies may hire an appraiser unfamiliar with a neighborhood, which could lead to an inaccurate valuation. To prevent this, appraisers recommend consumers check an appraiser’s name and license number with the California Dept. of Insurance to see where the appraiser is from and if the appraiser is familiar with the area where the home is located. Consumers and/or mortgage brokers and agents can click HERE to check an appraiser’s license."
