Jack M. Guttenburg Nails it!

Here's what he writes about the changes in the appraisal industry and it's unintended effects on the housing market.


The objective of HVCC was to prevent pressures being imposed on appraisers to raise values. But HVCC also prevents the loan officers, mortgage brokers and realtors who work with borrowers from pressuring appraisers to get a deal done in time to meet a deadline. Further, they can no longer keep their clients informed about the status of an appraisal because they are no longer in the loop.

In addition, the loan officers, brokers and realtors who fashion deals for consumers used to have access to informal value opinions from the appraisers with whom they worked. Such opinions allowed them to abort house purchases and refinances that clearly would not fly because of inadequate property value. This source of information is now closed to them, with the result that deals that previously would have been screened out are now going through the system to be rejected, imposing needless costs on everyone involved.

HVCC has also pretty much eliminated the ability of a borrower to use the same appraisal with multiple loan providers. Before HVCC, mortgage brokers could use one appraisal with any of the wholesale lenders with which they dealt, and lenders sometimes accepted appraisals ordered by others. Today, brokers are out of it, and lenders using AMCs will not accept appraisals ordered by other lenders because they cannot be sure that the other lenders are following the HVCC rules. The upshot is that borrowers often have to pay for more than one appraisal.

In sum, the HVCC "cure" for the appraisal problem of overvaluation has been implemented in a market where the problem has become undervaluation, and HVCC is making that problem much worse. It should be scrapped. When normal markets re-emerge, it will be time to reconsider how appraisals can be made independent without disrupting business relationships that have served borrowers well.


Read entire article here:
http://finance.yahoo.com/expert/article/mortgage/187349