Appraisal issues continue to be a problem for competing Lenders, Banks, and Mortgage Brokers. I receive calls from Attorneys and Realtors ... even Borrowers themselves (after the loan has not closed through a competing lender), asking, "What can you do to help this situation"? Currently, this is happening more often that you would think ... or like.
I definitely do not mind receiving phone calls or pleas for assistance regarding this issue. I'm always happy to have a chance to help and also grow my business. And, this is a problem where I think I hold a definite edge over many other lenders. I am a Mortgage Banker through Chicago Bancorp ... and I retain some control over the appraisers we conduct business with. A definite plus that pays off during the processing of
a loan.
But as a former Appraiser, I can tell you ... we are seeing issues of a nature that we have not faced prior to the passing of the HVCC ... and seeing them much more often. We have been left to face a huge "fire-storm" of troubles with nothing but a fire-bucket of water with which to put it out. In other words, when problems arise ... many times we have few routes of recourse.
Why are appraisals such an issue now? What are some of the appraisal issues we're seeing?
- Low Appraisals
- Longer turnaround times for delivery of Appraisals from Appraisers
- Appraisers called in to appraise in areas they are unfamiliar with
- Appraisal Fees re-structured (Some too high, others way too low)
- Inflexible Appeal processes
- Communication totally disallowed
- Delays in Underwriting Responses
These issues are causing huge losses of time in processing of loans and much frustration. Many times, they shut down a transaction completely. I believe that is when I hear from the totally frustrated professionals and buyers. They have reached a stalemate with their current lender and are hoping that maybe a new lender's appraisal will prove more friendly or beneficial to the progress of their stagnant transaction.
This is a particularly hard issue to explain to buyers and sellers wishing to complete an important deal. Communication between professionals should be key in the processing of a loan/sale ... but here we are, unable to communicate in many cases (or another professional unwilling or incapable of listening). How can they possibly fathom the reasoning for that ... fraud issues or not? They are justifiably frustrated and angry.
In May, 2009, the Home Valuation Code of Conduct (HVCC) came into practice as a means of "providing better appraisals" to the Lenders, protecting Loan "Servicers", eliminating "undue pressures" applied by mortgage officers, and perhaps most importantly ... to reduce greatly, or eliminate, mortgage/bank fraud.
If the latter items are deemed to be more important in the total scope of things then there will not be a reversal of this new Act, (currently under consideration). If the former list of items (annoyances), prevents the market from recovering, then there must be some time spent studying the affects of the Home Valuation 
Code of Conduct (HVCC). There is alot at stake.
If you are currently facing this issue all too often within your transactions, suffered through these problems within your own real estate transaction, or just believe that review of HVCC is needed ... make your feelings known to HUD, Fannie Mae, and your representatives in Congress.
If you are a real estate professional .... please contact and urge any professional organizations that you are a member of to seek this review as soon as possible. The more reasonable voices they hear, the better ... and the more quickly this issue is re-examined and resolved.
Gene Mundt, Sr. Vice President
Personal NMLS #216987
The Federal Savings Bank
1823 Centre Point Circle, Naperville, IL 60563
Skype! 630-219-1316
Gene: Thanks for posting. I appreciate it. I haven't had a lot of issues with HVCC. Sure, declining values are frustrating and I've had all my borrowers pledge to just pay the appraisal cost if they either don't like the value or the loan no longer makes sense. We're living in frustrating times although I sense that things will get better not too long down the road! Take care.
Thanks for a good post. You might want to submit this to your local papers...it's a good consumer-oriented information.
Paul: Maybe the area of the country, and the percentage of price drops felt, have something to do with the frustrations and challenges I am seeing. We're fairly closeby the City of Chicago ... and during this recession ... the midwest felt the problems that accompany a recession much more deeply than during other recent recessions. That may explain some of it ...
But it's not only the decrease or depreciation of values that we are finding frustrating here. My take on it is that most customers are fairly aware of that issue. It's the other surrounding problems that accompany the depreciations ... such as lack of knowledge of an area, unwillingness/incapability to discuss comps and adjustments, underwriters increasingly and unceasingly questioning appraisals, and more.
I sure hope you're right about things improving soon. I'm more than ready!
