Further Guidance for Lenders on HVCC

July 28, 2009


Appraising a property should be starkly black and white...not emotion. Unfortunately that's not how it always goes.

Appraising a property should be starkly black and white...not emotional. Unfortunately that's not how it always goes.

The Federal Fair Housing Agency, Fannie Mae and Freddie Mac have issued a new guidance to all lenders clarifying two points. They are:

  1. Lenders should use appraisers who have clear experience in the geographic area. The Uniform Standards of Professional Appraisal Practice (USPAP) requires that an appraiser be competent and knowledgeable of the local market to perform an appraisal. In addition, in reinforcing USPAP, the Enterprise appraisal guides require appraisers to have knowledge of the local market. The use of unqualified in-state or out-of-state appraisers, unfamiliar with local conditions, should be reported to state appraiser licensing agencies.
  2. Clarifying that appraisers are NOT prohibited from talking to the real estate agent.

HVCC’s Goal Was to Improve Appraisals by Protecting the Appraiser

The HVVC’s main purpose all along has been to protect the appraiser and the quality of appraisal reports. The code was to keep the appraiser from being influenced in any way and to make sure there is no conflict of interest. The clarification will help with the appraisal process in the future and still protect the appraiser. With the rules in place, the appraiser could no longer be approached by a lender/mortgage broker and asked to bring in a certain value. In some cases appraisers were bribed with cash or threatened with job loss. If they did not bring in the number the lender/mortgage broker was looking for the appraiser would no longer be hired by that person.

Unintended Consequences of HVCC

There have been some unintended consequences that came about from the HVCC program. A very large consequence has been underwriting times have increased, thus pushing back closing dates. In some instances closings have been canceled all together due to interest rate locks being broken due to the extended underwriting times. Another problem brought on by HVCC is the rise in the number of inexperienced appraisers appraising in unknown markets. Still another problem is that costs to the consumer have risen due to multiple appraisals on one property. This can take place when an inexperience appraiser turns in an iffy report. Underwriters then order a review appraisal. If the review appraisal comes in and is off by 3-5% of the original appraisal (depending on the purchase price), a third appraisal is ordered. All of the cost of these appraisals is placed on the consumer.

Only time will tell if the clarifications will help or hinder the purchase process. HVCC was put into place on May 30th, 2009. The ripple effect of the program started to become known in mid-June to early July. From an appraiser’s perspective, these recent changes can only help shorten the process. I live in the city of Chicago and the city is my appraisal territory. I would be very uncomfortable appraising in a suburb of Chicago.

We would like to thank Uqbar for kindly sharing today’s photo via the Creative Common’s License.

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About Katie Anderson

Katie Anderson is a respected and successful broker at Sudler Sotheby's Realty as well as a certified appraiser. She specializes in representing clients who purchase and sell condominiums, town homes, single-family homes and income property in the Chicago land area. In her small amount time in the real estate game (she became an agent in 2003) she has assisted in excess of 400 deals and over $200 million in sales and continues to use her skills as a certified appraiser. Katie resides in Chicago's Bucktown neighborhood with her loving husband and 4-year-old-daughter, where she spends much of her spare time with her family and friends. You can contact her at katie@thechicago77.com or at andersonbraack.com

View all posts by Katie Anderson


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