Some HVCC Myths

A lender must use an appraisal management company to order an appraisal. This is simply not true.

A loan correspondent (direct funding) can order appraisals directly from the appraiser.  Mortgage sellers must separate production from risk management however, and this includes appraisal ordering but this can still be done in-house.

Mortgage brokers cannot order appraisals directly but can use the appraisal ordering service of the lender that is funding the loan.

A lender can not speak directly to the appraiser. Again, this is simply not the truth.

There are no restrictions on communication between the lender and the appraiser during the appraisal process. Long before HVCC there have been restrictions against unduly influencing the appraiser.

A lender can no longer order “comp checks.” Again, not true.

Years before the HVCC appraisers were required to perform “comp checks” with the same care and quality as any other appraisal function.

What is wrong in using an appraisal management company?

There are a number of reputable appraisal management companies (AMC's) in the market.  AMC takes appraisal orders from lender, and then the AMC chooses the appraiser and places the order.  The AMC keeps part of the borrowers appraisal fee for this service. 

According to industry news a major concern is the lack of regulation and oversight.  AMC’s are not appraisers or lenders and therefore are not regulated by the State’s Department of Real Estate (DRE) or Office of Real Estate Appraisers (OREA.) 

Another concern is that the use of a third party for appraisal ordering will create additional risk in the market.   For example, the AMC can be located in Kansas and order an appraisal for beach front estate in San Diego.

Another example is that AMC may not verify the appraiser is experienced in appraising the property type in question, and may not verify the appraiser is familiar with the neighborhood.

Finally, the AMC may not disclose to the borrower how much of the appraisal fee actually goes to the appraiser.

What should you do if an AMC is involved in your appraisal?

Ask the AMC to verify that appraiser is experienced in the property type being appraised, and is familiar with the area.

If you are paying for the appraisal, ask how much of the fee actually goes to the appraiser.

Where can I find out more?

Dispelling the HVCC Myths (Appraisal Institute)

click: HVCC Myths

The HVCC Document (OFHEO)

click: HVCC document

HVCC Frequently Asked Questions (FNMA)

click: FNMA HVCC FAQs