RTC Mortgage Blog

HVCC Update, New Credit Inquiry Rule, Rate Update

September 30th, 2010 5:31 PM by Richard T. Cirelli

Update on HVCC:

HVCC is the Home Valuation Code of Conduct – the Regulation enacted about a year and a half ago that requires mortgage Lenders and Brokers to use an independent source for ordering appraisals so that the appraiser is not chosen by the loan originator. It was probably not a bad idea in theory but the rules weren’t very well thought out and although it’s gotten better, there are still some major flaws that need to be improved.

Now, Fannie Mae is working with the Federal Housing Finance Agency (FHFA) to develop and adopt appraiser independence requirements that will replace the HVCC. Until the revised requirements are released, the existing HVCC provisions continue to apply. In case you were hoping for things to go back to the way they were before HVCC, it’s not going to happen. Fannie Mae says they are “committed to supporting strong appraiser independence requirements. The revised requirements will maintain the spirit and intent of HVCC, and continue to provide important protections for mortgage investors, home buyers, and the housing market”. 

The biggest problem with HVCC in my opinion is lack of portability of appraisals. Although HVCC allows lenders to transfer an appraisal to another lender, once again the Government is letting the Lenders call the shots and the Lenders are saying “no”. So, it forces us to choose a Lender within the first couple of days of taking a loan application. If the lender chosen doesn’t close the loan, maybe because later we could get a better deal from a different lender, it forces the borrower to pay for another appraisal.

Other problems with HVCC…… The appraiser isn’t necessarily familiar with the local market; the Appraisal Management Company (AMC) that assigns it to the appraiser gives it to the one that will do it the cheapest – and you get what you pay for; the total cost of an appraisal has gone up at the expense of the borrower so that the AMC can get paid; it forced the best appraisers to get out of the business because they can only make about half of what they used to make per appraisal; the appraiser has no incentive do provide great service or high quality appraisals because the originator no ability to hire him again; and so on……….

The Impact of Credit Inquires:

Earlier this year Fannie Mae suggested that Lenders re-run a borrower’s credit report just prior to closing to make sure that they haven’t taken on additional debt that could affect their ability to qualify for a loan.

Now, Freddie Mac announced that they will soon establish a 120-day credit inquiry requirement. Effective February 1, 2011 any Lender who originates a loan to be sold to Freddie, must determine if additional credit was granted based on inquiries made by creditors in the past 120 days, as reflected in the borrower's credit report.

The bottom line is obvious – don’t take on new credit before or during the mortgage application process.

Mortgage Rate Update:

I’m seeing plenty of volatility as Mortgage bond traders try to figure out the Fed’s next move – will they provide more Quantitative Easing, now called QE2 and if so what will it be? And how will that affect mortgage rates?

Whether QE2 happens will be dependent upon upcoming economic reports which lately are sending mixed signals. Is the economy recovering, or isn’t it? Even the Federal Reserve Governor’s can’t agree on the current direction of the economy and whether to provide additional stimulus (QE2) or not. And if they did, how much good will it do?

The financial markets don’t like uncertainty and so I’m seeing lots of intra-day volatility. It’s become common for Lenders to issue two, three and sometimes even four rate sheets within the same day – as rates move higher or lower.

As an independent mortgage broker who loves this stuff, I monitor the markets all day long. I try to lock my client’s rates on the dips so I can get the best terms possible for them. I pay to subscribe to three different services that alert me to changes in the market. And as a broker, I can see the differences between lenders and take advantage of it for my clients.

By the way, my website has a daily update from one of these services. Here’s the link:


In the meantime, whether you are buying or refinancing, let’s take advantage of the lowest rates in history!

Posted in:General
Posted by Richard T. Cirelli on September 30th, 2010 5:31 PM



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