HVCC Effect on the Mortgage Application Process
HVCC Effect on the Mortgage Application Process
Before we proceed much further, it is important to have a clearer knowledge of what the HVCC is. It is an acronym for Home Valuation Code of Conduct and was effective last May 1, 2009. Its sole purpose is to eliminate fraudulent valuations frequently done in the past. Its aim is for integrity and honesty to appraisers. All parties involved in real estate transactions are affected by this ruling.
Its goal is very admirable, but lenders, appraiser and buyers are heavily affected by the HVCC. As part of its rule, lenders are no longer allowed to choose their appraisers from their list, however, they can use in-house appraisers who meet the requirements specified in the code and such as the appraisers, and compensation is not dependent of the value of appraisal. Moreover, any broker or parties who can gain from the transaction will not be a part of the appraisal process anymore.
Sellers have little patience with this law. This is because of the longer processing of the mortgage application, and due to this, sellers opt for cash arrangement. Nevertheless, this does not favour buyers since many buyers depend on the mortgage to purchase a home and they are finding it harder to secure a loan because of additional requirements. It is also difficult to qualify since the process is stricter.
Following are some effects of an HVCC to the mortgage application process:
1. Appraisers may be from a different town and there could be a chance that he or she could do an appraisal in an area he or she is not familiar. There may also be a chance of undervaluing the appraisal of properties.
2. Since appraisers are selected randomly, it also means that mortgage lenders could end up hiring inexperienced appraisers.
3. There is also a probability of an increase in a borrower’s expense because brokers are no longer a part of the loan origination.
4. A possible property undervaluing could mean that both the seller and the buyer might encounter problems in negotiations in the event of a sale.
5. This may result to consumers paying an added cost for locking in rates and funding for the loan. In case the lender will be changed, buyers may be required to pay an additional fee for a new appraisal. Most appraisers might be unwilling to work with you since the fee will be relatively lower than their earnings in the past.
Despite the HVCC’s goal, many are not happy about it. There are several problems associated with the HVCC law. This is maybe due to the changes it creates to the traditional ways of the process involved. Many new appraisers’ valuation is inaccurate and has been proven costly for most agents. It may take some time before everybody can work with the newly implemented rule. Nevertheless, once all will get used to this new process and begin to appreciate its good aim, everything will be in coordination again, but for now, adjustments have to be made.
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Category: Mortgage application
