Mortgage Daily Logo

Bad Appraisals, HVCC Hindering Recovery?

Appraisal

Home builders and Realtors claim bad appraisals are stifling the real estate recovery, though appraisers say their reports only reflect further deterioration. As appraisal management and software firms enhance their Home Valuation Code of Conduct offerings, a former state regulator calls the new code a disaster.

Foreclosed and distressed sales are being used as comparable properties in home appraisals, though no adjustments are being made to the values for the differences in condition, the National Association of Home Builders announced Monday. The practice is “needlessly driving down home values” because borrowers can distinguish between well-kept and distressed properties.

The NAHB blamed the practice on a lack of interior inspections and called for regulatory guidelines when using distressed or foreclosed comparables. The group said comparable properties further from the subject property should be utilized in areas with a high concentration of foreclosures or short-sales.

Integrated Asset Services LLC said last month that its iValue suite of automated valuation products now includes a distressed valuation feature designed to help servicers more accurately value distressed residential properties. The enhancement identifies properties that are in a state of distress.

“The distressed valuation feature is a way to individualize the value of each property according to the state of the local market and the property-specific factors that may negatively impact value,” Integrated President and Chief Executive Officer Dave McCarthy said in the statement.

Lawrence Yun, the chief economist for the National Association of Realtors, noted yesterday in a home-sales report from the group that poor appraisals are “snowballing” and have become a serious problem. He said sales contracts across the country are falling through at the last moment because of the appraisal problem.

“Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales,” Yun stated. “There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected.”

But the Appraisal Institute’s director of government and external relations, Bill Garber, called Yun’s comments ridiculous.

“We take offense with the notion that an appraisal is only good if it happens to come in at the sales price,” Garber said in a statement Tuesday. “The fact that the value reflected in the appraisal does not match the sales price is not the fault of the appraisal but a result of the market today.”

Garber noted that appraisers are accountable only to their clients, which are typically lenders.

Former Tennessee Real Estate Appraiser Commission chairman John Bullington said HVCC has “backfired and appraisers nationwide are taking the hit.” In a statement today, he claimed appraisals are now averaging two weeks longer than pre-HVCC appraisals and called for the repeal of the code.

Bullington — who said he is a certified general appraiser in Tennessee, North Carolina and Virginia — criticized appraisal management firms for taking a big cut of the appraisal fees while providing unreliable values. The firms don’t have to be licensed, certified or regulated. He emphasized that appraisal management companies are not mandatory, and lenders can maintain HVCC compliance by establishing meaningful risk management practices.

Bullington said an online petition has already garnered more than 38,000 signatures.

Fannie Mae is requiring that as of early next year, all appraisal reports and attachments be electronically submitted in the MISMO XML standard, according to Announcement 09-14. The initiative was endorsed by FNC Inc., which said it will contribute to better risk assessment and improved transparency in the primary and secondary mortgage markets.

FNC said its customers already receive the reports in a format that can automatically create and deliver the MISMO XML appraisal data to Fannie.

Veros Real Estate Solutions said earlier this month that it is fully compliant with Fannie’s new standard.

“While lenders can choose to individually submit appraisals via Fannie Mae’s web portal, Veros’ VRM platform will provide direct MISMO XML integration with the Fannie Mae system to facilitate the efficient flow of the electronic appraisal data,” the statement said.

DartAppraisal.com has been integrated with Mortgage Builder’s loan origination system, a statement last month said. The appraisal management company said its solution is HVCC compliant.

Southern Trust Mortgage LLC has implemented the Global DMS OASISOne platform, an announcement this month said. The online commercial and residential real estate valuation suite utilizes a centralized automation of reporting standards including SAS 70 reporting and offers the option to create government auditor logins.

GlobalDMS is a MortgageDaily.com advertiser.

An appraisal training program has been created for banks and mortgage lenders by the Appraisal Institute, a June 18 news release said. Dubbed Commercial Appraisal Engagement and Review for Bankers, the on-site Webinar reviews how appraisals fit into the regulatory scheme for financial institutions. The program can be delivered in either a four-hour or seven-hour format.

Related Posts

How Are My Property Taxes Calculated and How Do I Pay

How Are My Property Taxes Calculated and How Do I Pay

Homeownership comes with lots of new expenses and increased fees, like homeowner’s and title insurance, pricier utility bills, and property taxes. Even if you’re prepared for higher bills, it’s important to know exactly how much they’ll spike up. Especially when it...

Benefits of a Home Appraisal

Benefits of a Home Appraisal

A home appraisal inspection is not the same as a home inspection. The home appraisal inspector works for the bank that will be lending you the money to purchase your new home. The main reason an inspection is required is that the bank wants to ensure that the money...

Understanding Your Home Inspection Report

Understanding Your Home Inspection Report

How to read a home inspection report? A home inspection report, especially on an older home can be quite extensive. It usually carefully designed to be clear, easy to understand and helpful to the buyer. The home inspection report is an overview of conditions...

What Does a Home Inspector Do?

What Does a Home Inspector Do?

A home inspection report is very different from a home appraisal inspection. Inexperienced real estate salespeople sometimes do not understand the difference. Although real estate professionals that have worked in the mortgage industry and decide to shift into sales,...

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming paperwork has been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and furniture need to...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand-new mortgage loan can be a difficult task, especially for first-time homeowners.   After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first...

Newsletter

Don’t worry, we don’t spam