Gene
Leslie: Thank you for the suggestion! Coming from an "expert" that has had recent success with that ... I'll definitely follow that up!
Gene
Gene - OY VEY! Don't even get me started on my soapbox about HVCC and appraisal issues. Suffice it say that HVCC is deplorable and appraisal issues have been the bain of my existance for the past year. When it comes to problem escrows - I can attribute appraisal issues to about 90% of my problem escrows.
Needless to say, I have DEFINITELY sent my fair share of rants correspondence to my local representative about my experiences and feelings about HVCC.
On another note, I'm with Leslie, great post and you should definitely look into sharing this with more than just the AR community. Have you ever looked into the various blog syndication services? They're free and get a lot of exposure.
Donne: Thanks for the encouragement. And no ... I haven't ventured into those waters as of yet. Any suggestions or tips you can give would be much appreciated ... but I will do some research as well. Admittedly ... I'm not as techno saavy as I should be ... and you and Leslie are!
Totally agree with the appraisals being a big issue right now ... either you're dealing with it yourself or hearing of it and it trickles down to you. I know some think it futile to rant correspond ... but I too do my fair share of it. Guess I just can't give up ... lol.
I learn alot from you Donne. You're always so kind with your suggestions and info. Thank you ...
Gene
Gene, sounds like you fall into the community lender category, the only ones I use these days.
Gene ~ great information to share. I have yellow stared for feature and will re-blog. I believe your statement below is THE most important part of your message! Anticipating the problems in advance with a buyer and seller and play out all the scenarios.. that way when you come to the bridge.. they can cross it and be over the anxiety that just comes with today's real estate market. Waves are simply a part of every deal today......
"Communication between professionals should be key in the processing of a loan/sale ... but here we are, unable to communicate in many cases (or another professional unwilling or incapable of listening). How can they possibly fathom the reasoning for that ... fraud issues or not? They are justifiably frustrated and angry."
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Pat: I guess I'm about as area "community" representative for this region as possible these days. Been in this area my entire life ... both personally and professionally. I appreciate your taking the time to write and let me know your views and feelings about this issue. Just wish you were closer!!
Carra: Thank you so much for your re-blog and support. I appreciate your efforts on my behalf. You are so right. "Waves" ... (a very kind word) ... are to be expected anymore, unfortunately. Clients must be prepared and aware of this fact. Successful results take hard work and time.
Thanks again for everything, Carra ...
Gene
Good timing with this post. I had to have my buyer jump ship from one lender to another because of an appraisal glitch. It would take much longer to go back and forth fighting the undewriter than to start with a new lender who can approach the whole matter differently.
Jane: Aaahhh Jane .. I'm sad to hear this and wish you weren't facing this frustration. I'm hearing the same complaint too many times. It's truly a toss-up at times. Go back and start over with a new lender ... or continue slogging on forward and hope that you can straighten the issue out?? Neither choice is a good one ...
Hope it all works out for you quickly, smoothly, and successfully ....
My best, Gene
I haven't had any major issues with appraisals here. But there are others who are. hopefully this will change in the near future.
Robert: Good to see you again! I'm glad you are not experiencing this frustration .. and hope that stays the case. To say it's a real headache is an understatement. Hope Grand Rapids r.e. is keeping you busy ...
Thanks for writing ...
Gene
Gene this is an excellent post and well worth re-visiting these issues again. We've had inordinate issues with appraisals in AZ this past few years due to our high level of foreclosures etc. Lately I see some improvement - not much - but at least it appears we're headed in right direction.
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Gene - The way I see it, writing to my representatives is like voting - just my .02. You can't $!^%* about something if you don't vote and if you vote, then your representatives work for you and I'm going to get my votes worth. Anyway, there's something to be said about the power of the people, the more that people rant correspond, the louder our voice and the louder our voice, the more likely we'll be heard. JMHO
As for blog syndication, there are so many sites, I strongly recommend that you just start off with one or two and just gradually build your resources up. Check out this post:
BLOG SYNDICATION: It Really Works (Thx Renee & Jennifer)
Then check out the blog syndication sites on my blog page. I would recommend you start out with Blogburst and My Zimbio and then just work yourself up to more every week or so. It can be a little time consuming at first linking up your AR blog to your other blog sites but after awhile it's just part of a routine you get into and it just becomes a matter of maintaining them weekly or so because all of your AR blogs will automatically feed into them.
