A Real Life Example of How the HVCC is Destroying Mortgages
The HVCC has driven a loophole into the mortgage process by insisting that there needs to be a middle man between the appraiser of a home and the loan office. In the field, we’ve seen this have a negative effect on loans time and time again. We are constantly seeing appraisals where the appraiser ignored standard Appraisal Guidelines that have been established by government, and even Fannie Mae and Freddie Mac themselves, in order to bring an appraisal in extremely under value!
As an example we just had an appraisal in an Urban Market in which the appraiser only used comparables that were over one mile away from the subject property and exceeded six months on the sales dates in order to bring an appraisal in $50,000 under value.
Appraisal guidelines in Urban Markets stipulate that all comparables should be under a mile away and that they should have been in the last six months. Recently lenders have taken it a step further and stated that they want comparables under a half mile and within the last four months.
Why was it ok for the appraiser to use the comps that didn’t meet the guidelines? Because the fake appraisal was in the bank’s favor! By creating an appraisal based on false information it saved the bank almost thirty five thousand dollars. The loan was approved at 70% of Appraised Value. The home was worth $80,000 and with the banks appraisal being only $30,000 it cost the borrower $35,000.
If we had tried to do the exact same thing in order to bring the value up on a property, the bank would have blacklisted the appraiser, read us the riot act, and possibly even suspended doing business with us while they “reviewed” our practices. Talk about a double standard!
But since their appraiser, who’s actual market area was over 100 miles away (another big no-no in the industry), and was just newly licensed with the State, the bank claimed that the appraisal was valid and it was accepted.
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