Freddie's HVCC Guidelines Stir Controversy
Freddie Mac’s (FRE) implementation of the Home Valuation Code of Conduct (HVCC) is in its third month, but that hasn’t stopped critics and supporters both from voicing strong opinions about the new policy. Freddie Mac released a 10-page bulletin last week to reiterate its guidelines for income calculation, asset verification, liability calculation, appraisal quality and misrepresentation of occupancy. The Appraisal Institute issued a release endorsing the new guidelines, specifically the "best practice" recommendation that appraisers should be members of a professional appraisal organization. “The recognition of the professionally designated appraiser has been a missing component in mortgage reform,” Appraisal Institute president Jim Amorin said in the release. “These new guidelines are the right long-term solution for consumers and appraisers and will instill confidence in the safety and soundness of the mortgage lending process.” Ultimately, the originator or lender of the mortgage loan is responsible for the ensuring the quality of the appraisal, Freddie said in the bulletin. Freddie recommends the use of automated valuation models to detect potential fraud and inconsistencies in the appraisal process. Freddie’s bulletin also recommends appraisers’ licensing and performance should be reviewed at least once every licensing cycle, and highlights appraisal “red flags” like unverified comparable sales, the use of an appraiser not familiar with the market where the property is located and inconsistent or unexplained adjustments. Freddie Mac, along with Fannie Mae, are the country’s largest buyers of mortgages, and implementation of the HVCC has been met with some resistance, including Congressional attempts at an 18-month moratorium on the code on concerns that its regulations – including the use of third-party appraisal management companies - are driving up the cost of appraisals. Write to Austin Kilgore. HousingWire magazine explores the hot-button issue of the HVCC in a forthcoming feature to be seen in the August issue.