I told you once my husband wanted to buy me toddler's fire truck to ride around the office, complete with a blaring siren, especially when rates went up or low value was impossible to avoid.
There were so many good excuses for the siren. I wanted a fire hat too.
It's an exacting business looking out for mortgage borrowers. Gene, your customers are so lucky to have you.
Gene, this is a great point as to why buyers and REALTORS need to use lenders such as yourself who still have the ability to control the transaction. I am sure that your company as assembled a group of competent Appraisers who know the area and do their job in a responsible manner. Kudos to you for associating with a company (Chicago Bancorp) that has the business sense to treat this business like a business.
Hi Gene -- Just had an appraisal done where the appraiser was based over 50 miles from the subject property. You tell me?
Thanks for sharing. So far we have been able to maintain some control over our appraisers too. Even still the HVCC has caused major problems in our real estate market.
We've had a lot of trouble as a result of HVCC with not being able to communicate with appraisers and not having the ability to work with appraisers as familiars as they should be with an area.
Hi Gene,
I have had some of those problems. The one that seems to be the hardest are the appraisers that are from another state that do an appaisal in an area they are unfamiliar with and they don't understand the perceived value of a location.
Laurie
Most people dont realize that you are not required to use an AMC as a part of the HVCC. You simply cannot have direct contact with the appraiser and you cant have more than 35% of your business closed per year with 1 appraiser. As a lender, we select our own appraisers that we have known for a long time, and they know to give us the best TRUE value possible.
The AMCs are the problem, not HVCC!
I thought the HVCC was being phased out ???? It's one more government attempt that's gone off the tracks !
Anna: Some areas, such as yours, have had to suffer through more frequent occurrences of the growing number of issues than our Chicagoland area has. I can only imagine the stress everyone feels our your way. It's good to hear that you are beginning to see some positives ... as I'm sure you are more than ready for it. Hope the good news continues for you and the entire Phoenix area.
Donne: You're a jewel! Thanks for the info. Blogburst was something I had already seen and checked out (after your prior message), but I will look into your other site as well. I knew I could count on you!! I'll let you know how I'm doing ... (or I'll beg for more help!!!)
Kate: I can't quite get the picture out of my mind of you ... complete with your 3 babies ... hats and all riding around on that little truck and letting that siren whail! Thank you for your very kind words. (I think it takes one to know one!!)
Gene
Damon: As I'm sure you are well aware, these days it takes so much more time and energy to maintain any control over your transactions. We need to be alert 24/7 ... and even then, never-before-heard-of issues arise. The "job descriptions" for each of us has changed so dramatically in just a handful of years. I appreciate your kind words, Damon ... as you have always shown through your posts that you are a serious, intelligent, and thoughtful professional that cares deeply about his clients and business. Simply .. thank you.
Chris: As a former appraiser, I understand the advantages of being locally based and knowing a market inside and out. Still, it doesn't mean an appraiser from 50 miles away could not do a good job. As with any job, it's more about the effort and hard work you're willing to put into it to do a job well. Sounds like that effort was not made. With HVCC in place as it stands, we will continue to see the problem you mention happen more frequently. As a side note .. my son was just out your way on "storm duty" for Westfield Insurance. Sure hope you don't see anymore bad weather anytime soon ...
Markita: I use the word "control" carefully when I'm speaking of our abilities. As you point out, it doesn't take care of every problem ... and we must still wrestle with issues and get them cleared up before moving ahead. We just have a much better chance of doing that with our companies ... which is a real blessing, isn't it? I am hoping we see brighter and easier days ahead for each of us. Thanks for writing ...
Gene
Christine: I hear ya! It's happening all too often everywhere. HVCC needs a good, in-depth look given to it ... and a whole lot of common sense used in its repair. Keep your fingers crossed!
