Article examines appraiser fees under the HVCC

An article by Kenneth R. Harney on examines the issue of appraisal fees under the Home Valuation Code of Conduct (HVCC). The code establishes a firewall between appraisers and loan originators in an effort to ensure appraisal independence. This has led to the increase in use by lenders of AMCs.

Most AMCs have a business model where they charge a fee upfront for an appraisal, and then pay the appraiser a part of the fee. In his article Harney gives the following example, “an appraiser who’d normally charge $325 for a valuation ordered though a lender or mortgage broker, now might be required by a management company to do the same work for $175 to $200.”

The downward pressure on fees suffered by appraisers is a major factor in deciding to work with AMCs. A recent poll by Valuation Review asked appraisers if they were going to focus their work on AMCs under the HVCC. A majority said they would be, but only partly.

Most of the comments received cited the lower fees as the main reason not to build relationships with AMCs. Indeed, one respondent wrote “Until they regulate the fees and give experienced and qualified appraisers their due fee – I will work as little as possible for AMCs.”

Harney notes that the AMCs driving up of costs for appraisals will be passed on to the consumer, who could now be charged $400 or more for an appraisal. After paying the appraiser half of that amount, or even less in some cases, the AMC then pockets the difference.

To make matters worse for the consumer, the appraisal needs to be paid upfront, making the success of the loan file an irrelevant concern for AMCs.

The author claims that, as well as Fannie and Freddie, appraisal fees are increasing for FHA loans too. He cites anecdotal evidence from a broker of an instance where appraisal fees for an FHA cash-out totaled more than $1,000.

Harney concludes his article by calling for home buyers and realty professionals to “be aware of these sharply escalating fees – and their controversial use on FHA loans that are supposed to be exempt from the Fannie-Freddie code.”


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Mortgage brokers sue over valuation code, appraisers pitch in

As Valuation Review reported this week, the National Association of Mortgage Brokers (NAMB) has filed a lawsuit with the U.S. District Court for the District of Columbia against Federal Housing Finance Agency (FHFA) Director James B. Lockhart over the Home Valuation Code of Conduct (HVCC).

NAMB President Marc Savitt said in the announcement that the HVCC will drive up costs for consumers and push small businesses out of the market, and that it’s critical for mortgage and real estate professionals to maintain an appropriate level of contact with appraisers to ensure appraisal quality and independence.

Savitt spoke in more detail with Valuation Review recently regarding the suit. Here’s an excerpt from the interview:

Valuation Review: Would you prefer that the code be dropped completely? If the parties were to alter it, what changes would you like to see?

Savitt: We want it thrown out. Our suit will be in court probably within 10 days or so. We’re going to ask for an injunction to have this thing put on hold until it can be heard by the court. Especially with everything going on – we’re trying to restart the housing industry – this is going to delay the process and add cost to consumers.

Let me give you one example. Appraisers can’t work for half price. They’re hurting now. So if you’re making $400 on an appraisal now, and the appraisal management company is going to pay you $200, you’re going to raise your prices. So who ends up paying for that? The consumer.

You’re going to have a lot of lost time because you’ll have to have longer lock-in periods. Lock-ins are going to cost more money because they’ll be for longer periods of time.

Financially, it’s going to hurt the consumer first and foremost. Secondly, it’s going to hurt the mortgage brokers and the appraisers. The appraisers have actually called NAMB to team up and fight this thing because they’re own trade associations won’t stand up for them. They won’t fight for them.

To read the whole interview, see “NAMB president: Appraisers backing HVCC lawsuit” (requires subscription).

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February USPAP Q&A: Intended users, out-of-state review appraisers

The Appraisal Foundation has posted its USPAP Q&A column for February 2009. The latest column addresses:

  • Appraising Without Knowing the Intended Use or User
  • Probate Court Statute Basing the Appraisal Fee on the Appraised Value
  • Must a Review Appraiser be licensed or certified in the state jurisdiction where the subject property is located?
  • USPAP Applicability in Valuation for Financial Reporting

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Defendant in appraisal data case responds to charges

FNC has filed its official response to plaintiffs’ allegations that it misused data from appraisal reports sent over the AppraisalPort system.

Valuation Review has been covering the case since it was introduced in 2007.

In Harold H. Huggins Realt, Inc., P.E. Turner & Company, LTD., Residential Appraisal and Consulting, Inc. and Alfonoso V. Torres doing business as Front Door Appraisals vs. FNC, Inc., a trio of appraisers filed a federal class action lawsuit against the technology firm seeking damages for negligent misrepresentation, misappropriation, breach of implied contract and other charges.

According to the plaintiffs, although FNC had represented to them that the data they submitted using FNC’s “secure” data transmission service, AppraisalPort, would not be accessed or used by anyone other than the recipient lender, FNC accessed that data it “warehoused” and used the data to build its own valuable database, a database which FNC then resells to others.

In its answer to the complaint, FNC denied all allegations and claims that the suit is not appropriate to be a class action. Learn more about the details of FNC’s response in Valuation Review‘s report.

