Thoughts of R Scott Pierce Real Estate Appraiser

New HUD "Appraiser Independence" Requirements (ML 2009-28 & 2009-51) Become Effective Feb. 15th

Since its inception The Department of Housing and Urban Development (HUD) has established minimum property standards. While these standards have varied over time the recent changes have been some of the most dramatic in decades. By eliminating many of the "nuisance" repairs and mandatory inspections HUD hopes to make it easier to buy or sell a home with FHA financing.

Recent changes are highlighted in bold on this checklist.

POOR CONDITION -

STRUCTURAL DEFECTS -

TERMITES -

LEAD PAINT -

HEATING -

ROOFS -

WINDOWS/DOORS -

ELECTRIC/UTILITIES/MECHANICAL SYSTEMS -

CRAWL SPACE & ATTIC -

Access to both the attic and the crawl space is required. Both must have adequate ventilation. Crawl spaces must have sufficient clearance for inspection and maintenance. The 18 inch rule is no longer enforced.  However, all spaces must have adequate clearance for repair.  All significant settlement will require an inspection.

PLUMBING -

Minor plumbing leaks and defects are acceptable. Major plumbing problems will require inspection and repair. Water heaters must have a pressure relief valve. 

SAFETY CONCERNS -

Smoke detectors are not required but if they are present they must work properly. HUD no longer requires repair of the safety device that automatically stops an obstructed electric garage door opener. Trip hazards such as uneven walkways or sidewalks will not require repair. Missing handrails on stairways are acceptable.

HUD DOES NOT REQUIRE

HUD does not require the following:

• Appliances
• Screens
• Driveways
• Lawn sprinkler systems
• Pool repairs (unless they present a safety concern)

Of course all of these items are left to the interpretation of your appraiser.  However, if a FHA or HUD appraiser requires what you think is an unnecessary repair or replacement, you can visit www.hud.org to pull this information from the appraisal requirements of the site. 

If you need further assistance please visit my website at www.rscottpierce.com or call/text me at 601-466-4224. 

The DaVinci prototype for iphone is now available in the itunes app store.    It's been an eye-opening adventure to see the amazing developments that our Alamode software has provided for real estate appraisers.   Go directly to the itunes app store to download this free app.  Realtors and brokers - there's a similar app for specifically for your use that will blow your mind! 

Check out this very short video!

I have been emailed many times asking about the HVCC or the" Home Valuation Code of Conduct", and why it has been implemented.  While I will try to explain...my web site has a more expanded explanation, history, etc. Thought it would help to post on the blog.  Any questions you can blog here or email me @ rscottpierce@rscottpierce.com or text me at 601-466-4224. 

What is the purpose of the HVCC?
Enacted May 1, 2009, the Home Valuation Code of Conduct (HVCC) is a set of rules for the mortgage lending and real estate appraisal industries. The intended purpose of the HVCC is to protect appraiser independence and prevent pressure from being applied to appraisers to produce a desired property value. Ultimately, these safeguards are intended to protect consumers. Even though there has been considerable debate about the unintended consequences of the HVCC, compliance is required for all loans backed by Fannie Mae or Freddie Mac.

What can I expect to change because of the HVCC?
Nothing will change in the actual appraisal reports we produce. We've always focused on ensuring accurate, independent valuations in our appraisal reports. It's the core value of our business. We'll continue to do that going forward and we're ready and qualified to make sure everything we do complies with the HVCC.

The process of ordering appraisals has changed, however. If you're a homeowner in need of an appraisal of your home, an attorney needing a property appraisal, or even if you work for a small community bank or credit union and will continue to communicate directly with appraisers, click here to order an appraisal now.

a little advertising here!

If you're a mortgage loan officer or a mortgage broker who isn't allowed to order appraisals directly from an individual appraiser and are seeking an HVCC-compliant appraisal ordering system or service, I recommend using the Mercury Network for ordering HVCC-compliant appraisals. I'm already registered on Mercury Network, and it's the fastest, most compliant and effective way to order appraisals from me or any appraiser without overhauling your entire appraisal ordering process.

Because I'm already a Mercury Network member, after you complete your own Mercury Network profile, you can add me to your appraiser panel, if you choose to. Mercury Network's Intelligent Selection System (ISS) enables you to order appraisals "blind", based on pre-set ordering criteria so you can be confident you're ordering appraisals with complete HVCC-compliance. You'll also appreciate Mercury Network's pre-populated status message and text box-driven communications which provide you with an audit trail for each transaction. To order using Mercury Network, click here.

Where did the HVCC come from?
The HVCC was born from an agreement between the New York State Attorney General, OFHEO, Fannie Mae and Freddie Mac. In 2007 New York Attorney General Andrew Cuomo filed suit against First American Corporation and its appraisal management subsidiary, eAppraiseIT, accusing them of enabling Washington Mutual to pressure appraisers to change values, as well as hand-pick which appraisers should be used for WaMu's appraisal reports.

Attorney General Cuomo then subpoenaed Fannie and Freddie in order to learn more about loans purchased from banks like WaMu and the valuation processes they used. One of the results of the investigation was the HVCC, which was agreed upon and approved by Fannie and Freddie. From May 1, 2009 forward, every loan eventually funded by Fannie and Freddie must be in compliance with the HVCC.

