A message from NAMB regarding the HVCCMortgagePress.comCongress, Home Valuation Code of Conduct, Appraisal Management Companies, National Association of Mortgage Brokers
There has been significant bi-partisan movement forward by
Congress on the Home Valuation Code of Conduct (HVCC) as a result
of the phone calls made to your legislators' in-district offices
last week! Key Republican and Democrat Congressmen have shown their
support for the National Association of Mortgage Brokers' cause,
and we need to keep the momentum going. We cannot stop now!
Follow up Call to Action!
Please contact your Senators and Representatives TODAY, and urge
them to stop or delay the implementation of the final rule
promulgated by the FHFA, which implements the controversial
HVCC.
Congress has returned from recess; please contact your
legislators' at their Washington, D.C. offices. You can access the
contact information for your legislator here. We encourage you to
make every effort to try again if you are not initially successful
in contacting them. It is vital to the overall effectiveness of
this call.
Also, please forward this Call to Action to your mortgage broker
and appraiser contacts! By encouraging other mortgage professionals
to make calls, legislators will better understand the HVCC's
negative impact on the entire mortgage market.
Talking points
Its impact on consumers:
A. The HVCC negatively affects consumers by increasing the costs
to consumers for an appraisal, reducing consumer choice and
adversely impacting a consumer's ability to obtain a reliable and
quality appraisal.
B. The HVCC creates a heightened risk for consumers by requiring
the use of unregulated Appraisal Management Companies (AMCs) for
appraisals. The original investigation that prompted the HVCC's
creation was of an AMC and WAMU alleging that they engaged in
practices of pressuring appraisers on behalf of WAMU.
C. It increases the time to fund loans for consumers which
necessitates longer rate locks or extensions of existing locks
thereby increasing costs to consumers. In the case that a new
lender or broker is chosen, a new appraisal will be necessitated,
increasing the time to fund.
D. It restricts the portability of an appraisal since each
lender, in effect, will require a new appraisal.
Its impact on small business:
E. The HVCC squeezes out small business professionals that are
striving to survive and have been working with consumers in the
very neighborhoods where they are looking to purchase homes.
F. The HVCC affects small business appraisers, mortgage brokers,
Realtors and lenders in all 50 states without having been reviewed
by ANY state or federal legislature or agency.
G. Small business professionals who have indepth knowledge of
local market conditions are being sacrificed for large AMCs who
operate on a national scale to distribute orders through a primary
processing hub or hubs which can be located up to thousands of
miles away from the property being appraised.
Its failure to comply with procedural law:
H. Although the HVCC is broad regulation having a significant
impact on small businesses and consumers, it did not go through the
Administrative Procedures Act, the Regulatory Flexibility Act or
other procedural laws as required by any regulation issued by a
federal agency.
I. FHFA claims that as Conservator of the GSEs, its actions are
not "agency actions" under the APA and that its actions are
"expressly precluded from judicial review" as a result of the
Housing and Economic Recovery Act.
Appraisal standards exist:
J. The Federal Reserve issued appraisal independence standards
through Regulation Z being implemented this October which applies
to every industry participant.
K. The banking regulators issued interagency guidance on
appraisal standards which are expected to become final this
year.
Background:
1. The HVCC negatively affects consumers and the already
fragile economy.
As it stands today, the HVCC will take effect on May 1, 2009, and
this rule states that GSEs will no longer purchase loans from
lenders "accepting appraisal reports completed by an appraiser
selected, retained, or compensated in any manner by any third
party." It overwhelmingly impacts small lending institutions and
independent appraisers to the detriment of consumers.
a) Consumers will have to pay more for their appraisals to have
them completed by AMCs.
b) The exclusive use of AMCs limits competition in the
marketplace, leaving the consumer and independent appraisers at a
disadvantage.
c) The AMC model is flawed and will produce poor quality work
that will create a continuation of the declining housing
market.
2. The manner in which lenders will collect fees in
compliance with the HVCC is a potential violation of
RESPA.
a) Lenders may be in direct violation of section 8(b) of RESPA due
to possible up-charging and fee-splitting. Every lender will be at
risk of HUD action on every brokered loan they underwrite.
b) Lenders will not utilize brokers for fear of potential RESPA
violations. In addition, those lenders who only do brokered loans
will go out of business all together, and competition within the
marketplace will cease to exist. Again, at the detriment of
consumers.
3. There already exists pervasive federal regulation of
the mortgage lending industry's acquisition of real estate
appraisals.
a) FIRREA: In 1989, following the savings and loan crisis,
Congress passed the Financial Institutions Reform, Recovery and
Enforcement Act (FIRREA), which established a multi-faceted real
estate appraisal regulatory system involving the federal
government, the states, and The Appraisal Foundation. Since 1989,
the federal agencies responsible for regulating financial
institutions have promulgated regulations under FIRREA that set
forth "generally acceptable appraisal standards," and have issued
guidance relating to real estate appraisals, which, among other
things, set forth standards for selecting qualified appraisers.
These regulations and appraisal guidelines both prohibit improper
influence on appraisers and work to ensure appraisal
independence.
b) FRB Final Rule: In July 2008, the Federal Reserve Board
(Board) issued a final rule prohibiting all mortgage brokers,
mortgage lenders and their affiliates "from coercing, influencing,
or otherwise encouraging appraisers to misstate or misrepresent the
value of a consumer's principal dwelling." In issuing this final
rule, the Board concluded that "[no] particular procedure for
ordering an appraisal necessarily promotes" fraudulent appraisals.
Rather, the Board determined that the "coercion of appraisers,"
whether by lenders or mortgage brokers, "is an unfair practice" and
the final rule should apply to lenders and mortgage brokers alike.
NAMB fully supported the Board's final rule because it targets
problematic practices, rather than business relationships that
present no inherent problems.
c) FFIEC Interagency Guidance: On Nov. 19, 2008, the FFIEC
regulatory agencies issued proposed revisions to the "Appraisal and
Evaluation Guidelines," and requests for comment. The FFIEC
regulatory agencies are currently reviewing the submitted comments
and plan to issue a final rule this year.
d) HR 1728: "The Mortgage and Anti-Predatory Lending Act of
2009" was introduced on March 26, 2009. TITLE VI of the bill
APPRAISAL ACTIVITIES deals with every facet of the appraisal
process that will ensure true appraisal independence and protect
consumers.
4. The HVCC fails to comply with the Administrative
Procedures Act.
The HVCC is a substantive rule that created de facto regulation of
the entire mortgage industry in violation of the Administrative
Procedure Act (APA).
a) The FHFA is an agency and the HVCC falls within the
definition of a rule under the APA. As such, the FHFA was required
to utilize notice and comment rulemaking proceedings under the APA,
but the agency failed to do so.
b) Because this rule regulates the entire mortgage industry and
the FHFA failed to follow proper rulemaking procedures, we believe
the HVCC is void, invalid, and unenforceable.
For more information, visit www.namb.org.
