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Carver Communications - Index

Carver Communications - 6.1.08 - Index

By Al Dunagan
Dunagan Appraisal
I’m from the government
and I’m here to help
We live in a time in which if anyone
has a problem, politicians appear to believe
that it is their job to step in with laws, regulations,
hearings and news conferences.
New York Attorney General Andrew Cuomo
apparently sees a problem in which poor residential
appraisers are beaten up by their
lender clients and are forced to report higher
values than they should. So Mr. Cuomo has
single-handedly come to our rescue.
We all are familiar with the quasigovernmental
corporations known as Fannie
Mae and Freddie Mac. Both of these bodies
have come under intense criticism in recent
years for many things, including “cooking
the books” to speak of. Cuomo threatened to
sue the companies for allegedly failing to
make sure that appraisers were protected
from pressure to fudge valuation unless they
agreed to abide by Cuomo’s “appraisal code
of conduct.” Not surprisingly, Fannie Mae
and Freddie Mac wilted like wet Kleenex
and agreed to do whatever it took to avoid
more government investigations. So, by the
fiat of one New York lawyer, who I’m not
aware has had any real estate experience, the
real estate industry is now scheduled to be
blessed with a creation known as the Home
Valuation Code of Conduct (HVCC) on
January 1, 2009.
Features of HVCC
SMARTBOX
Here are some of the rules which the
HVCC, as now constituted, will enforce:
Appraisers will not be hired by mortgage
brokers or lenders. In fact, appraisers
will not be allowed to talk to, visit with, or
have any contact with any agents, mortgage
brokers, loan officers, processors or others.
Instead, all appraisers will receive work only
from Appraisal Management Companies
(AMC’s), and all appraisal requests will be
submitted to AMC’s, as will all appraisal
reports.
Lenders can own up to 20% of an
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June 1, 2008 REAL ESTATE NEWSLINE 29
AMC. Lenders also can develop and own
100% of alternate valuation methods, thereby
bypassing the appraiser altogether. Thus,
HVCC sets up an incentive for lenders to use
valuation methods other than professional
appraisers.
Fees to be paid to appraisers and fees
collected from the lenders (not the same
amount, of course) will be determined solely
by the AMC. (As a point of reference, one
company reported approximately $173 million
last year in revenues “skimmed” off the
appraisal process.
Appraisers’ response to HVCC
By and large, appraisers appear to be
completely opposed to HVCC. Some
16,000 residential appraisers signed and submitted
letters of protest, which were bundled
by Alamode, the large appraisal software
company, and submitted to Cuomo, Fannie
Mae and Freddie Mac.
AMC’s have a record of “skimming”
from 20% to 50% from appraisal fees. The
net affect will be that appraisers’income will
be decreased at least by the amount of the
“skim”, but potentially much more if the
number of jobs they receive is less than they
receive today. AMC’s represent that they
pay “market based fees appropriate to the
area being served.” My experience has been
that, almost universally, I am required to
accept a lower than normal fee in order to
receive work from an AMC.
In effect, appraisers will be similar to
government employees. They cannot be
fired without a lengthy process. The lazy
and the inept will be accorded the same
number of appraisals as the sharp ones.
Complaints by users will have to be routed
through bureaucratic channels. The process
will resemble today’s VA appraisal apparatus,
although it will be potentially even more
onerous.
All business incentives will be taken
away from appraisers. You cannot grow
your business, you cannot market, you get to
deal with a large corporation instead of
clients, and your pay will be reduced to boot.
If the HVCC, as now contemplated, is enacted,
I predict that the appraisal professional
will be dealt a severe blow. And I predict an
exodus of the brightest and the best people
now in the profession.
What can be done about
HVCC?
We, as the real estate professionals
who will be most affected by HVCC, are left
with the same anemic responses as always
when government treads on us: “Write your
congressmen and senators.” This imposition
is unusual, because usually this kind of draconian
step is accompanied by months and
years of discussion, Congressional hearings,
editorials, etc. This action is being spearheaded
by one politician in New York, who
has wrapped around himself the cape of
“savior of the appraiser” and invented the
salvation without benefit of much input from
anyone. I don’t know that Congress will
choose to intervene unless a mighty uproar is
heard from around the country. Stay tuned
for future updates as the saga continues, and
be prepared to ROAR!
San Antonio’s Premier
Residential Appraisers
Al Dunagan visits with Vivian Mauricio of Flagstone Lending (middle)
and Jacquie Saldana of First Choice Lending (right)
Dunagan Appraisals
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