Home Valuation Code of Conduct (HVCC)

Heads up Michigan mortgage borrowers this new law isn't in totally in your best interest.

As of May 1st all appraisals are supposed to be ordered by the bank. One item that real estate agents, mortgage bankers, banks, and consumers fail to realize about this new law is: the banks being the only people allowed to order appraisals is the inability to switch banks.

I truly think that this new law will reduce appraisal fraud but there are 5 other things it will do

1. It will put the small appraiser out of business. There are many small one man operations that don't have ties to banks. It will reduce the profit margin for them. Plus the banks will put the squeeze on them to reduce the price of appraisals.
2. It will raise the cost of appraisals for the homeowner. Banks are going to raise the costs. Especially if there are middlemen involved in ordering the appraisals.
3. It will screw people out of getting the best rate. Many times mortgage brokers would switch banks if the rates dropped. That way the client could get the best possible rate and the broker would get paid. Now the banks have effectively locked the client in by the appraisal not being able to be transferred to a different bank. Many times rates drop where it would be beneficial for the client to get the rates changed. Now the client won't get the absolute best rate during mortgage rate interest drops.
4. This one item is the most important. Many people won't be able to refinance because of the appraisal. If a bank turns down a loan the customer is screwed again. They will have to pay for a new appraisal at a different bank. Every bank has their little "hangups". Some banks may have different interpretation of the rules and how underwriting conditions were met. Now if a loan is turned down at one bank the deal will be dead. Who wants to pay for a second appraisal? Especially if it may die.
5. It will slow the whole process down. Now the appraisal process will take longer. Rate locks may have to be extended or cost more to get a 45 day lock.

Sadly this will protect the all the banks but will cost many consumers the ability to get the best rate or maybe even to get their loan. For more on Metro Detroit mortgages and mortgage rates feel free to give me a call.

The underlying principle of the law is great but they need to tweek the law. They need to add that the appraisals can be transferred to a different bank at no cost.

Russ Ravary your Oakland and Wayne County Real estate agent