Clarifying comment on Previous Post

This comment came from one of the readers of this blog and an attendee at CRP 2009


Your paragraph ???And the World Changes??? makes some good points but has one misconception. I don???t like the HVCC. It is a power grab by the billionaire that owns LSI, Lawyers Title, Chicago Title and many others. I think his name is Joseph Murin, he was #3 or #4 on the Forbes list of wealthiest Americans last year. He made $159 million last year. He owns something like 75% of the title companies in the country. With his company LSI, an appraisal management company, this HVCC scrapes 40% to 55% of the money out of the residential appraisal business that now goes to these appraisal management companies. The HVCC was brought about by a lawsuit by Andrew Cuomo suing Fannie Mae on the basis that the state of NY was being damaged by bad appraisals. Andrew Cuomo is alleged to be on the board of directors of several of these companies that benefit from the HVCC!
The HVCC controls the process ordering of the appraisal and the communications between the appraiser and the straight commission loan originator or broker. It does NOT, however, affect the ability of the appraiser to contact real estate agents to confirm details of a comparable sale. In a relocation appraisal, it is essential to call the agent of the closed comparables used in the appraisal to confirm the terms of the sale. For instance, if a home sold for a published price of $100,000; but the seller paid $3,000 in loan origination fees and closing costs normally paid by the purchaser, then the net sales price was actually $97,000. The seller walked away from the closing table with $97,000. That is the cash equivalency for that transaction. We must and can continue to confirm sales details from real estate brokers when performing relocation appraisals. We are supposed to do the same for Fannie & Freddie mortgage loans as well. They each came out with directives recently stating that appraisals are to be made on a cash equivalency basis and therefore the appraiser is supposed to contact the real estate broker to confirm the details of closed sales used as comparables. And we are allowed to do so under the HVCC.
The HVCC was passed to eliminate the pressure and appraiser coercion from straight commission loan officers and their processors. It does not hinder the ability of the appraiser to confirm the details of sales comparables.
The HVCC can be easily downloaded and read. It is about 7 pages long. Interestingly enough, a bank does can comply with HVCC without using these awful appraisal management companies. To do so, they must be mortgage lenders, not just mortgage brokers. A mortgage lender funds their own closings, and then sells the loan. A mortgage broker uses money from a wholesale lender to close their loans. The mortgage broker business model may go away as a result of the HVCC and other financial rules coming into play recently. This is a result of political power of the large banks that are using their political clout to eliminate the competition of the small mortgage brokers.
A bank can appoint an employee that is outside of the mortgage origination and processing department to oversee a blind rotation of approved appraisers of that bank. Many banks are using this process to avoid using the appraisal management companies. The borrower and the appraiser both get screwed by the use of appraisal management companies.
Dan, I hope this is helpful. If you have questions about the appraisal industry, email me. My business partner is the chairman of the SC appraisers licensing board and we are both active with the Appraisal Institute and try to keep abreast of trends in our industry.
This entry was posted in Uncategorized and tagged . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s