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Impact Of HVCC Starting To Surface
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CNBC Real Estate Reporter
“We have lost multiple loans already, due to low valuations, and we have some frustrated homeowners,” a mortgage broker in Maryland tells me.
“Start writing your story on the collapse of mortgage applications this week,” a mortgage analyst instructs me.
No, it’s not the temporary tick up in rates, well not all of it anyway; it’s partially the Home Valuation Code of Conduct. This is a new rule that Fannie Mae [FNM
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] and Freddie Mac [FRE
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] have adopted, only buying loans that came through this new system. The HVCC requires a sort of firewall between mortgage lenders and appraisers. Appraisal management companies have stepped in the middle, and are now assigning appraisals, instead of the lenders being able to rely on existing relationships with local appraisers.
Some say the HVCC will result in singular mortgage applications, rather than sending applications to three or four lenders, as was the case before. Combine that with the higher rates, and we could see a distinct drop in applications in the weekly MBA survey.
As many brokers expected, the HVCC is also resulting in some lower appraisals. Since the appraisers now may be unfamiliar with the local market, they will err on the lower side. Of course it may also be that the lack of a relationship with the lender is removing the 'expectation' of a certain appraised value. If the appraisal comes in lower than the sale price, then the deal is off.
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