Previous articles in this series described an epidemic of late-stage mortgage loan rejections that impose high costs on consumers. These rejections can be traced in good part to a decline in the quality of appraisals, which in turn has been aggravated by dysfunctional regulation.
The Home Valuation Code of Conduct (HVCC) has stimulated growth of appraisal management companies (AMCs), which intermediate between appraisers and lenders for the purpose of preventing lenders from influencing appraisal outcomes. The result has been lower fees paid to appraisers, increased workloads, and deterioration in the quality of appraisals.
Deterioration has been aggravated by the spread of AMCs owned wholly or partly by larger lenders, who share the profits extracted from the hides of both appraisers and borrowers.
Lenders should pay appraisal fees
Lenders ordering appraisals from a company in which they have a financial interest in effect receive a piece of the appraisal fee paid by borrowers they subsequently reject.