The Home Valuation Code of Conduct (HVCC) establishes standards for solicitation, selection, compensation, conflicts of interest and appraiser independence. It’s effective May 1, 2009 for any mortgage that will be sold to Fannie Mae or Freddie Mac (Federal Housing Administration (FHA) and Federal Home Loan Bank (FHLB) mortgages are not covered in the agreement).
With HVCC mortgage brokers lost the right to order appraisals for conventional loans going to Fannie Mae or Freddie Mac. Realtors and mortgage brokers are prohibited from selecting appraisers. Lenders are may use in-house staff appraisers to conduct appraisals; however, the loan production staff is prohibited from selecting, retaining, recommending, or influencing the selection of an appraiser and conducting any substantive conversation with an appraiser or appraisal management company (AMC) regarding the appraisal assignment.
What this means: The most experienced appraisers are leaving the industry because AMCs have dramatically cut their wages, in some areas by as much as one-third. The best are also leaving because industry integrity has deteriorated. With this scenario you can imagine whose left doing appraisals and why this ineptitude is creating national concern.
What to do? Write in the P&S Agreement that the property must be appraised by an appraiser with an office from the same city or county? Remove the key box to subvert surreptitious appraisals? Ask your lender about using AMCs. Ask which local and experienced appraisers they hire on a regular basis and if they pay prevailing fees or discounted fees.
Short sales, no sales, bank-owned sales – we need the best appraisers more than ever. Assigning inexperienced and underpaid appraisers to unfamiliar markets is a harmful byproduct of this code. HVCC was well-intended but short sighted and didn’t take into consideration how the industry worked or would be impacted.
(edited excerpt by Paul Hart)
You can click this link to help reverse HVCC.
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I agree with most of your article except for two different statments:
“creating national concern”
I’ve talked to what seems like half the nation over the past 12 months. As it turns out NOBODY cares that appraisers were forced into taking a 50% pay cut (least of all congress). NOBODY seems to care that they are paying $450 for appraisals rather than $300 as there were last year.
“HVCC was well-intended”
This may sound pretty but the ugly fact of the matter is that banks used Andrew Cuomo to force HVCC upon the public under the ploy of consumer protection. The larger AMC owning banks are making billions off of appraisal fees. Andrew Cuomo’s 2010 governor campaign fund is making millions off of the banks he helped.
You were right about most points however. Experienced appraisers with any degree of intelligence left the business last year rather than work for wages that are below what they earned 20 years ago.