Posted by Kate/CA on 9/12/09 5:21pm
Msg #303656

Stop Killing Home Values! Check out this website

Hopefully this will help repeal this Act and help our business. If any of you have refi lately, you may truly realize what the borrower is going thru. My husband and I did. We have extremely good credit. There should not have been any problems. Our first appraiser would not turn appraisal in. After 17 days they removed his payment they had given him. Second appraiser didn't even belong to the local MLS, had to pay for a 3rd one to point out the errors to get the 2nd appraisal corrected. Finally the 2nd a[[raoser corrected everything. Ready to sign. FBI comes in and shuts down the mortgage lender. O K let's start over, again. This mess took 3 months, new lender appointed by Government to take over these apps, completed in a month, with a 4th appraiser. This mess cost us a 1/2 point on our interest, still better than we had, but would of liked the rate lower.

http://www.namb.org/Forms.asp?MODE=NEW&Forms_FormTypeID=-29

Reply by JanetK_CA on 9/12/09 10:38pm
Msg #303699

I've heard lots of complaints from borrowers about this too. n/m

Reply by MikeC/NY on 9/12/09 11:07pm
Msg #303703

Unfortunately, internet petitions are virtually useless. You would be better served by writing your reps in Congress (and spreading the message to everyone you know to do the same thing).

In my other life as a Realtor, I know how bad HVCC is - it is stalling and killing purchase deals as well. The things you experienced are not all that uncommon - we've got appraisers coming in who are totally unfamiliar with the area, and this has been causing major problems. It has also increased the cost of an appraisal for consumers, because now there's a middleman involved. HVCC is an example of a good idea that was badly implemented, and it should definitely either be fixed or repealed...

Reply by Susan Fischer on 9/13/09 1:00am
Msg #303708

Are these the same appraisers who valued a major

fixer-upper with no foundation at "comparable" values with foundationed, solid homes of the area? The ones who, regardless of the absurdity of the deal, miraculously met the "asking price" or the "selling price", depending on the grease? Cash cow Sub-Primers paid well for Drive-by Appraisals.

The second appraiser "corrected" everything? Exactly. The value can't include much 'blue sky' because the economic cloud cover is pretty thick right now. Over-valuation is a major hole in the mortgage/real estate bubble.

To get back on track, the valuation must better reflect a ~limited~ 'blue sky' bet. A slowly growing equity is more stable than a sharp spike. Homes are not only huge Investments, but the Hearth and Hearts of our people.

In the old venerable days of the RE Appraiser, respect and prestige was a prized, valued, and trusted profession. Educated, regulated, and authorized by standards in training and expertise. Are there shortages of competence and ethics in the Industry? Looks like.

I say, let the borrowers choose their appraisers, check them out, decide for themselves, since all appraisers have the same legitimate authority to Appraise Real Estate for purposes of Commerce, right? It's the borrower's money. They're taking a chance on which lender they pick, so why don't they have the right to demand accredited appraisals of the collateral - the bedrock of every loan?

Reply by Shoshana/AZ on 9/13/09 8:44am
Msg #303717

Re: Are these the same appraisers who valued a major

In my experience as an LO, the appraisers that you speak of are few and far between. In AZ, appraisers are regulated and have strict guidelines to follow. The lender always reviews the appraisal with a fine tooth comb. Often, the valuation is changed because the lender feels that it might be too high.
Just my 2 cents.

Reply by Susan Fischer on 9/13/09 12:42pm
Msg #303732

"Stop killing home values." It was the willingness of

appraisers to inflate home values to facilitate easy "equity" loans to people desperate to pay off credit card and other debt - which generated billions in profits for the industry, and leaving homeowners upside down when the bubble burst.

The "values" people enjoyed are a double edged sword - great for home sales and "equity" loans, but pushing prices based on false values ever higher was no guarantee that the "values" would be sustained. It was predictibly the opposite.

I guess I'm saying that home values cannot be expected to remain at levels that were artificially generated. You can't use the highest appraisal for a property as its base value - just as you can't use it's lowest appraised value as its base. When neighborhoods are chock full of foreclosed homes and unemployed people, the value of homes drops until the market, and the economy stabilize. Just my 2 cents.

Reply by SheilaSJCA on 9/13/09 2:30pm
Msg #303740

Home values are based on market values, not appraiser whims

A lot of the high valuation came at a time, when values were raising quickly. Don't you remember how fast prices were rising, when anyone who was breathing was able to get a loan? Those high values were not something the appraiser "decided" to do, but is based on actual market data, which reflects what the greedy sellers and owners, were doing at the time, cashing in on the ever-increasing home prices.
It is not the appraisers fault, that the market tanked. How were they to predict the future any more than you or I can? The appraisals that were done, when prices were high, reflected the actual arms length transactions at those prices. Apprasiers, do NOT control or set the market. Consumers do. Remember these were all willing buyers and sellers.
Appraisers have always been regulated and professional, and most will not just stick a price on something to make a lender happy. They have always been allowed to be a neutral 3rd party, since they get paid up front, regardless, of what value they come in with.
IMO, there was no need, what so ever, for the current regulations.
Sure there are some sleazy ones, just like in any profession, that will bend over backwords if the price is right.

Reply by Susan Fischer on 9/13/09 5:48pm
Msg #303761

Maybe you're right. I think it's much more complicated

than greedy homeowners.

