An amendment to the Wall Street Reform Bill
that would eliminate the Home Valuation Code of Conduct (HVCC) survived congressional debates last week, according to one representative’s office.
A congressional conference last week took place to reconcile both versions of the House and Senate financial reform bills. As it stands now, the HVCC would be eliminated 90 days after the bill is signed. A new set of “appraisal independence standards” would replace it, according to the bill.
The Federal Housing Finance Agency
(FHFA) implemented HVCC in May 2009 in an attempt to improve the independence of appraisers by prohibiting lenders and third parties from influencing appraisals. It’s a controversial regulation, leading to an increase in demand for appraisal management companies (AMCs) and complaints from independent appraisers who claim they’re being cut out of the market.
But the “appraisal independence standards” will be written and announced 60 days after the bill is passed. The bill, unlike HVCC, allows Fannie Mae
or Freddie Mac
to accept any appraisal report completed by an appraiser selected or paid by a mortgage loan originator.
The bill also stipulates that the new standards will include a requirement that lenders and their agents pay appraisers at market rates.
The new standards will still subject loan originators to any state or federal laws that prohibit it from making payments, threats or promises to an appraiser to influence the work. But nothing in the standards will prohibit a person with an interest in the transaction from asking the appraiser to consider other information, provide further detail or correct errors in the appraisal.
Despite the efforts to end HVCC, some independent appraisers are still concerned with the bill's language. Frank Leogrande, of Grande Appraisals
in Oviedo, Fla., said fees for appraisals have dropped 40%, while fees for homeowners continue to climb.
“I don't think the language is strong enough to save the independent appraiser,” Leogrande said. “What's more, AMCs are still left in control of the lenders, who now own the entire process. It will take a class-action suit for fee equity to save the appraiser, but that will be years in the future.”
Vladimir Bien-Aime, the CEO of Global DMS
, which built a Web-based valuation management platform said earlier in the year
that HVCC should stay.
“Before HVCC, let’s face it, the door was wide open to loans containing inflated appraised values. In order to avoid the problems of the past decade, we need to do everything we can to protect the integrity of collateral valuations,” Bien-Aime said. “Is HVCC perfect? No. Is it necessary? Absolutely.”
The FHFA did not immediately have a comment.
Write to Jon Prior