The new Home Valuation Code of Conduct (HVCC) appraisal rules went into effect here in Sacramento on May 1 and the sh*t is hitting the fan.  They are a nightmare and a perfect example of the law of unintended consequences.   What started as an investigation by New York Attorney General Andrew Cuomo of Washington Mutual and eAppraiseIT,  ultimately entangled Fannie Mae and Freddie Mac.  To stop further scrutiny into their business practices, Fannie & Freddie agreed to adopt the new appraisal code which professed to isolate appraisers from the unwelcome influence of interested parties (the Realtor and the lender) and allow appraisers to come up with more objective and reliable conclusions.

While it is unfortunately true that too many lenders adopted a coercive approach to handing out appraisal orders, there were certainly other ways to tighten things up.   And, at the same time that these new rules were being put into effect, HUD was loosening the criteria by which appraisers were able to become certified to do FHA appraisals.   How does that make sense?   Well, it doesn’t.

Now we have a new parasitic and profit hungry private beaurocracy–the Appraisal Management Companies (AMCs)–to obstruct deals.   All conventional and some government appraisals must now be ordered through a specific bank who in turn orders the appraisal through one of their “approved” AMCs.  The AMCs pay a fraction of what appraisers are accustomed to earning, extracting the difference for their profit while attracting  the least qualified and geographically most distant appraisers. The results are awful.

Ironically, the banks seem to trust these new HVCC appraisals even less then before.   They subject them to computerized valuation methods that frequently result in a requirement for an appraisal “review” that creates at additional expense to the consumer and delays on the transaction.  Oh and delays often cost the consumer further in the form of “per diem” penalties for closing late.

So, to summarize, HVCC frequently attracts appraisers willing to work cheap, produces very poor quality work that the banks don’t trust, costs the consumer more, causes delays,  and drives seasoned appraisal professionals out of work.    Nice work boys.