HVCC The Mortgage Killer
Whether you live in Bonita Springs, Florida (Lee County) or Eustis, Florida (Lake County) or even Palm Beach Gardens, Florida (Palm Beach County), or anywhere in the USA for that matter, your needs to finance a home loan mortgage may be killed thanks to a wonderful idea called Home Valuation Code of Conduct, or HVCC.
What is HVCC? Quite simply it is government intervention that forces a total hands off involvement of the appraisal process in determining a property value for the purpose of financing.
Who is hurt by this? The Appraiser and the borrower.
The Appraiser:
- Forced to join a management company that will collect up to 40% of the appraisal fee. Yes, that is right. The appraiser will now lose almost 50% of his/her income by being forced to join in order to keep working.
- Only targets appraisers. Other valuation models, such as AVM (Automated Valuation Models) and BPO (Broker Price Opinions) are not affected. This will lead lenders to accept these values (which are less accurate) due to the less restrictions.
- No communication between the broker or lender or anyone else that stands to earn money from the deal. Single handedly destroyed all relationships with these entities literally overnight.
Borrower:
- If a new lender is needed, a new appraisal is needed. In the past, the Broker could simply submit their appraisal to the new lender.
- Increased time to fund loans. Lenders and Brokers can no longer communicate with Appraisers to expedite orders, which means longer rate locks (IE Higher interest rates).
- Forced to stick with current Lender even if not what they want because of increase fees to having to obtain a new appraisal.
And there is one big issue that surrounds this whole crazy plan… what is the real estate worth? Well, now without the communication from the broker or lender, an appraiser is left to appraise the value of the property. Sounds good in theory, but let’s look at reality.
Appraiser is given an order to appraiser property 123 Main Street, Anywhere, USA. Appraiser is not told the loan amount or an estimated value on the property. (PROBLEM 1: IN THE PAST, AS A COURTESY, THE APPRAISER WOULD CONTACT THE BROKER TO SAY YES OR NO ON THE ESTIMATED VALUE BEFORE WASTING ANY ONE’S TIME OR MONEY.) Appraiser determines value of property, but to keep in good favors with the management group and to avoid future legal actions for why they valued the property at $x.xx shaves several dollars off the top. (PROBLEM 2: THE ORIGINAL VALUE MAY HAVE BEEN THE RIGHT NUMBER TO DO THE DEAL, BUT TO PROTECT THEMSELVES AGAINST A NOW UNKNOWN, THE DEAL IS DEAD.)
Real life scenario: Borrower wants to refinance house. Eligible for RefiPlus, so we can go to 105% of the appraised value. Appraisal was ordered. Cost $400. Original appraisal cost before HVCC $350. (Appraiser needs to charge more because he has to pay someone now.) We needed at a minimum $x.xx to make the deal fly, but appraiser does not know this. Appraisal took over one week to obtain, when in the past took only 48 hours. Appraisal is returned with a value of $10,000 less then $x.xx. Deal is dead. Borrower is out $400. Broker is penalized by lender for fallout of locked loan.
Had this been pre-HVCC. The appraiser could have said it will be a tight deal on the value and let the borrower decide on whether to proceed. Now, the borrower is out $400 and had no decision. Pre-HVCC, the appraiser would have looked harder for comps to get the value that was needed just to keep the relationship with the broker/lender. (There is nothing wrong with this provided that the comps are there and justifiable.) Pre-HVCC would have allowed the borrower to get a 15-21 day rate lock offering a lower interest rate, instead of a 30 day lock or floating the rate in the current volatile market.
HVCC is a big deal when it comes to financing your home. It costs you, the borrower, more money to finance real estate. It eliminates your options to shop with multiple lenders when using a broker, which means you might not be getting the best deal. It is just all around bad news.
Help us help you in getting your rights back when financing your mortgage loan. A moratorium is being requested for 18 months. Should this happen or even if it does not, contact your state legislature to voice your opinion on the issue. Or take the time to sign a petition against HVCC.
Jason Price
Owner/Principal Broker
(352) 308-7219 Phone
For some time now, Knightlines Mortgage Services has been offering the people of Florida a convenient way to finance and re-finance their residential property.
But that isn’t the entire story - we are also doing commercial lending in all 50 states. AND - now we can offer commercial financing OUTSIDE of the country as well. Caribbean, South America, etc - just call for the details.