MortgageReverse

Does The Home Valuation Code of Conduct Apply To Reverse Mortgages?

image Fannie Mae recently announced that all single family mortgage loans (except government-insured loans) that are originated after May 1, 2009, and delivered to Fannie Mae must comply with the new Home Valuation Code of Conduct (HVCC).  Currently, this doesn’t apply to HECMs but people I’ve spoken with wouldn’t be surprised if it changes in the future. 

The HVCC was agreed to in March by the GSEs after negotiating with New York Attorney General Andrew Cuomo, who had threatened to sue both GSEs over alleged fraudulent appraisals.

The code requires that appraisers are selected and assigned a on a blind basis via independent third party platforms (appraisal management companies).  The hope is that this “firewall” between originators and appraisers will prevent inflated housing values being assigned to borrowers home values.  Whether or not this will actually happen remains to be seen.

Business Week wrote about the HVCC in Housing Appraisals: Still Blowing Bubbles? which discusses the flurry of new appraisal management companies being started by some of the same subprime players that helped inflate the real estate bubble in the first place.

In the BW article, Bill Garber, director of government affairs at the Appraisal Institute, worries that subprime foxes have been invited into the appraisal henhouse. The new industry wide rules "have transferred the [improper influence] problem to these appraisal management companies, which are not regulated by anybody," Garber warns. 

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