Those inflated appraisals were not based entirely on actual maket data in so many cases, and they certainly couldn't have been based on what greedy homeowners simply commanded.

The lack of credentials mentioned above are a testament to the failings of the industry to regulate, and perhaps as appraisers are reigned in from justifying inflated prices to meet market 'demands', then refis with huge cash-outs will not be freewheeling cash cows anymore.

The failure of Wall Street to "predict the future" is as much to blame as homeowners who were bombarded with offers too good to be true from powerful marketing strategies.

While I'm quite sure that some homeowners instinctively knew their rat-trap homes weren't worth the amazingly high values the brokers promised, the appraisers justified, and the lenders approved, blaming them for jumping at the ready cash is rather like blaming a children for headsful of cavities when parents feed them sugar every day, and don't teach dental hygiene.

Reply by John_NorCal on 9/13/09 10:08pm
Msg #303773

Re: Home values are based on market values, not appraiser whims

So true. It is market force that drives appraisals, the dot com boom was crazy as we all know. There have always been guidelines as to distance, and similarities to the subject property. My own recent experience was refinancing my home. When the appraisal showed that my home is worth around $300,000 less than last year my eyes just about popped out. But when I saw the comparables used within a 3 block radius I understood what the market has done to all of us.

Reply by JanetK_CA on 9/13/09 10:20pm
Msg #303777

Agreed! It's all about comps

BTW, CNBC is, at this moment, re-broadcasting a great program called "House of Cards". I watched parts of it during a previous broadcast, and I think they did a great job of illuminating the many different factors that came together to create the economic mess we're living with today. It's two hours long, but I highly recommend it. It's scheduled for re-showing again this Tuesday evening.

Reply by Susan Fischer on 9/13/09 10:49pm
Msg #303779

Thanks for the tip, Janet - So happy for re-run Tues. n/m

Reply by SharonMN on 9/14/09 3:30pm
Msg #303847

Re: Are these the same appraisers who valued a major

Susan said: "I say, let the borrowers choose their appraisers, check them out, decide for themselves, since all appraisers have the same legitimate authority to Appraise Real Estate for purposes of Commerce, right? It's the borrower's money. They're taking a chance on which lender they pick, so why don't they have the right to demand accredited appraisals of the collateral - the bedrock of every loan?"

Because the appraisal is for the LENDER'S protection - to make sure the collateral they are accepting is worth as much as the loan. The borrower has already had a chance to view the property and get as many opinions as they wish on its value before they made their offer and signed the purchase agreement. Making the lender accept a report from the borrower's appraiser is kind of like making the purchaser accept a home inspection report from the seller's inspector.

Reply by MikeC/NY on 9/14/09 11:02pm
Msg #303883

Exactly...

"Because the appraisal is for the LENDER'S protection - to make sure the collateral they are accepting is worth as much as the loan. The borrower has already had a chance to view the property and get as many opinions as they wish on its value before they made their offer and signed the purchase agreement. Making the lender accept a report from the borrower's appraiser is kind of like making the purchaser accept a home inspection report from the seller's inspector."

You've got it exactly, Sharon. The problem now with the HVCC is that appraisers who are not qualified to work in certain areas (it's not just about comps, they need to know the neighborhood) are being thrown into the mix and screwing up deals.

In the bad old days, the lenders/mortgage brokers got to choose the appraiser, and at times there was pressure on the appraiser to "bring in a number" so the deal would go through. The purpose of the HVCC was to create an arms length transaction between the appraisers and the lenders - the lenders cannot deal directly with the appraisers, they have to go through a VMC which assigns an appraiser.

While this all looks good on paper, some of the problems are:

1. The appraisers assigned sometimes know zero about the area, and are unqualified to do the job. Appraisal is not an exact science, and although comps do set a baseline, you need more than that to go with. In many cases, appraisers cannot use comps older than 30-60 days; in some areas, there may be no comps in that time-frame. What does an out-of-area appraiser do in a case like that?

2. Some VMCs choose their appraisers much the same way an SS will choose a notary - lowest price gets the job. Ability and experience are not necessarily a factor. As with anything else, you get what you pay for...

3. The price to consumers has risen. An appraisal that used to cost $250-$300 can now cost about $500 - and they are not portable. You cannot shop around for a better deal on a loan and use an appraisal you've already paid for - a new lender means a new appraisal. In the case of a bad appraisal, where the number clearly doesn't reflect reality, a good mortgage broker can sometimes get the fee refunded. If you're dealing directly with a bank rather than through a broker, good luck with that...

4. Appraisers are being paid less now because the VMCs are taking a big slice of the fee; at the same time, appraisers are being told to provide more documentation than they had to provide before. As a result, some appraisers are less motivated to make the effort necessary to do the job properly, and they're turning in what can only be called shoddy work. Low appraisals based on bad comps are not that uncommon.

5. Although the purpose of the HVCC was to create a "Chinese wall" between the lenders and the appraisers by requiring a VMC to stand between them, the fact is that many of the larger VMCs are owned by the lending banks. So it's a very small "Chinese wall"....

Finally, if anyone cares, HVCC at this time only applies to loans guaranteed by FannyMae or FreddieMac. FHA loans are exempt (I believe VA loans are also), as are loans from banks that hold their own portfolio of mortgages.