Nov 13, 2009 7:45 am US/Eastern
New Rules Make Home Sales, Refinancing More Costly
BOSTON (WBZ) ―
Mortgage rates below 5-percent have people scrambling to refinance.
They have also helped breathe new life into the troubled real estate market.
But a new rule has many people shocked to discover their financing is near collapse just days before closing.
That's what happened to Pam and Ted Ten Eyck of Mansfield.
They planned to refinance to a 20-year mortgage to put them in a better financial position down the road.
"We have four children who will be in the midst of college and grad school and we're hoping we can afford that," said Pam.
WHAT IS HVCC?
But their carefully thought out plan was derailed by HVCC or Home Valuation Code of Conduct.
"We were surprised and we were frustrated," said Ted.
The rule was designed to keep appraisers from being pressured into inflating home values; a practice that contributed to the housing crisis.
But Pam and Ted's mortgage broker,
Jeff Chalmers, says HVCC goes too far.
"You have no control over it," he said.
"As a mortgage broker, I cannot contact the appraiser at all."
WHAT IT HAS CHANGED
Under the old rules, Jeff would call an appraiser he knew and the whole thing would be done in a few days.
Now, the appraisal has to be assigned by an independent management company.
The whole process costs more and takes longer.
For Pam and Ted, it took so long, their low interest rate expired.
"I was thinking I wasn't going to be able to send my kids to college," Pam said.
HOME SALES HURT
HVCC is also affecting sales.
Arlington Realtor Mark Lesses says home values often come in low because appraisers are being sent to unfamiliar territory.
"I've had folks come from the Cape, so there's a piece about the market they just don't understand," he said.
Another mortgage broker told WBZ he had an appraiser sent to Massachusetts from Canada.
Even if a buyer and a seller agree on a price, if the appraiser's number is too low, the bank won't finance.
"I haven't had any completely blow up, but it's been hairy a few times," Lesses said.
THE DELAYS
The biggest issue is delays.
Deals that used to take 30 days can now take two months or longer.
That can mean losing an interest rate which can be expensive.
"Easily tens of thousands of dollars over the course of the mortgage," recalled Ted Ten Eyck.
Pam and Ted eventually got their loan, but only because Jeff Chalmers paid out of his pocket to extend their rate.
"If it weren't for HVCC, we would have closed on time without a problem and with it, it created nothing but problems," Chalmers said.
WHY DO WE HAVE HVCC?
HVCC may seem like a hassle but it was designed to keep consumers from paying too much for their home.
That was part of the problem that led to the real estate crisis.
It's also part of the reason so many homeowners owe more on their house than it's worth.
HVCC has also been tough on appraisers.
The management companies take a huge cut from their fee.
Anyone working as a real estate appraiser has taken a significant pay cut since the rules went into effect this spring.
There is a
bill in Washington that would put an 18-month moratorium on HVCC.
But there has not been a lot of movement on it.
Here are some helpful links if you are planning to buy a home or refinance your mortgage:
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