HVCC in Sheep’s Clothing

An American Tragedy and the Truth behind our Real Estate Recession

By Don Simkovich – March 1, 2012

Glendale, CA. – I just heard that 2012 will be great for Real Estate because “they” are going to loosen lending regulations.  But isn’t that what got us in trouble in the first place, says a local expert turned activist.  According to Loring Greene, a local developer, Real Estate agent and State Certified Appraiser, our Real Estate recovery should have gained a lot more traction by now.

“When homeowners can get to their equity it employs millions of people, it always has” says Greene.  Ask any Realtor or homeowner if they are happy with our lending regulations and they are all in agreement that we are all in a “world of hurt” because of a new practice that very few consumers are aware of.

Buried under the Frank Dodd, financial reform act of 2011 are the effects of the H.V.C.C., Home Value Code of Conduct, which is obstructing the natural market appreciation that grows from increasing interest and participation in Real Estate.

What has subtlety happened is that we have lost one of our rights that are part of the original “Bundle of Rights” in land ownership.   The freedom to choose is basic in the free enterprise system; you get to choose your own religion, doctor, attorney, CPA, geologist, surveyor, the list grows exponentially in a free society but the freedom to choose your own Real Estate Appraiser has been taken off the table.

Not to mention that appraisers like Greene can no longer market themselves to homeowners, loan brokers and banks who would like to hire a State Certified Appraiser as their appraiser and local expert.  This legislation discriminates against a long standing, noble profession the Real Estate Appraiser, as well as loan brokers and has created a vacuum of accurate appraisals.

The H.V.C.C. affects us nationally and was the result of a little known law suit by Andrew Cuomo, who was the New York State Attorney General and the end result was the H.V.C.C., whose policies were promulgated by the GSE’s, Fannie Mae and Freddie Mac.

The H.V.C.C. went into effect May 2009 and although it has expired its adopted practices still prohibit homeowners, lenders and their agents from knowing their appraisers. Lenders must schedule appraisals through anonymous third-party administrators, called A.M.C.’s, Appraisal Management Companies.  The effects of the H.V.C.C. have replaced experts like Greene with neophyte appraisers, who will work on the cheap and fast to break into the business; but at the cost of the consumer and our property appreciation.

True professional appraisers are being driven out of the business in favor of these inexperienced appraisers who often compete against each other bidding on-line for jobs or are selected by the A.M.C.’s who often take up to 50% of the appraiser’s fee.

The result is artificially deflated appraisals for a variety of reasons by inept appraisers who are often not familiar with the neighborhoods they are assigned.

Originally the H.V.C.C. was a good idea so as to protect appraisers from lender pressure to hit a certain number.  But it has backfired on us and is an overcorrection of massive proportions.

You have to ask yourself, is it really the appraiser’s fault that banks were lending on “stated income programs” to anyone who could and very often would lie about their income to get a loan.

The “Banksters” as Greene calls them and Washington collectively threw out years of regulations that prohibited such lax lending and now “they” want to shunt the blame on the ground troops in the trenches doing all the grunt work scratching for our true values.

Investing in a home can be one of the biggest financial decisions most Americans will ever make and the loss of this freedom to choose our own expert now makes homeownership a much more daunting prospect.

Tragically, Americans have lost two basic economic freedoms, the right to choose their own representation and the right to free enterprise for an important profession in our economy.

But if losing your freedoms doesn’t put a burr under your saddle maybe the loss of your money will as it can often take two appraisals to get a loan approved, doubling the cost to the consumer.

Irate homeowners and agents are calling on Greene to perform a “rebuttal appraisal” for a lender’s “reconsideration of value” to save their deals.  The rebuttal is more time consuming and costly as it requires a full review and critique of the first appraisal and a whole new appraisal.  And not all banks will allow a “reconsideration of value” leaving many deals to fall dead which is stalling our recovery.

Real Estate is the flagship of our economy; no one can afford to stand idly by. We have to roll the clock back says Greene who has been boycotting the lending industry.

Unfortunately, there is no national coalition of appraisers large enough to make a difference, so homeowners need to pressure Realtors as the N.A.R. National Associates of Realtors is far more powerful but first they will need to mitigate their misplaced disdain for appraisers.

There is a small ray of hope as the California Attorney General Kamala Harris announced the creation of the Homeowner’s Bill of Rights.

Homeowners should call her and other elected officials and demand that their rights to equal representation be reinstated and added to the “Homeowner’s Bill of Right” or our nation’s economy may never fully recover.