By While we’ve all been focused on the Homebuyer Tax Credit and the effect that foreclosures have had on the real estate market, Congress has been hard at work, trying to right some unintended wrongs.
For some time now, the home buying process, already strained by the desperate straits of our nation’s economy, has been made more difficult than necessary as a result of unofficial “rules” put in place by Fannie Mae & Freddie Mac. These “rules”, known as the Home Valuation Code of Conduct, were put in place to reduce abuse by appraisers, who’d been under pressure from lenders, real estate professionals, sellers … you name it, to make sure that a particular house appraised for a certain amount (whether that amount had any basis in reality or not).
But while paved with good intentions, the HVCC’s road was littered with potholes.
The HVCC put the onus on lenders to order appraisals. It also required that lenders stay out of the process; that they not exert any influence over the appraisal. This has led to the use of appraisal management companies, which, for lack of a better description, are like brokers for individual appraisers. The AMC (appraisal management companies) gets an order for an appraiser, then assigns someone to take care of the job. The big problems here are that, more often than not, appraisers are being assigned to value homes in communities and neighborhoods with which they are wholly unfamiliar. Also, the use of the management companies requires the splitting of appraisal fees, causing appraisers to cut their rates and putting many experienced appraisers out of business.
Complaints about the HVCC have run the gamut from inaccuracy in valuation, “lowball” appraisals, to inexperienced appraisers (not to mention a host of other complaints). As a result, many sales have been adversely affected.
It looks like that may be about to change.
The US House of Representatives has been hard at work on its financial and mortgage industry reform bill. It has voted to terminate use of the HVCC, pending the initiation of a new Consumer Financial Protection Agency. The House’s bill, now on its way to the Senate, requires the director of this agency to implement national sales rules and standards that will cover all transactions.
Once the new standards are in place, Fannie Mae & Freddie Mac will be barred from using their much-maligned rules.
How the Senate will handle the creation of this new agency (if it goes along with it at all) remains to be seen, but the House bill is a clear signal that the HVCC is all but dead in the water.
