This post was provided by our friends at WoodlandsHomeListings.com who specialize in homes for sale in Woodlands TX
The past few years have proved to be a rough road for real estate appraisers. After the housing and financial crisis set in across the country, the government started adding new regulations to the mortgage sector of the appraisal industry. While some of the changes might have been needed, a lot of them did nothing but force a lot of good appraisers out of the business.
The most damaging blow the appraisal profession took was called the HVCC which stands for Home Valuation Code of Conduct. This new set of rules was created by the New York Attorney Genereral, Andrew Cuomo, who talked Fannie Mae and Freddie Mac into adopting these new codes and in exchange the Attorney General’s office would stop investigating the two mortgage giants. At first glance the HVCC looked like it would be a good deal for appraisers but in hindsight it almost destroyed the profession.
The main goal of the HVCC was to create a communication barrier between the loan officer and the appraiser. The reasoning behind this was that Cuomo believed some appraisers were being coerced by loan officers into inflating appraisal values in order to get a loan done. The HVCC’s solution was to add a middle man into the appraisal process and most lenders starting using appraisal management companies. These management companies would then hire the appraisers instead of the loan officer doing it directly. With this new found power that management companies had over the appraisers, they quickly started slashing the appraiser’s fees and professionals were forced to either work for a significantly reduced wage or get out of the industry. No one was regulating the appraisal managment companies and the HVCC allowed them to monopolize the industry.
The HVCC has since been abolished, as people started to realize it was a bad idea, but a lot of damage had already been done to the industry. As the lender’s business models have changed because of the HVCC, most will continue to use appraisal management companies. The goverment has tried to introduce new law that requires the management companies to pay appraisers "Reasonable and Customary Fees" but they have always found ways around it. With significantly less certified appraisers in the industry today, basic supply and demand should start pushing appraiser fees back up to where they need to be. It’s time for appraisers to take back their industry.