Is the HVCC the wrong tool for the job?

What is  the HVCC?
The Home Valuation Code of Conduct (HVCC) is a set of rules for the mortgage and appraisal industries. It was enacted May 2009.  The purpose of the HVCC is to protect appraiser independence & prevent pressure on appraiser to produce a desired property value or other appraisal result, such as limited required repairs.  These safeguards are intended to protect consumers.  The verdict is not out as to it will help or hurt consumers.  This appraiser feels it will be some of both. There has been considerable debate, rightly so, about the unintended consequences of the HVCC, compliance is required for all Fannie Mae or Freddie Mac insured mortgages.

Will there be any changes because of the HVCC?
The actual appraisal reports we produce will not change. We will continue to produce accurate, independent appraisals. We will continue to make sure our appraisal process complies with the HVCC.

The process of ordering FNMA & Freddie Mac insured appraisals has changed greatly. 

However, if you are a homeowner in need of an appraisal, an attorney, or even if you work for a small community bank or credit union and will continue to communicate directly with appraisers. You can order an appraisal now here.

If you're a mortgage loan officer or broker who isn't allowed to order appraisals directly and are seeking an HVCC-compliant appraisal ordering service, please use the Mercury Network for HVCC-compliant appraisal ordering. I am registered on Mercury Network, and it is fast, HVCC compliant, effective appraisal ordering system.

After you complete your own Mercury Network profile, you can add me to your appraiser panel.  Mercury Network's Intelligent Selection System (ISS) enables you to order appraisals "blind", based on  your criteria (i.e. FHA approved, years of experience).  There will be an audit trail for each transaction. To order using Mercury Network, click here.

Where did the HVCC come from?
The HVCC came from an agreement between the New York State Attorney General, OFHEO, Fannie Mae & Freddie Mac. In 2007 New York Attorney General Andrew Cuomo sued First American Corporation and its appraisal management (AMC) subsidiary, eAppraiseIT.  It accused them of allowing Washington Mutual (WAMU) to pressure appraisers to change (usually increase) appraisal values, as well as select which appraisers would be used for WaMu's appraisal reports. 

Attorney General Cuomo then subpoenaed Fannie Mae & Freddie Mac in order to discover more about mortgages purchased from banks like WaMu and their appraisal processes. One of the results of the investigation was the HVCC, which was agreed upon and approved by Fannie Mae and Freddie Mac.

From May 1, 2009 forward, every loan funded by Fannie Mae and Freddie Mac must be in compliance with the HVCC.

What are the details of the HVCC?
The HVCC specifically prohibits any party from coercing, suggesting, or influencing appraisers in any way to produce a specific or desired value for a residential property.  This was already illegal.  The HVCC changes nothing here.

Only the lender or a party authorized by the lender can engage the appraiser and order an appraisal that will be backed by Fannie Mae or Freddie Mac. Mortgage brokers and real estate agents are not allowed to engage appraisers or order appraisals. Also, internal loan production staff members or any other person who is compensated on a commission basis are not allowed to have any substantive communications with an appraiser. All of the Mortage Broker & Realtor groups are pretty upset about this portion and have been campaigning for repeal of the HVCC.

Personally, I don't miss the comp searches and the calls from lenders/mortgage brokers letting me know that a certain value "works" for their loan package.  Obviously, we always would ignore any overt requests for particular values and the appraise without bias.  So this part about the HVCC I can support. 

All loans backed by Fannie Mae or Freddie Mac must abide by the HVCC. The code doesn't apply to FHA and VA insured loans, or to appraisals ordered for non-lending purposes (Divorce, Bankruptcy, REO, Estate, etc).

Lenders are required to provide the borrower a copy of the appraisal report at least three days before the loan closing. The lender, not the appraiser, must provide the copy to the borrower, at no charge. This allows the buyer to read the report and decide whether to go forward with the purchase.  This appraiser supports this part of the HVCC.

You can read the full HVCC on Freddie Mac's website by clicking here: http://www.freddiemac.com/singlefamily/pdf/122308_valuationcodeofconduct.pdf