There’s always something to howl about.

The $1392.50 Appraisal Fee or How the Home Valuation Code of Conduct Rewards Inefficiency At the Expense of the Consumer

Have you heard of the Home Valuation Code of ConductNew York Attorney General Cuomo forced Fannie Mae and Freddie Mac to adopt the measure, in what can only be described as a Machiavellian scheme.  Essentially, mortgage brokers are forbidden from direct contact with residential appraisers; all appraisals for agency loans (not FHA or VA) must be ordered by a lender-approved appraisal management company.

What’s an appraisal management company? Exactly.

The intended result is to keep all loan production personnel (broker or banker) from undue influence on the independent appraisers hired to perform the valuation report.  You see, rather than to cease doing business with rogue mortgage brokers or unscrupulous lenders, a minority of appraisers felt it necessary to encourage Attorney General Cuomo to “put the arm” on the lending industry to protect their past ethical trangressions.

Wholesale lenders, realizing that the appraisal would now be THEIR property, clamored to the idea.  This was just another chance to restrict the value proposition of mortgage brokers (portability) and lock up some business.

Big Banks 1 Consumers 0

Wait!  That’s not all!  If the assigned appraiser is backed up, tough crap!

You see where I’m going with this?  The lender pipelines are ALREADY clogged up because the volume has spiked and the employee count is down.  Soon, we’ll be adding loan applications from the Obama refinance/loan modification plan and a further drain will be put on the overloaded appraisers.  Can I choose to deal with appraisers who won’t do refinance transactions?  Nuthin’ doin.  Ya takes what ya gets under HVCC.

Big Banks 2 Consumers 0

Still, I persist like Mr. Magoo negotiates a maze.  I took a loan application last week, checked Zillow for the Zestimate, closed my eyes and ordered the appraisal from the selected lender.  I locked the rate for thirty days and uploaded the loan submission.  I expected 10 business days in underwriting; surely, the appraisal would be uploaded within a week.

As Meatloaf might say “Stop Right There!  Before we go any further…

I received an e-mail from the lender instructing me to immediately extend the rate lock for another 15 days…at a .25% fee.  For this $417,000 loan, the added cost to the borrower is $1042.50.  I rejected those terms, cancelled the rate lock, and demanded the $350 appraisal fee to be refunded.

Sorry…there ain’t no refunds.

Big Banks 3  Consumers 0

My customer is stuck with a $1042.50 premium to account for the inefficiency of the appraisal management company, to assign a $350 appraisal….BUT

..the lender said the loan looks like a slam-dunk approval.

Big Banks 4  Well-Qualified Consumer (-$1,392.50)

It just keeps going, and going, and going…