HVCC Takes Effect for Fannie Mae & Freddie Mac Loans
The much anticipated HVCC is now in effect, assuming the failure of latch-ditch efforts to delay implementation by the NAMB (National Association of Mortgage Brokers) and NAR (National Association of Realtors.) All 1-4 family loans sold to Fannie Mae and Freddie Mac are subject to the HVCC. The actual document can be found by clicking here.
So what is different today from yesterday? There are quite a few things that haven't changed, for instance the HVCC still does not apply to FHA and VA loans and it also does not apply to jumbo loans, loans over Fannie Mae and Freddie Mac limits. Any such appraisal assignments that you undertake today can be performed exactly as one which you completed yesterday. Obviously any private assignments are completely unaffected, so those divorce appraisals, bankruptcy appraisals and tax grievance appraisals can be completed the same way you did them yesterday. These types of private appraisals are also going to be increasing for several reasons:
--Existing and pending legislation promises to restrict real estate agents from performing BPO's, and restricts broker market value estimates to listing activity only, not allowing them to provide market value estimates for mortgage, legal or tax related purposes.
--Potential congressional action could allow bankruptcy judges to modify the terms of troubled homeowners' mortgages. Any such action would likely increase the need for appraisals for this reason.
--The decline in property values has not been properly accounted for by many assessing jurisdictions. This will surely lead to a great increase in the number of tax grievance and tax appeal appraisals as homeowners look to reduce their property taxes.
With regard to Fannie and Freddie and AMCS: As we and many others have repeated, there is no mandate within the HVCC for the usage of appraisal management companies. This is amongst the many myths that have developed surrounding the HVCC. Question 35 in Fannie Mae's Home Valuation Code of Conduct Frequently Asked Questions (FAQs) asks: "Is a lender required to use an AMC for ordering appraisals?" The answer: "No. A lender may order appraisals directly from an individual appraiser." A link to Fannie's FAQs can be found here. A link to the Freddie Mac FAQs can be found here. Lastly, a link to the Appraisal Institute's HVCC Myths and Realities document can also be found here.
While the HVCC does not mandate the use of AMC's, bank consolidation and other factors have undeniably increased the share of appraisal orders that flow through AMC's. Individual appraisers need to evaluate how taking orders from management companies fits with their overall business plan. Working with management companies on a limited geographical basis or on specific types of assignments (for example, review assignments, which appear to be increasing) can be beneficial for many appraisers seeking to limit the percentage of their overall practice devoted to AMC's. Appraisers need to be cautious with some of the newer AMC's as to both the unrealistic time pressures they may impose and their ability (or willingness) to pay the appraiser promptly.
One other source of information worth mentioning: The Appraisal institute and the American Bankers Association will be presenting a two hour telephone briefing on the HVCC on May 6th at 2:00 PM Eastern. Information regarding this can be found by clicking here.
So you have an appraisal assignment for Fannie Mae today and don't have time to read through all the documents and FAQs (but you should find the time anyway) and next week's telephone briefing is too far away. Some of the important facts that you need to remember are:
--The HVCC does prohibit an appraiser from collecting payment for the appraisal directly from the borrower.
--The HVCC allows communication between an underwriter or processor with an appraiser in order to request additional information or seek an explanation about a valuation if they do not violate the requirements outlined in Section III.B of the HVCC.
--The HVCC does not allow a lender to accept an appraisal prepared by an appraiser that was ordered by a mortgage broker, nor can a mortgage broker provide a lender with an approved appraiser list for the lender to use when ordering appraisals for that particular broker.
Is it possible that the Hope for Homeowners program, one which began with the promise of huge funding allocations for FHA loans and countless FHA appraisal assignments, might actually be revived? To date, this program has produced just 51 loans! The Wall Street Journal reported on April 29 that new guidelines laid out by the Obama administration for its foreclosure-prevention program encourage use of the Hope for Homeowners program. Other news reports indicate that this will be accomplished through lower fees, streamlined procedures and various incentives to loan officers. This is important news to FHA appraisers since this heavily funded program requires an FHA appraisal for every loan.
Happy May Day! While the HVCC has impacted the appraisal landscape since it was first announced prior to Fannie Mae and Freddie Mac coming under the conservatorship of the FHFA, a serious appraiser with a proactive business plan can not only survive but thrive in this world of the HVCC!
We really hope you find our newsletter to be informative! If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue. If you want to look back at past issues you can see our archive at www.fhaappraisernewsletter.com
Regards,
Bill Collins
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