HVCC is Here to Stay. Any Chance for Improvements to the Process?
Our FOCIS –plus study has a section on Home Value Code of Conduct (HVCC) compliance. Warehouse lenders in particular are interested in whether a mortgage company has a written HVCC policy and what process lenders use to comply. Some lenders have an internal appraisal management process to comply. The process involves approving appraisers for their panel and having someone, not involved in the origination process, select appraisers randomly. Others use an external appraisal management company (AMC) that has a stable of appraisers that are selected randomly.
What is the impact of HVCC?
HVCC has been a challenge for originators who don’t have the flexibility they had in the past. Some mortgage bankers complain there are quality issues with appraisals and order a review appraisal before approving a loan. Some appraisers are complaining they can’t earn the fees they earned in the past if they are part of an AMC. It seems all participants have something to say about HVCC.
I called Griff Straw, the CEO of Solidify, to get some current color on HVCC and how people are adjusting. Solidify is an appraisal technology company that provides a solution for HVCC compliance. Here is the dialogue between Griff and me.
Griff: One of the most asked question I get today is when is HVCC going to go away?
Cork: What do you think?
Griff: The heart of HVCC is appraisal independence and the key objective of HVCC is here to stay. We may have some changes in the mechanics and process, but appraisal independence is here to stay.
Cork: I would agree. I can’t image congress or regulators back peddling on this one. We’ve heard many failed thrifts recently were the result of appraisal quality issues.
Griff: We’ve heard that as well. HUD recently adopted the practices of HVCC.
Cork: So how can industry participants adjust and adapt to HVCC?
Griff: We offer a technology solution for lenders and appraisers. Lenders can create a panel of high quality appraisals and our technology provides compliance with HVCC. Lenders have reporting tools to monitor appraisal quality. In addition, appraisals don’t have to share their fee with us.
Cork: Sounds like a win win for lenders and appraisers. How do you get paid?
Griff: Lenders pay us a technology fee on each transaction. Most lenders believe this is a much better approach to comply with HVCC and ensure high quality appraisals.
Jimmy Dean once said: “I can’t change the direction of the wind, but I can adjust my sails to always reach my destination”.
HVCC is here to stay. We can’t change the fact that appraisal independence is going to be a critical part of the loan process. We can however investigate and find solutions to adapt to the change.