The Home Valuation Code of Conduct, or HVCC, was passed on May 1st, 2009, by the Fannie Mae and Freddie Mac Foundations and the Attorney General of New York. The HVCC is intended to prevent individuals and organizations from having any influence on the requested appraisal itself.

One way the HVCC limits the infationary practices of appraisals is by requiring the lender to provide the borrower with free copies of the appraisal inside 3 working days.

An alternative way it does this is require that banks randomly select 10% of appraisals to test them and report any infractions to Fannie Mae or Freddie Mac. This ensures the compensation of in-honme appraisers is not based on their estimates and that the appraiser is independent of the lenders’ sales staff.

The HVCC is affecting 1-4 Family loans acquired by Fannie Mae and Freddie Mac. It does not affect FHA, VA, or jumbo loans. Private assignments are also untouched, such as divorce appraisals, bankruptcy appraisals, tax grievances and tax appraisals. The HVCC applies only to appraisals, so automated valuation models, broker prices options, and tax assessments remain unaffected.

There are many misconceptions about the rules and regulations of the HVCC, and these facts may clear up some misunderstanding. As an example, the HVCC doesn’t particularly restrict communication between the appraiser and the property agent ; however, the appraiser is proscribed from accepting payment straight from the borrower– 3rd parties are approved by the bank to select, retain, and supply payment for compensation to the appraiser.

The employment of Appraisal Management firms, or AMCs, is not required by the HVCC. Lenders from individual appraisers can order appraisals. Mortgage consultants can be told a specific AMC to use to submit information on loan applications and begin the appraisal process so long as lenders employ a group of authorized AMCs. This is permitted because brokers are not picking, maintaining, or providing payment of compensation for the appraisers.

The code doesn’t permit lenders to accept appraisals prepared by appraisers that are ordered by mortgage brokers, and it doesn’t allow financial consultants to provide lenders with an authorized valuer list to use when ordering appraisals for that precise broker.

The HVCC has effects on not simply the end user, but also each individual or company concerned in the Home Valuation industry. Right now, only loans sold to Fannie Mae or Freddie Mac are dependent on the HVCC ; however, the FDIC, NCUA, and the Fed Reserve also have outstanding policies that may increase liability to both lenders and investors.