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Yesterday, I was able to find the Federal Trade Commision (FTC) response dated April 30th regarding the Home Valuation Code of Conduct.

This was made during the comment period before the HVCC becomes finalized.  The FTC stated in their document that they are in favor initiatives that improve the mortgage process for consumer and also wants to protect appraiser independence.  Based on their response it appears that the FTC has some concerns regarding the Home Valuation Code of Conduct and how it was written when submitted for comment.

The FTC stated that mortgage brokers account for 58 - 70% of all mortgage loans and that the HVCC could inpose unduly hardships to consumers to access mortgage credit and increase appraisal fees, and reduce timely and accurate appraisals.

If a consumer currently contacts a mortgage broker for purchase or refinace they begin the process which includes the appraisal work. During the process the mortgage broker contacts several banks to get the best interest rate and terms for their client.  Under the HVCC as it currently stands it states that the mortgage broker could not submit the same appraisal to the different banks.  This may result in a consumer not being able to get the best term/loan agreement since banks change their offers fequently.

Also the FTC states that the HVCC may undermine appraisal independence and result in faulty appraisals.  Remember this code of conduct was written as a result of a lawsuit in which their were fraudulent appraisals that were used.  It was determined that the appraiser felt undue pressure from the appraisal managment company to come in at a higher number.... yet the code says that all appraisers must get their work from an appraisal management company.

When you are working with individuals credibilty and reason to do the right thing you will also find some that will work the system.  I am not sure how the code of conduct will change that dynamic.  Currently all appraisers must take a Standards and Practices course that clearly defines their roles and responsibilities in the lending process.  If someone is going to cheat the system they will cheat no matter what system is in place.

My personal take on the HVCC is that it is limiting appraisers like myself who are ethical and trying to build a business by providing quality appraisal reports in a timely fashion.  My business is built on the service that I provide to my customers.  If the HVCC isn't changed than customer service doesn't matter and I become an form-filler.  That isn't what I want to do with my career and I truly hope the HVCC is changed so that I won't have to in the future.  I am glad to see the FTC spent time reading through the Home Valuation Code of Conduct and realized there are some big problems for both consumers and appraisers.

Recently the Office of Federal Housing Enterprise Oversight (OFHEO) released a report on housing markets in the US and highlighting areas of decline and appreciation.

In the last Colorado is staying steady, with an statewide overall appreciation rate of 1%.  Grand Junction is seeing much stronger growth according to the study and the Denver/Aurora area is right at 1% growth for the 1st quarter.

Of course these are general numbers and you can go to any neighborhood and find that some areas are stronger and some are declining faster than the 1%, however I think this is a good indicator of the Denver Metro area at this time. 

Reading the local newspapers you have to be very careful where the story is generated.  If it is a national story than it talks about declines and a difficult housing market.  While they market isn't anywhere near what it was in 2000, we are seeing small recoveries which can be overlooked in when reading national stories.

According to  the OFHEO the top 20 declining cities are all located in California and Nevada.  These are markets that saw double digit growth earlier in this decade.  Lots of people had to get interest only loans just to be able to afford monthly payments, or have a 40 -50 year mortgage.  These people don't have equity in their homes and now owe more than it is worth. 

In the Denver Metro area there are people that find themselves in this same situation.  Owing more, unable to refinance or sell and having a difficult time paying the mortgage.  With the busiest time of the year to purchase real estate upon us, hopefully we will continue to see a slow and steady increase in prices.  This will allow people some options that they might not have had a few months ago to either sell or refinance.  The next 3 months will be interesting to see how the market can correct itself.

The comment period for the Home Valuation Code of Conduct just ended yesterday.  As a fee appraiser that is trying to build a successful business I am very dismayed by the first draft and hope to see significant changes now that the comment period is over.

This code of conduct is a result of lawsuits filed by Andrew Coumo the Attorney General for the State of New York.  It is attempting to ensure that appraisers provide an accurate value opinion without being pressured by a lender/mortgage banker/broker.  This make sense - an appraiser should give their opinion of value and not have to "hit a number". 

Unfortunately, the code of conduct takes away the appraisers ability to market their company and build relationships to increase their business.  Currently the code is written to allow Appraisal Management Companies an opportunity to work as the middle man for every transaction of course receiving a large portion of the appraisal fee (typically 40%).

In this scenario providing a quality product and good service is not rewarded. There are many appraisers in todays market that see their job as filling out a form.  These are the people that do the minimum to get the job done.  Look at your last appraisal - when it asks for description of the house does it say "Standard" or does it go into detail about your home?  What about your neighborhood?  I have seen several appraisals where all the boxes are checked and there are 1 or 2 sentences of descriptions and that is it.  Is this an appraiser that has spent the time needed to do the research to truly understand how much your home is worth? 

While the intent of the Home Valuation Code of Conduct is good, I think it needs a lot of changes to protect the buying public.  Instead it seems to be protecting the banks, automated valuation products and Appraisal Management Companies. Did I mention that one of the lawsuits was directly related to an Appraisal Management Company pressuring it's appraisers... Oh and that at one time Attorney General Coumo was a major shareholder in an Appraisal Management Company.  Seems to me the Attorney General should be more concerned about protecting the homeowners and ensuring they get a quality appraisal report when they purchase or refinance a home.

The Real Estate Commission in the State of Washington is against the Home Valuation Code of Conduct.  Wondering why Erin Toll who is the Director for the Real Estate Commission in the State of Colorado hasn't commented about these changes.  As a woman who has made a name for herself as a consumer advocate I would think she would see the problems with what has been suggested.

I will update my post as more information becomes available.