House Panel ‘Sunsets’ HVCC in Consumer Finance Bill

[Update 2 clarifies intent of Miller amendment.]

House of Representatives lawmakers approved a bill that establishes a regulating agency for financial products marketed and sold to US consumers. The legislation also seeks to “sunset” a current regulation on the way house appraisals are ordered.

The House Financial Services Committee continued this week to consider sweeping financial regulatory reform as it marked up and approved by a voice vote HR 3126, the Consumer Financial Protection Agency (CFPA) Act.

The Committee considered a number of amendments to curb the authority of the agency, including a measure to remove “plain vanilla” language from the Administration’s initial proposal that would require only basic types of financial products to be marketed and sold.

Committee chairman Barney Frank (D-Mass.) for weeks opposed “plan vanilla” requirements, which are removed from the legislation by a key provision supported by House Democrats.

The Committee also approved by voice vote an amendment that would ultimately retire the Home Valuation Code of Conduct (HVCC), the set of standards on ordering appraisals for house purchases that took effect May 1.

The provision, introduced by Rep. Gary Miller (R-Calif.), is part of an effort to call on regulators to streamline existing appraisal independence rules into one set of standards. Regulators could then “sunset” and retire the HVCC, according to a statement from Rep. Miller’s office.

“While I am supportive of ensuring accurate appraisals, I have repeatedly expressed concern that the HVCC has potential to increase costs to consumers, significantly hinder a consumer’s ability to obtain legitimate and reliable appraisals, and adversely impact small business professionals who work in the very neighborhoods where these consumers are looking to purchase homes,” Rep. Miller said.

“In fact, since the implementation of the HVCC on May 1,” Miller added, “there are numerous examples of higher costs for appraisals, poor service, the inability to use one appraisal for more than one lender, questionable quality of appraisals, and the inability to make corrections to inaccurate information on an appraisal report.”

The Miller amendment calls on the CFPA to revamp appraisal independence rules and ultimately put an end to the confusion around HVCC and its effect on appraisals and the housing market. The HVCC would become ineffective on the day the CFPA completes a rule-making process to establish standard codes for appraisal independence.

The House panel approved HR 3126 in a 39 to 29 vote. Having cleared a major hurdle, the bill moves on for consideration by the full House.

Write to Diana Golobay.