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FHA appraisal Q&A – Well and septic issues

What are the FHA appraisal requirements for well, septic and property line distances? Here’s an excerpt from HUD’s Frequently Asked Questions – Valuation Protocol.

1. Is the appraiser still required to report well, septic and property line distances on an addendum to the URAR or is this only required when problems are noted? How is the lender to determine if these distance requirements are met if the appraiser is not required to identify?

The appraiser is not required to sketch the distances between the well and septic, however, he or she should be mindful of FHA’s minimum distance requirements between private wells and sources of pollution (septic systems) in the performance of FHA appraisals; and, if discernible, comment on them. Prudent appraisal practice would have the appraiser requesting a copy of a survey from the homeowner, if available.

If the appraisal notes a distance issue it could be potential for contamination. If the appraisal notes any adverse site conditions, that may warrant further inspections or due diligence. In either case, it is the lender’s decision as to whether a qualified third party should map the distances and/or require testing for compliance with local or state requirements, or, in their absence, FHA requirements. Appraisers are expected to have geographic competency, which would include familiarity with local or customary inspection requirements. Local or customary requirements should be noted within the appropriate area of the appraisal report. However, the decision to require a test, certification or inspection, other than what is automatically required as noted in ML 2005-48, is made by the lender and FHA requires the lender to be familiar with the market areas in which they lend.

For more FHA appraising expertise, don’t miss Valuation Review‘s special report: “FHA Appraising 101: 15 Top Tips and 124 FAQs.” Access to the report is one of the benefits you receive when you subscribe to Valuation Review.

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Answers to your Fannie Mae 1004MC questions

The learning curve for the new 1004MC Market Conditions Addendum could be steep for some.

In an exclusive Q&A with Valuation Review, McKissock USPAP Instructor Tracy Martin explained the challenges appraisers will face in completing the analyses, what she’s hearing about clients possibly paying higher fees as a result of the form and her thoughts on whether the 1004MC will solve the primary problem: that too few residential appraisers are able to provide the level of detail needed for clients to understand neighborhood/market trends.

Here’s an excerpt:

What should appraisers know about any possible liabilities from the form?

In my opinion, the greater liability lies in not being able to support opinions and conclusions. In the case of the 1004MC, the liability will increase in direct proportion to the appraiser’s inability to research, analyze and interpret market data.

And, while this may not be a liability, per se, I cringe at the thought of the inevitable questions from underwriters who do not understand the form posed to appraisers who do not understand the form.

What other tips or advice can you share with appraisers regarding the form?

Don’t wait for continuing education classes. Make every effort to become proficient with a spreadsheet program. Learn how to incorporate MLS data into Excel (or some other spreadsheet program). Learn how to create charts, graphs and tables.

Maintain a master database, rather than bury the data in individual work files. Re-inventing the wheel for every assignment is counter-productive.

The master database should be built upon, that is, new data added, on a periodic basis – weekly, monthly, quarterly. The frequency of the addition of data should reflect that dynamics of the market. For rapidly changing markets, weekly input would enable the appraiser to identify trends and/or changes “at the drop of a hat.” For more stable markets, monthly or quarterly input would probably suffice.

You can read the full article at

Also, don’t miss the upcoming Mastering the 1004MC Webinar.

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Valuation Review recently hosted a live national audio seminar on the new Home Valuation Code of Conduct from its Cleveland, Ohio, studio. Hundreds of appraisers, lenders and others called in to participate and get answers to their questions about the code.

A few highlights:

  • US Bank Chief Retail Appraiser Tony Pistilli on how appraiser exclusionary lists might change — “We’re discussing re-evaluating our exclusionary appraisal lists by virtue of how many different business lines we have. We, at times, have disparate lists in the bank itself, so we want to consolidate that and only include those that have extensive documentation going forward. There’s going to be, I think, a new list for our bank that would include those appraisers on the Fannie Mae or Freddie Mac exclusionary list, and then anyone we have substantial documentation for within the last year.” 
  • FNC Chief Appraiser Kathy Coon on fee changes — “I suspect appraisal fees will increase (under the HVCC). There are only so many appraisers to go around, and of those, there are only so many that can produce quality reports.” 
  • Allstate Appraisal’s Steve Albert on the projected rise in AMC business – “I don’t necessarily feel there’s going to be a rush to AMCs from lenders. … We’re not being overwhelmed by calls from lenders who invariably are choosing AMCs. Everyone’s making that decision over the next couple of months.” 
  • Appraisal Institute VP Joe Magdziarz on appraiser education — “There are about 13,000 licensed appraisers, at last count, on the market today. FHA has precluded licensed appraisers from performing appraisers for them. I would anticipate that will happen eventually in the HVCC.” 

Listener comments about the show echoed the quality of the experts:

  • “Good choice of panelists; well moderated; excellent inclusion of questions”
  • “I would recommend the radio vehicle; October Research has the model down cold. Highly worthwhile.”

For those who missed it, CD copies of the show are available. Also, look for more analysis from the show in an upcoming edition of Valuation Review.

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