Laurie: Chris, in another comment, mentioned much the same thing. I believe personally, that a good appraisal CAN be accomplished when using an out-of-state/region lender ... but it does have its' challenges. Time and effort must be taken to get an appraiser that will do the job right .. and well. HVCC decreases the chances of that happening greatly ... and you are reaping the results of that. Something definitely needs to be done regarding these changes ...
Phil: You bring up a good point. Still, some have or retain the ability to that better than others. I'm glad that you have conquered the issue in regards to your work. Especially when talking of senior issues, you want to take care to get the best possible value for a home as possible. So much relies on it. I appreciate your input ...
Michael: From what I know, HVCC is back on the table for discussion, so far. A review is possible. It definitely is being promoted by many real estate professional groups. We'll see what the results are. I think the government was right to take a look at the overall issue of appraisals. I have no problem with them doing so and agree with it. The result was definitely askew. As with most things tackled by them, a 2nd or 3rd try will most likely see better results for us.
Gene
Gene, I think that ALL aspects of the loan process have become frustrating to both buyers & agents. Sometimes it is valuable to get out of one situation that is not working smoothly and go into another. I've done it myself & have sometimes advised it. Some lenders are so inflexible & have control freak processors/underwriters that they go too far. Trying to seek out fraud, they run amok thru the transaction. We all have our horror stories & successes too. The new rules are just not making the process better for the consumer.
Great post.
Gene - Phil's (#22) comment is spot on. No where in the HVCC rules and regs does it state that we MUST order appraisals through AMC's. As a matter of fact, AMC's aren't even mentioned. It's lenders that created the whole AMC mess in an effort to get a slice of the appraisal pie. It's also true that not all lenders use AMC's however, I have found very few that don't. The majority of lenders are using AMC's (usually ones that own) and therein lies the problem.
Gene - Thank you for writing this in a clear and understandable post. We just discussed this issue at our Monday morning meeting and I understood that it was a good possibility that the HVCC would be rescinded.
Lyn: As a lender, I still can't provide a definitive answer to that predicament. Do you stay in the present deal thinking that you will save time by hammering out the problem there??? Or do you just start over and hope that you don't have the same issue elsewhere? I've heard it work out both ways ... but frustrations seem to lean towards moving on. I am greatful that I have at least some control or possibility of input regarding my appraisers at Chicago Bancorp. Otherwise you'd have to feel pretty helpless. And you are right ... there are definitely differences amongst underwriters. Some are more willing to listen and review, while others remain firm and unrelenting. Some are gun shy ... others feeling their power, I think. No matter what the reason, it can cause havoc. Hopefully we see a review of this HVCC soon ... and things improve along with it. Thanks for the kind words, Lyn!
Donne: Again ... greed. It explains alot ... and causes much misery for all. Sometimes I just want to scream ...
Margaret: It's good to hear that your office is on top of this issue and discussing it in meetings. Sometimes just understanding issues more clearly helps ... and creates patience. Please let me know if I can ever answer any questions for you or anyone else within your agency. I'd be glad to help if I can ...
Thanks for writing .. and thanks for the thumbs-up on the post ... Gene
Gene:
Thanks for the information, it was indeed timely. After I finished reading your post I got a call from one of my buyer's agents. Our listing did not appraise for value and you know how the rest of the conversation went after that. We were very lucky, since we price our listings at market value we were only down less than 1.5 %, but it could have been much worse.
The appraiser came from over 50 miles away and at least 6 cities > 100k residents. The most frustrating aspect is we as REALTORS have no real recourse.
Thanks for the information.
Frustrated in DFW
Brent: Sorry to hear of your predicament ... and yes, being only a small amount over the appraisal can be a real huge blessing. As I've said in previous comments, as a former appraiser I don't believe the distance of the appraiser is the largest obstacle to a good appraisal ... it's the work they put into it. A good appraisal CAN be produced if they're willing to do the work to accomplish it. That being said, it seems to appear that few are. Totally frustrating. The HVCC certainly has put handcuffs on the process ...
Hope all worked out with your deal ... and you don't suffer anymore like it in the future ...
Gene
Thanks Gene, everything worked out fine. The buyers agent is a pleasure to work with and our sellers are awesome. Its just so frustrating when there is very little you can do to point out inconsistencies or even errors. You just have to love it when the government steps in to 'help'.
Thanks again...