Lendisphere

HousingWire is reporting that Appraisal Valuation Fraud has INCREASED over the last twelve months, according to an index measured by Interthinx, a software developer specializing in the mortage industry and its “issues”.  

But WAIT A MINUTE…..didn’t Congress pass HVCC early this year with the express purpose of combatting fraud by keeping brokers out of the appraisal process?  Didn’t they tell us it was because the  Big Banks were the only ones trustworthy enough to handle that grave responsibility?

So since the Big Banks have been handling appraisals themselves or contracting that job out to their “management companies” (which are primarily owned by the Banks themselves, providing a new source of revenue back to the mothership)…. and now that appraisal fraud is skyrocketing 46% from this time last year, I think it’s fair to ask the obvious question…  who ACTUALLY done it?

 The Home Valuation Code of Conduct affects every conventional loan application made after May 1, 2009. It requires brokers and most correspondent lenders to hand over control of the appraisal to the investor themselves, or to order their appraisals through an Appraisal Management Company.

The intent behind this legislation is to keep parties related to the transaction from hitting the electric shock button when an appraiser can’t find value, and rewarding him with a food pellet when he behaves.  It’s all about shielding the appraiser from undue pressure.

But here’s the thing we know: the appraisal is the absolute cornerstone of any loan package. Everything else is built around that primary piece of collateral.   We count on a  great appraiser to drill down to a fair and accurate value, even in tricky neighborhoods and with unique properties.  We need accuracy, on time, every time.

Well, here’s the latest joke I’ve been hearing from my appraisers, who I consider the best in the business:

Q: Guess how much the appraisers are being paid by these Appraisal Management Companies?

A: On a $350 conventional appraisal, appraisers will be paid in the neighborhood of $165.

Will Work For Peanuts!

And that’s not funny.                

Appraisers’ income will be slashed by more than half.  As a result, we are going to see the best appraisers leaving this profession en masse.

Accurate appraisals can take tens of hours of work, and really great appraisers will not do all that work for peanuts. So who will?

The newbies. The ones who phone in a glorified AVM. The ones who are not particularly interested in the detailed work to document the true market value of your listing  with unique features, or in a location with few comparables, or in a historic district.

HVCC is going to put the most precious and subjective piece of loan documentation in the hands of people who will work for less than half the industry standard.  I think that is nuts.

What do YOU think about HVCC?