The Effects of the Home Valuation Code of Conduct (HVCC) on Appraisers
An appraisal is meant to give an accurate valuation of a property and an appraiser is meant to be an objective participant in the buying and selling of homes. However, many appraisers say that they have been pressured to appraise homes for specified values.
On May 1, 2009 the Home Valuation Code of Conduct (HVCC) is set to be put into operation. The HVCC is a code of conduct that is meant to prevent bias in appraisals used for Fannie Mae and Freddie Mac loans. Brokers will no longer be permitted to choose the appraiser to obtain the appraisal themselves. Loans outside of Fannie Mae and Freddie Mac will not be subject to the HVCC.
Many appraisers state that most of the pressures they have felt have been in regard in appraisals for refinancing. Most appraisers are small business owners who are competing intensely for jobs. Appraisers who refuse to bend to pressure, run the risk of losing future work.
Because of the HVCC, appraisal management companies (AMCs) will begin finding appraisals for lenders. Lenders will not be permitted to contact the appraisers. The purpose is to make appraisals more reliable because the appraisers will not be pressured to come back with a specific valuation. This should result in an increase in the quality of lending decisions.
The National Association of Mortgage Brokers filed a lawsuit to stop the HVCC but the suit is unlikely to be successful. Even if the suit is successful, the PMI Group has decided not to insure loans that are secured by brokers.
The HVCC can be very beneficial to the lending industry. However, many are now wondering when and how the Home Valuation Codes will be supervised and enforced.
