By: Dennis Norman
After May1st Fannie Mae and Freddie Mac will no longer accept loans that do not comply with The new Home Valuation Code of Conduct (HVCC).
Since between Fannie Mae and Freddie Mac they control about 90% of the secondary mortgage market in America this will most likely affect real estate investors one way or another.
The new HVCC states “No employee, director, officer, or agent of the lender, or any other third party acting as joint venture partner, independent contractor, appraisal management company, or partner on behalf of the lender, shall influence or attempt to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion,compensation, instruction, inducement, intimidation, bribery, or in any other manner…”. It then goes on to list 10 specific practices or acts that are not allowed as well as additional regulations. Basically it means “hands off” to lenders when it comes to appraisers. For the complete code click on the HVCC link above.
It is apparent that, in an effort to obtain accurate, unbiased appraisals, Fannie Mae and Freddie Mac do not want lenders to have any influence on the appraiser with regard to their opinion of value. No doubt this is the result, at least in part, of the many over-inflated appraisals on homes financed with sub-prime mortgages which left many people saddled with debt on their homes well in excess of the actual value of their homes.
Just in case the HVCC guidelines are not followed, a hot line number has been established for appraisers to call and report a possible violation. This should get interesting in the months ahead.
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Two Questions Concerning HVCC
1) Why should appraisers be footing the bill for consumer protection by giving up 1/2 of their paycheck? Answer: They should not be footing the bill for this and in fact the borrower is being lied to on the HUD-1 concerning the actual appraiser’s fee.
2) How do you reach the invisible IVPI that was setup to protect appaisers from lender/AMC pressure. Answer: The IVPI was a hoax.