In May 2009, a little-known law snuck in like a thief and clobbered a lot of homeowners over their unsuspecting heads. This is referred to as the Home Valuation Code of Conduct or HVCC. It's intent was to make sure that the appraisal you got on your property was accurate--not inflated to help a favorite Realtor or lender close a deal, or to get additional business from anyone who stood to make money on your mortgage or home purchase. But often the road to Hell is paved with good intentions.
The problem is that for an appraisal to take place, someone has to order it and someone has to perform it. Enter the Appraisal Management Company, or AMC. These guys take the order from the lender, Realtor, whoever, and farm the assignment out to an appraiser contracted with them. For an approximately 40% commission. Yep, the cost of appraisals went up and refinancing became a lot more expensive for consumers.
Then there is the quality issue. Just like in all professions, there are good, bad, and ugly appraisers. Sometimes the ones lenders want to use are popular because they are experts and turn in professional work. And provide emergency rush jobs (which helps the borrower) if needed. But with no say in who does the appraisal, the appraisers have less incentive to go the extra mile, and the chance of you getting stuck with an incompetent appraiser goes up. So borrowers have less faith in the system.
Finally, there is the portability issue. In the past, if you started working with a lender and didn't like your rate or service or whatever, you could take the appraisal (which YOU pay for) and go to another lender. Now you'd have to start over and pay twice.
Fortunately, a bill is being kicked around in Congress called HR 3044, which would put an 18 month moratorium on the HVCC. It was just a bad solution and needs to be replaced with something that will actually do what the original bill intended.
