The Home Valuation Code of Conduct In Full Effect

The HVCC, or Home Valuation Code of Conduct (link: Fannie Mae FAQs), went into effect on Friday, May 1, 2009.

Michael wrote about its imminent arrival in an April post as the National Association of Mortgage Brokers (NAMB) had just announced the withdrawal of their lawsuit versus FHFA, thus ending their legal battle against the HVCC.

After months of preparation by lenders and appraisers alike, we're just past the May 1st start date and now submitting files according to the new guidelines. At this point, any appraisal ordered or paid for by loan production staff members (loan officers and processors at brokerages and banks alike), homeowners or real estate agents will not be accepted by Fannie Mae or Freddie Mac.

While NAMB was vociferously opposing the Code, the reaction was mixed in the appraisal industry (as far as I could see).

But the grumbling in the appraisal industry is picking up: HVCC Appraiser Talkback Survey: What's Really Going On? (Appraisal Scoop, April 30th)

The intentions of the HVCC were admirable. Everyone wants a better appraisal system. The reality of the new rules? So far the biggest beneficiary has been AMCs, or Appraisal Management Companies - the companies through which lenders order/pay for appraisals. Business is booming for them. Borrowers pay $50-75 more for appraisals, the AMC takes their cut, and the appraiser gets paid approx. $100 less for the same report they did back in April.

But I guess only time will tell if the HVCC is the appraisal panacea, or if it was just an ill-conceived solution to a complicated problem.

Full Steam Ahead for HVCC

The National Association of Mortgage Brokers (NAMB) announced today that they were withdrawing their suit against the Federal Housing Finance Administration (FHFA) to block the implementation of the Home Valuation Code of Conduct (HVCC). 

What this means is that the HVCC is coming.  Nothing is going to stop this train.

The intent of the HVCC was to clean up the appraisal process, to keep loan officers from exerting pressure on appraisers to inflate home values.  It attempts to do so by separating the loan originator from the appraiser.

Starting May 1^st, mortgage brokers will not directly be able to order appraisals for borrowers.  They will have to use national clearinghouses to make the order. 

Thus, the new process puts another middleman collecting his ounce of flesh in the process.   Additionally, appraisers will feel less need to be competitive, as their services will no longer be “shopped.”

It will make the process more expensive to the borrower.  And it is unclear what benefit the consumer, or the housing market, will reap from these new regulations.

The NAMB claims their withdrawal was done for strategic reasons.  It hopes to assess its legal options and challenge the HVCC through various means.  I hope they find this route soon.

NAMB press release.

More on HVCC.