House Members Look to Eliminate HVCC, Change Appraisal Process
An amendment to the Wall Street Reform Bill being debated today in Congress would eliminate the hotly contested Home Valuation Code of Conduct (HVCC), which has changed much of the home appraisal process since its introduction last year. 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 also limits the interactions between the appraisers and those originating the loan.
This has led to increasing demand for appraisal management companies (AMCs), while also acting as a magnet for complaints from independent appraisers who claim they’re being undercut out of the market.
There have been so many reports of HVCC violations, in fact, that the government-sponsored enterprises (GSEs) recently implemented a process to handle them. The volume of complaints, however, hasn’t been enough to sway Edward DeMarco, director of FHFA, to fund an Independent Valuation Protection Institute. In a letter written at the time, DeMarco wrote that the HVCC was having the original desired effect.
“As intended, the Code has improved the independence of appraisers — reducing opportunities for fraud, protecting consumers in the mortgage process and providing greater confidence to the investor community in their purchases of securities backed by mortgages that have appraisals performed under the Code,” DeMarco wrote. “Ultimately, these effects inure to the benefit of homebuyers as well.”
But in July 2009, Jed Smith, managing director of quantitative research at the National Association of Realtors (NAR) wrote a report on the impact of HVCC based on survey responses from its members. Smith wrote that 69% of Realtors reported increased appraisal times of more than eight days after HVCC was implemented, compared to pre-HVCC appraisals.
Of the appraisers surveyed, half also reported a reduction in fees received from the AMCs after completing an appraisal.
The House-Senate Conference Committee is meeting today at noon to debate the amendment, among others, in an attempt to reform regulation of the entire financial industry. If the amendment is approved and the bill is passed, HVCC would be eliminated 60 days after the President signs the bill into law.
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