Fed Eliminates HVCC, Appraisal Management Companies Here to Stay

Reverse mortgage originators hoping that the Federal Reserve’s final interim rule ending the Home Valuation Code of Conduct would eliminate the use of Appraisal Management Companies are out of luck.

According to the Department of Housing and Urban Development, the Fed’s final interim rule has no direct implications on the agency’s appraisal independence guidelines so far.

“We are still reviewing the Interim Rule as well as the Dodd-Frank Bill and at this juncture do not anticipate the need for any significant policy changes,” said Lemar Wooley, spokesperson for HUD in an email to RMD.

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AMCs active in the industry tell RMD they haven’t seen any changes that will drastically change alter the business.

“Much of the Fed policy solidifies the rules our industry has been guided by for over a year with a few minor differences,” said Erik Richard, CEO of Landmark Reverse, an AMC that focuses on the reverse mortgage industry.  “We are curious how our competitors will work to comply with the customary and reasonable fee language in the new regulations.”

In 2009, HUD published its own requirements to ensure there is a buffer or firewall between the appraiser and loan originators as well as a “reasonable and customary” free requirement.  The Fed’s final interim rule is designed to be consistent with HUD’s guidance but changes a bit according Richard.

The Fed requires appraisers be paid a customary and reasonable fee for services performed in the geographic market in which the property being appraised is located.  These rates are established by objective third-party information, including fee schedules, studies, and surveys prepared by independent third parties such as government agencies, academic institutions, and private research firms.

“Our business model has always been you get what you pay for, so we pay our appraisers a premium to work with us,” said Richard.  “It would seem that other AMCs will have to either raise appraisal fees or cut their profit margins up to 50% unless they can convince the government that $200.00 is a reasonable fee for an assignment.”

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  • Since the HVCC and HUD rules were never tied together, the HUD statements are no surprise. While there was little hope of HUD volunteering a step backwards in their policy, it does not mean that the industry should not press to have it altered.

    Again the HUD policy seems to assume that the former policy resulted in lenders and borrowers compromising the independence of appraisers. It seems as if the better course would have been to prosecute appraisers and lenders who participated in such practices. The quality of appraisal has declined under the current policy and with no HVCC requirements seems doomed to decline still further in HECM land.

  • Its still the most anxiety ridden part of my relationship with my clients- they can’t get past the part where I say I have no idea who, when or what the appraiser will be and it impacts the biggest part of the whole process.

    When I buy a burrito at my local TexMex restaurant I spin a wheel on Mondays to see what its going to cost me- I feel like the appraisers do the same some times. And I’m not joking.

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