Home Valuation Code of Conduct is Better for Business, AMCs Say
A trade group for the appraisal management company (AMC) industry warned that if proposed legislation repealing the Home Valuation Code of Conduct (HVCC) is passed, it may lead to the same damaging business practices that puts undue pressure put on property appraisers. The specific legislation that catches the ire of the Title/Appraisal Vendor Management Association (TAVMA) is HR 1728 which passed the House of Representatives and is awaiting Senate approval. The financial reform bill includes a provision to repeal the HVCC. TAVMA warns that without the HVCC, mortgage brokers and other commissioned-based lender employees will again be able to handpick appraisers and communicate with them without an independent “firewall.” Appraisers may be subject to overt and implied pressure to inflate estimates in order to artificially sweeten mortgage deals. Currently, the HVCC supplies that much-need firewall, TAVMA says: “Unbiased home valuations protect consumers and encourage lenders to provide home financing,” said TAVMA executive director Jeff Schurman in a press statement. “Turning back-the-clock, and letting parties who are compensated based on closed deals order and interact with appraisers will inevitably lead to pressure and inflated appraisals.” Since Fannie Mae (FNM) and Freddie Mac (FRE) implemented the HVCC last May, many lenders have turned to AMCs to facilitate compliant appraisals. On one side of the debate, lenders and brokers argue that AMC-hired appraisers are often paid less because the firms take a cut of the appraiser fee. Other complaints include allegations that AMCs use out of market appraisers who aren’t qualified to value homes in specific markets and appraisers travel too far for work or use inaccurate or wrong comparable sales to conduct appraisers. TAVMA contends the AMC industry it represents provides lenders with objective appraisals. It claims AMCs use licensed and certified local appraisers who travel on average 13 miles or less to assignments. TAVMA said AMCs have systems in place to challenge an appraisal in case incorrect or incomplete comps are used. The trade group also argues that appraisal quality and appraiser objectivity has improved since the HVCC was implemented. “If Congress wants to help consumers, and not just a small group of interested parties, it will make sure that it retains safeguards to protect appraiser independence, before it discards new rules that are already doing this job,” Schurman said. Since the HVCC’s implementation, there have been multiple attempts to repeal the code or at least slow it down. Rep. Travis Childers, D-Miss., introduced House Resolution (HR) 3044, along with 123 cosponsors. The bill would impose an 18-month moratorium on the HVCC. The bill is now sitting in the House Financial Services Committee. Lawmakers passed an amendment to HR 3126 — the bill that would create the Consumer Financial Protection Agency — that would outright eliminate the code. That resolution passed the House Financial Services Committee but still needs a majority vote from the House of Representative. Two other bills that would also repeal the HVCC, resolutions 1728 and 4173, already passed the House of Representatives and are on to the Senate. Even if the HVCC is repealed, Schurman believes lenders, especially those that continue to hold loans on their balance sheets, will continue to look to AMCs as a means to provide independent appraisals. “The tide has changed as far as the way that lenders look at appraisals. They’re not just looking at them as just a piece of paper in a file,” Schurman said. “Freddie Mac has said on three different occasions the quality of appraisals has gone up since HVCC and they’re not going to forget that when and if the HVCC is sunset in some way.” Write to Austin Kilgore. The author held no relevant investments.