The mortgage and real estate mess has drawn the keen attention of many regulators in Washington and elsewhere, as if the existing laws governing those industries were largely inadequate. It must be, is the thinking, that there were too many gray areas and too many gaping holes in them. By amending a few of them or legislating brand-new stuff will cure the present ills in no time.
That's how there now is the HVCC, or Home Valuation Code of Conduct. It is an appraisal system required by Fannie Mae and Freddie Mac on mortgages they purchase from lenders. The aim here is to keep loan originators from strong-arming appraisers into fudging the numbers for their own purposes. In other words, make them more accurate. The result of the code is that independent appraisers are now largely working for appraisal management firms from whom they get their assignments, meaning they are no longer in any direct contact with mortgage brokers and loan consultants.
Well, the first reports are in on this and they aren't all that appealing. First of all, the cost of an appraisal has gone up 15 to 30%, like from around $325 to $425. Usually the appraiser takes home about half of that, so his income is obviously whittled down. The borrower may also have to pay a no-show fee of $50 to $100 if he can't make it to the house on time. The end result is that the consumer is paying more and the appraiser is making less. And the only beneficiaries appear to be the appraisal management companies.
Was this change necessary? Perhaps not. The old system certainly had some weak areas but still functioned acceptably. It was at times abused by some mortgage brokers and also others in the business. All in all, though, it had a very small role to play in the collapse of the real estate market.
If the old regulations were enforced properly, many of the manipulations had been avoided. But they weren't. So now it seems those legislators and regulators who for the most part failed to provide oversight when it was needed are behind this change. Shifting nicely any blame from themselves to the defective laws and thus skirting responsibility. And living another day working on more regulations that aren't really necessary.