The stated purpose of HVCC was to protect appraiser independence and prevent originators from putting pressure on appraisers to produce a desired value, with the intent being to protect consumers. There it is again-the originator is the problem. The originator is the popular scapegoat for all things that went south in the mortgage industry. That’s an entirely different debate though so let’s stay on task here.
Did some originators unduly coerce appraisers to inflate values? Yes. Did that need to be addressed? Most certainly. But as the old saying goes, “if you outlaw guns, only outlaws will have guns”. In other words, if an originator is intent on influencing value to make a loan work they will figure out a way – HVCC or not. And as is often the case, you fix one thing and another gets broken. Talk to originators and consumers and you’ll find unintended consequences of HVCC that don’t exactly fall in the category of protecting consumers.
A value check with an appraiser, prior to proceeding on a refinance, is a great customer service and makes good business sense. Homeowners often have an unrealistic (or no) idea of what their home is really worth. Pre-HVCC, a quick email to an appraiser to see if a $200,000 value was in the ballpark for 123 Anywhere Street was allowed. With that you could quote a rate, have an idea if MI was necessary, etc., but moreover just see if the refinance made sense for the consumer. And you could resolve all this before spending the consumer’s money and the consumer’s and originator’s time. But not anymore. Value checks are prohibited and the consumer must “pay to play”, i.e. incur the appraisal fee and hope for the best.
And that segues nicely into what consumers pay now for those appraisals. There is no set fee in the industry but remember the Appraisal Management Company (AMC) that has to get paid? Enter the consumer via higher appraisal fees. Appraisals are now $50-$100 higher than pre-HVCC.
And finally, what about when there is an issue with the appraisal? Maybe other comps are available, the originator knows a listing comp will be requested, the underwriter will need a better explanation of an adjustment. The originator can’t make that call now. S/he gets info from a Realtor, gives it to the lender’s appraisal department, who gives it to the AMC, who gives it to the appraiser…..that’s a lot of cooks in the kitchen. And much gets lost in the translation. The result is a process that’s inefficient at best with ultimately the consumer paying the price-whether it be in a time delay, lock extension fees, review appraisal fees or otherwise.
So is HVCC working? The answer really depends on who you’re asking.