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New Consumer Protection Bureau Established

Recently President Barack Obama signed the Dodd-Frank Act which will cancel out the the existing Home Valuation Code of Conduct (HVCC.) Fannie Mae and Freddie MAC enacted the HVCC just a little over a year ago, which caused higher costs, closing delays as general federal pandemonium.

The new bill should help consumers get more accurate home appraisals, faster closings, more completed transactions and may pave the way for increasing home values.

“This bill will mean good news for consumers because they should see more reliable home appraisals,” said Appraisal Institute President Leslie Sellers. “It will encourage the use of highly trained and competent real estate appraisers and will provide much-needed resources for oversight and enforcement.”

The now defunct HVCC forced lenders to use low cost, sometimes sub-standard appraisal companies in order to save money, leading to untrained or inexperienced appraisers that delayed the appraisal process and hurt valuations.

According to the National Association of Realtors, more than three quarters of Realtors reported the time to get an appraisal increased after the HVCC took effect, and more than a third declared the process cost them sales. 85% of appraisers and 55% percent of Realtors reported a decline in appraisal quality.

Low appraisals don’t even help buyers as much as they might think. Lowball appraisals create a need for more cash outlay to make down payments and meet closing costs, which must be paid out of pocket.

Furthermore, under the HVCC, mortgage fraud and misrepresentation reportedly increased as much as 7% from 2008 to 2009, according to the Mortgage Asset Research Institute.

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