What are the specifics of the HVCC?
The HVCC specifically prohibits any party from coercing, suggesting, or influencing appraisers in any way to produce a specific or desired value for a residential property.

Only the lender or a party authorized by the lender can engage the appraiser and order an appraisal that will be backed by Fannie Mae or Freddie Mac. Mortgage brokers and real estate agents, without lender permission, are not allowed to engage appraisers or order appraisals. Also, internal loan production staff members or any other person who is compensated on a commission basis are not allowed to engage the appraiser or have any substantive communications with an appraiser.

A specific exception has been made for institutions which, because of their small size or limited staff, would be unable to establish absolute lines of independence. These smaller institutions are required to clearly demonstrate that they have implemented “prudent safeguards to isolate its collateral evaluation process from influence or interference from it s loan production process.”

All loans backed by Fannie Mae or Freddie Mac must abide by the HVCC. The code doesn't apply to FHA and VA insured loans, or to appraisals ordered for non-lending purposes.

Lenders are required to ensure that the borrower receives a copy of the appraisal report at least three days before the loan closing. The lender, not the appraiser, must provide the copy to the borrower, at no extra charge. This allows the buyer to read the report and decide whether to go forward with the purchase.

You can read the full HVCC on Freddie Mac's website by clicking here: http://www.freddiemac.com/singlefamily/pdf/122308_valuationcodeofconduct.pdf

Mortgage Brokers and Appraisals
On March 31, Fannie Mae and Freddie Mac released an update of answers to questions frequently asked (FAQ) about the HVCC, including whether or not a mortgage broker is allowed to order an appraisal directly from an appraiser. The answer is clearly "no" and that has not changed. However, within that same HVCC FAQ update, the question of "Web portals" was addressed. Within the context of appraisal management, Mercury Network falls within the Web portal category.

The 16th question and answer located in the Freddie Mac HVCC FAQ states:
Question: May a lender direct a broker to use a Web portal set up either by the lender, or by the lender's authorized agent, through which the broker inputs a request for an appraisal and then triggers the lender's system to order an appraisal?
Answer: Yes. A lender may direct a broker to use a Web portal in this manner.

Freddie Mac FAQ:
http://www.freddiemac.com/singlefamily/hvcc_faq.html#16
Fannie Mae FAQ:
https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/

source:  xsite webportal, mercury network, wintotal, aurora

I have not been a good blogger the last year.  Many changes are occurring to the real estate market and the appraisal industry even as we speak.  And frankly, it has been difficult to keep up.  So I challenge those of us bloggers to write more about what going on in your part of the  market about these  constant changing market conditions, etc.  Post your remarks here if you want. 

Of course, the new HVCC (Home Valuation Code of Conduct) is out.  This new change has completely turned the appraisal industry on its head.  Basically appraisers are to have no more communications with the homeowner, realtor, etc.  with regard to the appraisal being completed.   All of the AMC'S (Appraisal Management Companys) are asking us to sign agreements stating we will not communicate with anyone except the contact to get access to the home.  If we are contacted, we must not disclose any information about the appraisal, and more importantly disclose the "who, what, and when" to the AMC.   

Most of our business is coming from the third party managers OR AMC'S now.  Making me wonder what to do with all of the email addresses I have accumulated during the past 10 years.  I have kept these for marketing purposes.  Guess for now I will hang on to them and see what finally "pans out" in this new environment. 

I will be posting the new HVCC on my site within the next week.  Every time I get ready to do this, I get a revised copy.  So with that being said, let me know what you think. 

Market Values continue to decline.   I talked to a competitor yesterday who said the market is so confusing that determining a good market value is difficult.  I could not disagree more.  Appraisers are slaves to the market, and as long as you are depending on an experienced appraiser to determine value, there will be no confusion.  In todays changing market, the most recent comps must be utilized along with several comparable listings.  And remember, the appraisal report will not be necessarily accurate after 60 to 90 days. 

Because there are going be many foreclosures, some of those sales should be considered in determining market value.  In my local MLS, realtors are choosing not to upload many short sales and foreclosure sales in the system.  I guess the reason would be that they might be used for comparable purposes.  As that might be true in some instances, its not giving a totally overall accurate view of the market.  This in turn does a dis-service to the market as a whole.   All comparable sales should be disclosed.  An experienced appraiser and realtor can determine if data should be used to determine market value.   

To a better 2009...

Recently I read an article in the Hattiesburg American, that quoted a realtor saying the local market is balanced.  I am not sure what that means, but if balanced means values are falling, many homes are on the market, and concessions are running rampant...then I will except balanced.  I prefer big time adjustments.   Those of us who have been in the the market during the past 4 years have been spoiled.  Listing were snatched up, asking prices were blown out of the water, supply was going down faster than a bottle of vodka at Cortney Loves' House.  That is not the case now.  Inventory is building, realtors are begging, and supply is growing like the alimony Britney will be paying k-Fed.     Seriously speaking....I think is time for all of us to except that values will be making a big time adjustment.  So lets pull up our sleeves, adjust all our listing down 10%, and quit trying to keep up the Jones'.  They could be taking us to a scary place in home ownership.  

http://www.hud.gov/offices/adm/hudclips/guidebooks/4930.3G/index.cfm