Home Builders Share Their Side of HVCC Controversy
The National Association of Home Builders (NAHB) on Monday hosted a summit focused on residential real estate appraisals. Despite conflicting viewpoints among industry players when it comes to appraisals and the role of a sweeping new code, major trade groups at the NAHB's summit agreed on the need for reform in the appraisal process. Participants at the summit discussed several issues involved in appraising in today's market, including the use of foreclosed or distressed properties as a comparison without proper adjustments, according to a NAHB statement. Another major discussion focused on the Home Valuation Code of Conduct (HVCC), which took effect May 1 and which changed the way the industry orders appraisals. The NAMB's statements urging reform on the appraisal process come after Lender Processing Services (LPS) deputy general counselor and chief compliance officer Donald Blanchard sat down with HousingWire in an attempt to dispel some HVCC "myths." NAHB's statements seemed ready to defend at least one report circulating the industry -- that the HVCC slowed the appraisal process. The HVCC impedes the "ability to obtain appraisals of the quality required in today's distressed markets," according to NAHB. Some appraisers are working in areas outside of their geographic familiarity, NAHB said, which may pull down home values and impacts sales where inaccurate appraisals come in below the contract sales price. "This is causing unwarranted downward pressure on home prices at a time when housing and the economy are struggling to emerge from the worst downturn in decades," NAHB said in a statement late Monday. The NAHB, along with the National Association of Realtors (NAR) and the Mortgage Bankers Association (MBA), called for clarification of the HVCC and establishment of "best practices" for the appraisal process. The groups also called for the adoption and enforcement of a clear regulatory framework for the use of distressed and foreclosed properties in the appraisal process. Such regulatory guidance will allow appraisers to form "realistic" valuations based on comparable sales. "An accurate appraisal is an important part of any real estate transaction, and reforming the appraisal process is critical to the nation's housing recovery," said NAR president Charles McMillan. "Quality appraisals are threatened by unintended HVCC consequences and an inconsistency among the various federal regulators." McMillan added the government should establish consistent appraisal rules for both the government-sponsored entities (GSEs) -- to which the HVCC officially applies -- as well as the Federal Housing Administration (FHA) lending program -- which FHA commissioner David Stevens recently said would adopt language from the HVCC to align FHA and GSE policies. "Ensuring that appraisals are fair and accurate is the lynchpin of our secured lending system," said MBA incoming chairman Robert Story, Jr. "As a lender, it is crucial that I can count on the fact that an appraisal is correct and that the appraiser has not been subject to pressure from any interested party to the transaction. We want to work with appraisers and regulators to ensure that every appraisal results in an honest, truthful evaluation of a property's value." The industry response comes as a handful of HousingWire readers recently voiced frustrations over both the clarity and purpose of the HVCC. Some argue the Code was formed for political gain while pushing the middleman out. Write to Diana Golobay.