Under the new, far-reaching Home Valuation Code of Conduct, appraisers and mortgage brokers say the code has crippled business and hurt customers. In this system, critics say, only one winner has emerged – appraisal management companies, who are profiting to the detriment of everyone else.
But the management companies, or AMCs, have something to say about it, too. Several things, actually.
Firstly, “Get off our backs – we’re not the ones you have the argument with,” in the words of Jeff Schurman, executive director of trade group Title Appraisal Vendor Management Association.
Schurman said he understands where mortgage brokers’ and appraisers’ angst comes from, but he spoke out of frustration with the deluge of calls he’s gotten concerning the HVCC’s negative effects on the mortgage industry.
‘Nightmare Stories’
In its campaign to overturn the HVCC’s rules, the National Association of Mortgage Brokers urges members to contact Schurman’s group in addition to the Federal Housing Finance Authority, which created the rules.
But Schurman’s group, along with many AMCs themselves, withholds wholehearted praise for the new code, also.
“I understand that there are nightmare stories out there,” said Donato D. Maisano, manager of Springfield-based Strategic Information Resources’ AMC division (SIR) and a licensed appraiser himself.
“I’m not disagreeing with any of that … I would say that 95 percent of those horror stories are true, and there’s probably more out there.”
However, AMCs and their representatives argue in favor of distance between appraisers and brokers, which presents a strong case for using AMCs in the process. But if the HVCC is causing widespread, systemic problems with the mortgage process itself, Schurman said, AMCs should be concerned and lobby for change.
Stephen Sousa, head of the Massachusetts Board of Real Estate Appraisers, said he couldn’t speak to the AMCs own opinions about the HVCC, except to note that the code has been very beneficial to them from a business standpoint.
True, AMCs say, the HVCC has pushed more business in their direction, although it’s too early to quantify how big the business increase has been.
Maisano was specifically charged with starting the appraisal management arm of SIR about six months ago, he said, because the company sensed a business opportunity in the offing.
The Home Valuation Code of Conduct took effect on May 1, and was intended to create distance between mortgage brokers and appraisers. Previously, mortgage brokers could request an appraisal directly, and would sometimes pressure appraisers to falsely inflate home values.
Under the new code, mortgage brokers typically request the appraisal through the lender, which contacts an appraisal management company, which in turn sends the assignment to an appraiser. That leads to agonizingly slow turnaround times, brokers say. In addition, it has broken longstanding business relationships, pushing brokers and appraisers to put themselves in the power of AMCs for the first time.
Along with a host of complaints concerning the HVCC in general, critics say this arrangement puts too much power in the hands of appraisal management companies, who get extra business as well as the ability to take a nice fat fee from each appraisal – which also chops down appraisers’ cut of that fee. In addition, AMCs have little official oversight, killing the HVCC’s ability to prevent the kinds of shenanigans that inspired its creation.
Waltham-based Pro-Teck Valuation, for its part, is actively trying to defend itself against some of what they believe is unearned criticism.
“There’s been a lot of outcry against AMCs, and it’s a little misdirected and it’s inaccurate,” said Tom O’Grady, executive director.
O’Grady and Jeff Dickstein, chief appraiser, say their company adds value to the process. Generally independent appraisers do take a larger fee home, but Pro-Teck argues that they handle other work expenses such as marketing and insurance, thus freeing up appraisers to pick up more jobs.
“There are a lot of appraisers out there working with AMCs and they’re perfectly happy with it,” O’Grady said, adding that it was a “vocal minority” responsible for much of the fuss.
Still, Sousa of MBREA says he’s been hearing a great deal of upset from appraisers taking pay cuts. Further results have arrived from an MBREA survey of its members, Sousa said, and 55 percent of respondents say they’ve seen a pay decrease, often of more than 25 percent.
Although AMCs are not directly regulated through the HVCC, several groups have put out model legislation to clamp down. Schurman said his group isn’t opposed to regulation, as quality AMCs already enact tight internal controls – because those systems are already largely in place, AMCs wouldn’t object to the validity that regulation would afford them. But Schurman winces at the idea of state-level rules.
Watching The Watchmen
TAVMA would object to having any oversight from state appraisal boards, which are tasked with overseeing appraisers themselves, not administrators. Regulation itself might not be a bad thing, but only if that regulation came at the federal level instead of creating a patchwork of 50 different sets of rules. As it stands, four states have individually adopted AMC regulation.
Maisano says regulation is not only inevitable for AMCs, it’s a good idea.
“AMCs definitely need regulation – you can’t have this much of an impact on the industry and not be regulated,” he said.
