It was a dark and stormy night. April 30, 2009. The next day, new federal legislation, known as HVVC went live.
Does it sound like the transmutation of a virulent disease?
HVVC is the acronym for the Home Valuation Code of Conduct. Some federal legislators were no doubt suffering from a hangover one day. They decided they had the solution to appraisal fraud. Yes sirree, bob.
After the savings and loan failures of the 1980s, legislation known as FIRREA said no party to the transaction can order an appraisal for a mortgage: not the buyer, not the seller, not the Realtors. Only the lender may place the order for their loan appraisal.
Now, in 2009, the federal lawmakers said, "No, the lender can't order the appraisal either." Let's invent a new entity: the appraisal management company, or AMC for short. From now on, only an AMC may place orders for appraisals for mortgages.
The only people who embraced this legislation were the ones who wrote it and the AMCs. Everyone else thought those lawmakers should check into the Betty Ford Center.
The AMC' didn't have the backbone to charge a separate fee. They developed a parasitic relationship with the appraisers. The AMCs would charge the typical appraisal fee to the borrower and keep nearly 40 percent for themselves. Pretty good money considering all they had to do was place an order for an appraisal.
What qualifications did an AMC meet? At least one participant had to be inhaling and exhaling. AMCs didn't have to have licenses. If you could spell appraisal, that was good, but not required. Even if your appraisal license had been revoked, it was OK. It would have been a great job for Osama bin Laden.
Appraisers thought the 21st century had reinvented slavery. They were doing more work and collecting a fraction of the fee. Not to mention appraisal fees haven't risen much in the last 20 years. Not to mention some unscrupulous AMCs were keeping the whole fee and not paying the appraisers at all.
Those AMCs had Teflon underwear. They had no offices in the appraiser's state. Appraisers had no way to force payment.
Lenders, borrowers, sellers and Realtors developed hives at the mention of AMCs. On the first appraisal I ordered via an AMC, they appointed an appraiser from Fort Lauderdale to drive here to the Florida Keys. His job was to deliver an estimate of value on a duplex on the water.
How many sane people will pay for a tank of gas, drive eight hours and spend several hours looking for comparables in a place they've never been, then an additional eight to 10 hours to complete a complicated appraisal report in order to collect a whopping $200 appraisal fee?
That particular appraiser had already been censured twice by the Florida Real Estate Appraisal Board. I guess he figured Fort Lauderdale was for beginners and he could raise incompetency to an art form here in the Keys.
One of the few bills to receive a unanimous vote by the Florida House, Senate and finally the governor is HB 303, the Florida Appraisal Management Company Registration and Regulation Act, signed into law May 17, 2010.
Can I get a "hallelujah"? It includes some struck-by-lightning stipulations.
The AMC's must have a control person actively certified to conduct appraisals in Florida. They must maintain a list of competent appraisers -- no more Fort Lauderdale appraisers stopping at gas stations asking, "How far is it to Big Coppitt?"
They must pay appraisers a fair fee and they have to prove they researched what that is. Oh, yes, and they have to actually pay the appraisers in a timely manner. Appraisers may show on the appraisal report what fee they received. The AMCs must disclose what fee the AMC charged separately.
The AMCs must review samples of each appraiser's work regularly and audit at least 10 percent of all the appraisals they get in a year. They have to have qualified, Florida-certified personnel to conduct those reviews and audits.
No person or entity can have a 10 percent or greater interest in an AMC that has had an appraisal certification denied, revoked, refused, canceled or surrendered.
The AMCs must renew their registration every year. The Florida Real Estate Appraisal Board can discipline any AMC violations.
Here we are in Florida, the land famous for pirates selling swamps, sinkholes and cesspits to unsuspecting tourists. Yet when it comes to good real estate legislation, we are once again leading the country.
What do you think?
Regina E. Corcoran, SRA, is a Florida real estate broker, state-certified residential appraiser and residential contractor. She is president of AmeriRealty Corp. and vice president of AmeriMortgage Corp. She can be reached at ReginaECorcoran@cs.com. Corcoran writes her column exclusively for The Citizen. It appears every other Sunday.