The change that we in the mortgage and housing industries have experienced within the past year is amazing. As a result of last fall’s elections, we have gone from a relatively conservative government to a significantly more liberal one. The economy has tanked in a way that most of us have never witnessed. Now with the Home Valuation Code of Conduct (HVCC) and other regulatory mandates, some of us have been less than positive about our profession and our jobs.
Even the more sober among us must acknowledge that things in our industry going forward will be at least different, if not more challenging. Since I am generally an optimistic person, I tell myself that there must be a silver lining up there behind those clouds. For every door that closes another opens. It is just my job to interpret all of this and move in the right direction.
Since most of us do not want to change professions, I am going to take the position that someone has to do mortgages and that the market will take care of any excesses imposed upon us by the government. Looking at it this way: I have come to the following conclusions and encourage you to do likewise.
Half of the market
The HVCC only applies to mortgages sold to Fannie Mae and Freddie Mac. They only make up part of the market. That changes on a daily basis, so let’s say they are involved in half of the current market. That leaves 50 percent of the market not affected by HVCC. Federal Housing Administration (FHA) loans are very popular right now, and they are not affected by the HVCC. This is something for those of us consumed by all of the HVCC negativity, to take heart about.
The other half
To listen to some loan officers out there, one would think the only way they can make a living is to influence appraisers into appraising property for more than it is worth. I have too much confidence in the integrity of our mortgage professionals and too much confidence in our system to believe that. Fannie and Freddie are going to be buying large numbers of mortgages. Many if not most will be approved without having to be readdressed in regard to the appraisals. At times when the appraisal must be questioned, there is a proper procedure for doing this. If the appraisal is wrong, it will most likely get changed. That leaves a few potential loans that cannot and should not be made. Is that not what appraisals are suppose to be about and the way it should be?
In conclusion, the sky is not falling. To the extent that we think we see pieces of the sky falling, it will not all be caused by the HVCC. Our worst enemy right now is the economy and the sluggish housing market. Home values are truly at a critically low level and this is contributing to the fallout of many of our deals. Until the market stabilizes the road will be rocky.
The new administration, whether you support it or not, is pumping a record-shattering amount of money into system to stimulate the economy. Much of this will help the housing market. This will occur in the form of tax incentives and more jobs available to would-be homeowners.
So it is about time that we all quit complaining and go to work doing what we do best, serving our customers. Appraisers too have been dealt a financial blow within the past few months, so we are in the same boat. Most appraisers are more than willing to take a second look at an appraisal that has come under question. We are not talking merely about the appraisal validating each and every loan application, but also flawed appraisals. There is a proper way to challenge appraisers who do sub-par work, and it is our responsibility to do it. For those properties that do not qualify as collateral for a given loan, then is it not proper to find another deal and move on?
My glass is half full and not half empty. I hope that yours is also.
Charlie W. Elliott Jr., MAI, SRA, is president of Elliott & Company Appraisers, a national real estate appraisal company. He can be reached at (800) 854-5889.
