Shock to the System
A well-intentioned new rule may hurt homeowners more than it helps.
And it’s those middlemen that have loan originators like McConnell steamed. Since AMCs entered the valuation equation, costs for appraisals have gone up by as much as $150, yet appraisers are making less. Before May, Auburn-based appraiser Tom Love charged $400 for the service. Now, he’s routinely offered $225, a drop that has forced half of his staff out of the business. Fewer appraisers can afford the new rates, and those who are left are either unqualified or have to work twice as hard to pay the bills. In either case, loan originators say, the quality of appraisals has significantly declined.
At the end of July, all seven Seattle-area loan originators interviewed for this story blamed the HVCC for killing at least one—and in some cases, several—home sales or refis they’d worked on since May. Jeff Tisdale, a loan officer with Sky Mortgage in Bellevue, watched a refi fall through in July when a home he conservatively estimated at $650,000 was appraised for $500,000. His client lost out on a $500 monthly reduction in mortgage payments.
Randy Ramig was finally able to refinance his mortgage, but he had to bring nearly $2,000 to closing to improve his loan-to-value ratio. McConnell is still seething. “This is one of the clearest indications of just how bad the HVCC process can be,” he says. “It’s a well-intentioned but poorly conceived and executed policy.
Published: September 2009
Without reviewing the appraisal(s) in question I can’t say whether they are valid or not – but bear in mind that loan professionals very, very rarely understand the guidelines that appraisers must adhere to when performing valuations. As an appraiser I’ve had loan officers, realtors and homeowners suggest “better” comparables, when in fact their comps would not be acceptable under USPAP, FNMA, FHA or even individual lender rules…perhaps due to having transpired too long ago, being more than 25% different in gross living area, more than 10 years older/newer than the subject, different in style (i.e. split levels can’t be compared to 2-stories), requiring of more than a 10% single adjustment, etc. Even during the real estate boom when values were climbing 2% per month there was much pressure on appraisers to inflate values so that mortgages could reach that magic 80/20 ratio, usually because the homeowner had refinanced and pulled out most of their equity 8 or 10 months ago (or sometimes just so they wouldn’t have to pay for mortgage insurance).
As for the HVCC, yes – my per-appraisal fee has been cut almost in half due to the AMC’s taking much of the money in exchange for sending me work. But that’s the ONLY downside I see. No longer am I fielding numerous call per day from loan officers looking to see if I can “hit a number” to make their deal work. No more free “comp searches” taking up half my time and rarely resulting in an actual order. No more depending on loan officers to provide me with a living only if I’m willing to dance to their tune, and cutting me off if I don’t. I’m actually getting MORE work (albeit at half price) now because my willingness to commit fraud for $400 a pop (so that loan officers can make thousands per deal) is no longer a prerequisite for getting business. The collusion of lenders and appraisers to inflate appraisals was RAMPANT. I think the general public would truly be shocked if they knew the extent of it.
So the HVCC took the lenders and appraisers out of bed with each other, and that’s a good thing. Quality would be greatly improved if there were some kind of regulation regarding how much of the fee the AMC’s can take, as many skilled professionals are being forced out of business and are being replaced by newbies in sweat shops that work cheap and have to crank out appraisals so quickly to meet AMC-imposed turn times (again, under threat of being cut off) that due diligence simply cannot be performed.
The HVCC is a huge step in the right direction, but does need some fine-tuning. We just can’t go back to the way things were, with the majority of refinance appraisals being inflated and with dishonest appraisers getting all the work and honest appraisers struggling to make a living. And you know, there will always be loan officers,agents and homeowners who are absolutely incredulous that the value of the home isn’t what they believe it to be, or isn’t what the extremely flawed online modules like Zillow say it is. Even 2 of the 3 listings shown on this page have dropped their asking prices considerably – obviously their initial value estimates were too high, but I’m sure the homeowners and agents would never have believed it at the time. It’s just the nature of the beast.
Twice the work for 1/2 of your old paycheck? Wow…what a great concept.
I don’t know of a single intelligent appraiser that is willing to work under those conditions (the emphasis is on "intelligent").
I think the problem here is the difference, not clearly stated about, but implied, between “work” and “jobs”. A fraudulent appraisal takes much more effort that an accurate one, for an honest appraiser. See: “No more free ‘comp searches’ taking up half my time and rarely resulting in an actual order.” Besides if you connection between intelligence and monetary gain held any water, all the the major corporations would be run by MENSA, which, I assure you, they are not.
JohnnyD you do all the free appraisal work that you can handle. It’s all yours buddy. I left that flea bitten “profession” long ago to pursue businesses that actually turn a profit.
Just thinking of you doing twice the work for half the fee gives me pure job. Thinking of you working for less than minimum wage while your expenses continue to increase by 10% or more each year gives me a warm fuzzy feeling. Thinking of your increase in liability skyrocketing at least 10 times over the past 2 years offers me pure elation. I’ll watch for your name on the bankruptcy docket so I visit you on your finest day.