I am curious to know how many people are aware of a recent change in the appraisal process for conventional loans. (Conventional loans are loans that are sold to Fannie Mae and Freddie Mac. Basically, this is any loan under $417,000 that is not an FHA or VA loan.) This change or law is called the Home Valuation Code of Conduct, commonly referred to as HVCC. Instead of boring you with the entire law, I am going to try to hit on some important highlights that could affect you.
1. Mortgage brokers are no longer able to order appraisals directly. They must use appraisal management companies. This could cause higher fees and will probably delay the loan process. This new law makes ordering a conventional appraisal similar to ordering a VA appraisal. Those of you that have had experience with VA appraisals understand that this is not always the smoothest process.
2. Mortgage bankers can order appraisals directly from an appraiser. However, this new law prohibits anyone in loan production, ie. loan officers, from ordering an appraisal. This is now done by a risk management department that has no loan production responsibilities at the company. Keeping this process "in house" carries a huge advantage over using the appraisal managment companies.
The obvious question now is what is the difference between a mortgage banker and a mortgage broker. That distinction is pretty easy to explain.
Mortgage bankers close loans in their own name and sell the loan to the "bigger bank" a week or two after the loan closes.
Mortgage brokers close loans in the name of the "bigger bank."
By the way, Midwest Mortgage Capital is a MORTGAGE BANKER.
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This requirement probably was enacted to keep loan officers from choosing appraisers who would stretch the appraisal to get the deal done. I have seen loan officers working at mortgage companies who based their business on volume instead of viability of the loans and buyers. I have never seen this with a bank mortgage. Is the bank generally more responsible? If so, why is this?
ReplyDeleteWith anything that comes out of Washington, there is compromise. The fact that some companies are able to still order their own appraisals and others are not is a compromise. That being said, the answer that would come from Fannie Mae or Freddie Mac would be that banks have some "skin in the game." This means that a mortgage banker cares what happens to the mortgage even after it has been sold. Mortgage brokers still care but face fewer negative repercussions if they just sold a deal with a bad appraisal.
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