As we continue to move forward in 2014, many are still wondering what direction the appraisal industry is heading in. Since the “Great Recession”, the industry has been in a period of transition, and the balance of power within the valuation space has been on an endless roller coaster ride.
A lot of veteran appraisers feel that they are getting phased out of the valuation process due to more lenders working with Appraisal Management Companies (AMC) as a result of the Home Valuation Code of Conduct (HVCC). They continue to argue that they are seeing lower fees and increased oversight, and have garnered much resentment towards AMCs as a result.
As of no real surprise, appraisers continue to be most concerned about the fees they are being paid for their services. According to an article in Valuation Review, transparency is going to have to be the catalyst that reforms the current system if no legal precedents are going to emerge to establish true “customary and reasonable” fees in 2014.
It has also been speculated that more alternative valuation products will be used in 2014, and these technologies will play a huge role in how appraisers conduct their business. Though they can be of help to appraisers in the field, many still fear that lenders might start replacing their services with these emerging technologies – however, this is unlikely.
The housing inventory is expected to increase in 2014, thanks to the rise in home values that were seen throughout 2013, and the demand for these homes is also expected to remain at a healthy level – especially if interest rates remain the same or drop slightly. At the same time, foreclosure sales are expected to decrease even further in 2014, along with the overall foreclosure inventory.
Another big factor in 2014 will be the new Qualified Mortgage (QM) rule, which makes securing a loan for first-time homebuyers more difficult. The new QM rule currently affects fully amortizing mortgages, and lenders must show that a potential borrower’s total debt payments don’t exceed 43 percent of their pretax income. With that being said, loans that are eligible for purchase by Fannie Mae and Freddie Mac can have higher debt-to-income ratios for the time being.
AMCs will also face new challenges in 2014, as 12 new states will begin to officially adopt rules and regulations. Currently, 38 states have enacted AMC legislation, while the remaining 12 have regulations that are pending. It has been speculated that these 12 states wanted to ensure that their legislation met the federal minimum standards—which are set to be published on February 18, 2014—before finalizing any rules.
The early adopters will most likely need to update their AMC legislation in order to meet the minimum requirements, and it’s imperative that AMCs servicing lenders stay on top of all the changes occurring in each state to help ensure compliance and avoid costly penalties.
Valuation Review – valuationreview.com