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The Home Valuation Code of Conduct (HVCC), a guideline which introduces a firewall between lending institutions and appraisers, went into effect on the first of May this year. According to Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, HVCC is meant to "improve the reliability of home appraisals," by preventing fraud in the appraisal process. Lenders and brokers who wish to sell loans to Fannie Mae and Freddie Mac can no longer select an appraiser themselves, instead, they should approach an independent appraisal management company which will assign an appraiser for each deal. This would effectively stop collusion between lenders and appraisers leading to inflated home values. Appraisers and lenders say that HVCC, instead of helping the industry, is hurting it. A number of honest and efficient appraisers have been hit because the appraisal fee should now be shared between the appraisal management company and appraisers, instead of appraisers taking the entire fee. There have been instances of appraisal management companies assigning appraisers who have no familiarity with local conditions and data to appraise properties. This leads to incorrect estimates, and incorrect estimates, in turn, lead to buyers and sellers walking away from deals.

Lawrence Yun, chief economist of the National Association of Realtors, has warned that the housing market recovery can get delayed and there could be a rise in foreclosures, if problems related to appraisal are not quickly corrected.

Already Encountering Problems Caused by the HVCC? NAMB wants to know!

If you have experienced issues with appraisals due to the new regulation make your voice heard. You must include specific, tangible evidence of how the HVCC has harmed your consumers and/or prevented you from conducting business.

Send an email, including your contact information, to hvcc@namb.org explaining the problem and it will be included in NAMB's report to the FHFA.

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