Conventional financing now requires lenders to follow specific guidelines with regards to appraisals known as the Home Valuation Code of Conduct.  It's a way of safe guarding a property's value, but how does it affect you, the customer?

Effective May 1, 2009, all lenders selling loans to Fannie or Freddie must agree and acknowledge they are complying with new guidelines known as the Home Valuation Code of Conduct.  Basically, Fannie and Freddie are now regulating appraisals.  The HVCC was adopted  to help reinforce the independence of the appraisal process as well as to enhance the overall integrity and confidence in the national housing finance system. Why the big change?  Probably, because Fannie and Freddie lost their shirts when homeowner's defaulted and values were improperly substantiated.  And they want to keep the rest of their laundry intact.

Good intentions, surely, but the new regs do take some getting used to.  Under the HVCC, the lender can have NO communication with the appraiser.  In fact, we can order an appraisal only from a type of approved round robin system.  So not only d we not know who is doing the appraisal, we also are not sure of what the charge will be.  I understand the intention of this requirement is so that the appraiser does not feel coerced or pressured into finding a certain value.  But, I will admit, it's difficult for those of us who never abused the system.  A good lender used to use good appraisers, who knew the area and were depended upon to have good comps and produce an excellent product.  However, it seems a couple of bad apples have spoiled it for the rest of us.   Say you're doing a refinance.  The only reliable information I can glean about what the home is possibly worth is from unreliable sources.  Used to, I could pull a string of comps and figure out a nice ballpark.  But sales have been few in many areas, and the data just isn't there.  The customer now must roll the dice and pay for an appraisal.  Unfortunately, oftentimes a borrower has a rosy idea of his home's value, and is sorely disappointed with the finished product. 

FHA appraisals and Rural Housing appraisals are still ordered the old way. Yet, if I have to change my appraisal from one that was originally FHA because circumstances warrant my customer getting a conventional loan instead, I can't have the original appraiser convert the old appraisal to an FHA appraisal.  I have to order a new one through the new system.  And my customer has to pay for a new appraisal.

The customer has to now have three full business days to review the appraisal, and in rare circumstances, they can sign a waiver to speed up the transaction.  But most lenders don't want to make this exception in any case due to the possible repercussions that may occur.  Also, the appraisers can take up to five business days to complete an appraisal once they accept it.  So no more rushes.  Which means, on purchases, everyone better just settle in.  The process WILL take longer.

But with all changes, there are grumblings and getting used to's.  And what's in place may possibly morph to address newly discovered kinks.  It's best not to lose sight of what these new regulations are setting out to accomplish.  And hopefully, these goals will be met.

Let My Experience Work For You!

Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910.  For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.

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