Register Real Estate Advisors

New guidance on HVCC

Fannie Mae has issued guidance regarding the Home Valuation Code of Conduct. The guidance includes a reminder to lenders that appraisers must have the appropriate knowledge and experience for a specific geographical location and particular type of property.

Other items in the guidance document:

• The HVCC does not require the use of an appraisal management company (AMC)
• Nothing in the HVCC prohibits real estate agents or brokers from contacting the appraiser about concerns or errors with the appraisal
• Appraisers may use data from short sales and foreclosures if they deem that information appropriate for the assignment.

Updated from the Texas Associations of Realtors Weekly News Email.

HVCC Myths Vs. Facts

Myths…
1. HVCC prohibits Realtors and lenders from talking to appraisers.
2. A lender is required to use an appraisal management company (AMC) to get an appraisal.
3. Lenders are required to choose appraisers from a rotating roster approved by Fannie Mae or Freddie Mac.
4. The code applies to all mortgages that require an appraisal.
5. HVCC requires an appraisal where a lender was previously under no requirement to obtain one.
6. A mortgage broker may select the appraiser.
7. A mortgage broker may not transfer an appraisal from one lender to another.
8. Borrowers must use a credit card upfront to pay for an appraisal.
9. A borrower may pay the appraiser directly.
Facts…
1. Realtors and lenders can talk to appraisers, including requests to consider additional data or to correct errors.
2. Lenders may directly retain the services of an independent appraiser.
3. Lenders may choose to use a rotating roster of appraisers but are NOT required to do so by Fannie Mae or Freddie Mac.
4. The code applies only to 1-4 single family loans sold by Fannie Mae or Freddie Mac and does not apply to FHA, VA, or the Federal Home Loan Banks.
5. Nothing in the HVCC requires a lender to obtain a property valuation or to use a particular methodology.
6. If the lender grants permission, a mortgage broker may directly contact a lender-approved AMC that retains the appraiser.
7. A mortgage broker may transfer an appraisal if the lender who ordered the original appraisal grants permission.
8. A borrower is not required to pay for an appraisal with any one particular form of payment.
9. Payment for an appraisal must be made to the lender or third-party hired by the lender to retain the appraisal services.

The ABR offers it’s members a Buyer’s Rep publication that provides members with industry news and updates each month. In the February 2010 edition there’s an article written by Melanie McLane, who is both a broker and a residential appraiser. Her insight is very informative, so I want to share it with my readers. I have summarized her article below.
The work of appraisers has been turned upside-down over the last year due to changes in the industry forced on them by the mortgage crisis taking place nationwide. Most of the changes in policies, procedures, and regulations over the past year have been detrimental for the appraisal industry. This also causes problems for real estate agents and their buyers.
How did this happen? First, in 2007 New York Attorney General Andrew Cuomo filed a lawsuit against First American Mortgage charging they allowed WaMu (Washington Mutual) to improperly pressure appraisers who would appraise at the value needed. In March 2008 Fannie Mae and Freddie Mac agreed to adopt new loan appraisal policies. May 1, 2009 The Home Valuation Code of Conduct (HVCC) became effective for all single-family mortgages (except government-insured loans) delivered to Fannie Mae and Freddie Mac. Feb 15, 2010 was the effective date for HUD’s version of HVCC. November 1, 2010 the original HVCC agreement is set to sunset on this date.
HVCC was designed to improve the integrity of the appraisal process, but several unintended negative consequences have occurred. Appraisal Management Companies take about 40% of the fee from appraisers and expect the appraisals to be completed quickly. This is leaving many appraisers disgruntled. The AMC’s send out bulk requests and the job goes to whoever applies first, which might not be the best appraiser for that particular area. AMC’s, for the most part, remain unregulated in most of the country. To make matters worse, most AMC’s are owned by banks! So are they really a firewall between the lenders and the appraisers?
So how does all of this affect you, the consumer? The quality of appraisals is down, so some buyers may overpay for houses. On the other hand, some appraisals are off in the other direction, causing sellers to lose money. Having an outside party AMC is actually slowing down the appraisal process and causing appraisals to take longer and closings to take longer.
You can learn more about HVCC at http://www.realtor.org/hvcc . I encourage my buyers to use lenders I recommend because I know those lenders because using a lender you don’t know anything about, could cost you your next home. Do not use internet lenders for a something as important as a mortgage! You can ask your lender, when looking for the best loan option, whether they use AMC or do they have an independent appraisal department. Also, how is the lender going to ensure an appraiser with geographic competency. Have local appraisers refused to work for your AMC and if so, why? These are all things you, the borrower, can ask your lender before they order an appraisal.
As a courtesy to my sellers, I include a list of upgrades for the appraiser. I also have the appraiser contact me to schedule the appraisal visit, so that I can talk to him and get his email address and send him a copy of the contract so he knows the purchase price. I also want to know if that appraiser is familiar with the area and has done appraisals in that area before. I want to be able to contact him directly if the house does not appraise in case he overlooked something.
The National Association of Realtors and others have been working to implement a moratorium on HVCC, but right now it is still set to go into full effect on November 1, 2010.