Arizona Mortgage Company News: HR 3126 Passes House Committee
If you are currently working with an Arizona mortgage broker you may be interested to know that on October 22, 2009 HR 3126, the Consumer Financial Protection Act of 2009, passed the House Financial Services Committee with an amendment that could ultimately end the Home Valuation Code of Conduct (HVCC). The HVCC was aimed at the selection of appraisers by Arizona mortgage brokers -- as well as mortgage brokers from across the country. At the very minimum it HR 3126 will enforce an 18-month moratorium on the HVCC.
In Arizona, I'm not so sure that the HVCC was such a bad idea or that it caused any serious problems for any mortgage company or their clients. I hope any replacement to the HVCC keeps the original intent of the code. Let me explain what the HVCC is and how it affects any Arizona mortgage broker, realtor, and their clients:
Home Valuation Code of Conduct (HVCC) | Effect on Arizona Mortgages
Effective May 1, 2009, the Home Valuation Code of Conduct (HVCC) established standards for solicitation, selection, compensation, conflicts of interest and appraiser independence as they relate to mortgages and Arizona mortgage brokers. It is effective for any mortgage that will be sold to Fannie Mae or Freddie Mac. Federal Housing Administration (FHA) and Federal Home Loan Bank (FHLB) mortgages are not covered in the agreement.
From Bob Hunt, RealtyTimes staff writer:
The major emphasis of the HVCC has to do with the selection of appraisers [by an Arizona mortgage company]. Believing that much of the abuse of appraisal practices resulted from quid-pro-quo selection practices, and good-old-boy networks, the Code seeks to insure that the selection of an appraiser [by an Arizona mortgage company] will be an arms-length transaction. Hence, for example, under the HVCC neither a mortgage broker nor a real estate agent may be the person who selects the appraiser. A lender may select the appraiser, but the person who does the selecting can have nothing to do with the loan production staff.
The institutional response to this, following the path of least resistance, has been to employ a third-party Appraisal Management Company (AMC) to select the appraiser. An AMC is a middleman. It receives an appraisal request from a lender [Arizona mortgage company] and then it assigns an appraiser from its list of approved appraisers who have agreed to take assignments.
The primary complaints about AMC appraiser selection processes are:
- appraisers are given assignments that take them out of their geographical area of familiarity and expertise
- it's turning out to be much more difficult for an agent (the one who is likely to know the neighborhood and relevant comparables) to provide helpful information to the appraiser -- everyone is so uptight about the new regulations they have been interpreted to mean that no one can have a meaningful discussion with the appraiser
National Association of Realtors President, Charles McMillan, met with both the New York State Attorney General and with the head of the Federal Housing Finance Agency (the overseer of Fannie Mae and Freddie Mac) to convey industry concerns. Representatives Travis Childers (D-MS) and Gary Miller (R-CA) have co-sponsored HR 3044 that would impose an 18-month moratorium on the use of the HVCC.
The complaints from NAR have undoubtably come from the ranks of realtors who were upset because they lost deals when homes wouldn't appraise for the asking price. Perhaps there were also concerns expressed by Arizona mortgage brokers. This makes me wonder just how me more deals were lost after the enactment of HVCC? Personally, I believe a good appraiser does not need to be an expert in a specific geographic area to do his/her job. There are enough tools available on the MLS for appraisers to get a firm grasp on property features. Additionally, appraiserss have full reign to talk to the listing agents of all properties sold in an area. Therefore, if the appraiser has any questions about a property about to be used as a comparable -- he/she can get a full disclosure from the listing agent.
It would seem a good time to pause and reassess.
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