One of the most difficult pieces of the mortgage process right now is the appraisal. On May 1st, new guidelines took affect with the Home Valuation Code of Conduct (HVCC). The intent of this was to eliminate "upward bias" in appraisers as a result of pressure from lenders. Unfortuantely the result of this new guideline has been a lower quality appraisal. The biggest complaint from appraisers, lenders and real estate agents is that the process is slow and the values are low.
The reality is appraisals are harder than ever before. Now with the lack of data (other than foreclosures) and additional reports that are required for an appraisal, it takes twice as long to complete an appraisal. The number of appraisals being ordered is much higher than it had been. The time between a purchase agreement being written and the closing date is usually less than 30 days. If the closing date is further out, the seller wants a final approval sooner. In the last few months, we have seen more closings in 3-4 weeks. With appraisers and underwriters being much busier, it puts everyone on a "rush" status and files are finished right before closing.
With refinances, the lender can't "talk" to the appraiser, so the appraiser has less information about the mortgage. There have been many refinances that can't be approved due to lower property values. Sometimes just a few thousand dollars ($5000-10,000) separates an approval and a denial on a refinance.
Two lawmakers that serve on the House Financial Services Committee introduced HR 3044 late last week in an effort to temporarily lift new requirements from valuations and the way appraisals are ordered. It would impose an 18 month moratorium on the new rules. The lawmakers concerns are the way appraisals are currently being ordered, many appraisers are going out of their normal area and it leads to faulty valuations as appraisers have little or no background in the housing market that they are being sent to.
This makes it difficult for buyers, sellers and everyone else involved in the real estate transaction. Hopefully we will have a solution sooner than later!!
Leslie Vanderwerf, Advisors Mortgage - lvanderwerf@advisorsmtg.com – Website
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