How HVCC Affects Mortgage Applications
How HVCC Affects Mortgage Applications
The Home Valuation Code of Conduct or HVCC targets consumer protection. Particularly the buyers or borrowers may benefit from this law. It was instigated last May this year. Since then, only conventional loans acquired through Fannie Mae or Freddie Mac guidelines are affected.
This law states that no employee, director, officer, agent or any other third party in behalf of the lender should be directly involved in appraising a property. More specifically, the said individuals are prohibited to “influence or attempt to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion, compensation, instruction, inducement, intimidation, bribery, or in any other manner.” Given this premise, such ruling may be considered favorable for the participants of any real estate transaction, from the buyer to the lender and even some escrow companies. On the other hand, there are many complaints flying around. Many critics are scrutinizing whether this law can really make the real estate industry a better one, that is, free from fraudulent activities of unqualified appraisers.
The ‘normal’ appraisal process before was rather simpler. A loan in process nearing approval signals the loan officer to accomplish the appraisal request form. After such document is completed, it would be sent to the appraiser. An appointment is to be set so as to perform the inspection and appraisal. When the HVCC was brought about, there have been some changes. A common difficulty experienced through the guidelines of HVCC, the mortgage process takes more time now and has become stricter. There are more requirements also required to be submitted. There are even some buyers who have difficulty in qualifying. This then results to sellers preferring cash transactions.
In case there is a need to change lenders, some buyers and sellers are hindered to do so. First, there are further expenses. Secondly, they want to save time in finalizing the process. This is because if there is a new lender, a new appraisal is also needed. Prior to HVCC, the existing appraisal could be used by the lender or until he requests another one. Due to these reasons, the buyer or seller sticks with their current lender. They are then diminishing their chances to benefit from lower rates offered by another lender.
The closing of the loan may also be stalled. The time frame for approval is also extended. Before, a loan can be closed within a month. Now, it takes 45 to 60 days before it is finalized. This can also result to longer rate locks. The deal is then posed to more expenses. The purchase contract may also be required to be renegotiated if the closing date exceeds the projected period. In some cases then, if one party cannot endure the lengthy waiting time, the transaction is cancelled.
Currently, only conventional mortgages are affected by the HVCC. Those acquired through the Federal Housing Administration or Veterans Administration cannot be influenced by the HVCC restrictions. Conversely, this still poses difficulty for agencies providing conventional mortgages and appraisal companies. There is an increasing number of borrowers who are rather inclined to applying for FHA or VA mortgages. And the Housing and Urban Development agency may also be confronted with compounded liabilities, as it is the only agency granting such loans.
Amidst all the challenges brought about and criticisms received by HVCC, its aim to target scheming appraisers may be helpful for real estate consumers. On the other hand, any real estate enthusiast should be able to hurdle the risks of applying for mortgages. Along the process, there is still the possibility that such law can be beneficial for everyone.
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Category: Mortgage application
