New Appraisal Requirements

March 13th, 2009 11:15 AM

The final version of the HVCC, Home Valuation Code of Conduct, has been released and takes effect on 5/1/2009. Here are the highlights in a nutshell.

• No one can attempt to influence an appraiser’s value.
• No “Comp Checks”.
• Cannot remove an appraiser from an approved list without cause and written notification.
• Cannot do additional appraisals, AVM, or BPOs for a better value. It is OK to do them as part of a quality program or if the original appraisal is flawed.
• Lender must give the homeowner a copy of the appraisal 3 days before close.
• Only the lender can order appraisals. May use AMCs or appraisal companies.
• Payment to the appraiser must come from the lender, the AMC, or the appraisal company.
• No one in the loan process can talk to the appraiser.
• Anyone selecting an appraiser must be independent of the loan process and must be qualified.
• No one employed by the lender or a company owned by the lender can do an appraisal unless independence can be supported, procedures for adherence to the code are documented, and annual reviews are performed.
• 10% of all appraisals must have a quality check done.
• Establishes the IVPI (Independent Valuation Protection Institute). They will have a hotline for complaints by and about appraisers. They will also publish and promote best practices for appraisers.

The HVCC applies only to Fannie Mae and Freddie Mac loans. These rules do not apply to loans that will be kept in house, FHA loans, or appraisals for non-lending purposes.

There are some important distinctions to be made here. Lenders do not have to use AMCs (Appraisal Management Companies). As long as the appraiser selection is separate from the loan processing folks, a lender can pick whoever they want. That pick may be an AMC or an appraisal company.

The point is that lenders have options. In house appraisers can still be used if you meet the conditions of the HVCC. Quality appraisers can be used so long as the individual that selects them is independent of the loan process.

The biggest impact is on the brokers. No more “comp checks”. They will have to wait until the lender has the appraisal done before they find out that the home is worth $100,000 less than the homeowner’s estimate.

Most of the requirements are good. The IVPI, quality control, and independence are all big pluses for the profession. The exclusion of the brokers, the inability for direct communications, and the requirement to provide the homeowner with the appraisal 3 days before close will all lead to problems. While the communications issue will slow down the process, the 3 day requirement will put more pressure on turn time. For an accurate appraisal, there needs to be enough time to verify information with agents, cities, and counties. Too quick turn times can result in poor appraisals.

 

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