I recently read through the comment section of the Revised HVCC blog post, and one of the comments in particular jumped out at me. It asked some very good questions and made some poignant comments.
I thought I would address the comments and questions, here:
HVCC Frequently Asked Questions
How is it that the Attorney General of the state of New York has the authority to make a code that applies to all appraisers in every state?
He doesn’t. Fannie and Freddie adopted this code voluntarily, and that is why it applies to all 50 states. Now truthfully they adopted the code because Cuomo was threatening them with lawsuits. But really, why they adopted the code is irrelevant in regard to its reach. Fannie and Freddie did adopt it. And as such, it applies to all 50 states.
However, it also should be noted that lenders do not have to comply with these regulations. They only have to comply with the code, if they want to sell their loans to Fannie and Freddie. Banks that keep the loans on their books do not have to comply with this code.
This code does not change any rules or acceptable code that is not already in place.
I think mortgage brokers and loan officers would disagree. The ban prohibiting mortgage brokers from being involved in the appraisal process is a significant change. However, I would agree that the gist of the code, which is to prohibit appraisal pressure, is something that is already in place in many state and federal regulations.
The code seems to drive the choice of appraiser into the heretofore non-existent AMC business. The AMC’s of course will skim off some of the appraiser’s fee and anyone who does not agree with that will be stricken from their LIST.
While the code may increase the use of Appraisal Management Companies, the code specifically prohibits AMC’s from exerting pressure on appraisers to reach a pre-determined value. AMC’s are also prohibited from using any list that acts as a coercive measure on appraisers. Appraisers would be wise to use this code to keep Appraisal Management Companies honest. That means filing a complaint with the IVPI any time an AMC steps over the line and pressures an appraiser to reach a predetermined value.
Truly independent and honest appraisers who comply with USPAP and state laws should not have to be on any type of Approved List to do an appraisal for a lender. In the past this has been discriminatory and exclusionary.
I believe the code actually addresses this concern. Section I.B.(8) prohibits the use of “exclusionary lists” without written notice to the appraiser, including written evidence of the appraisers illegal conduct. As such, any Approved appraiser list will be based primarily on competence and the qualifications of the appraiser.
Who will establish and run the Independent Valuation Protection Institute? We already have state agencies and the Appraisal Institute that seem to do a good job.
This is a good question, as currently it is unclear who will run the IVPI. However, unlike state agencies, the IVPI will enforce appraisal independence directly through Fannie and Freddie. So any lender who violates the code may be prohibited from selling future loans to Fannie and Freddie. Hopefully, the IVPI will act as an advocate for appraisers, keeping banks and mortgage lenders honest.
What will be the result of Appraisal Quality Control? As in the past I think it will lead to “no think” canned appraisal phrases and clauses that will pass QC.
I suspect it will depend on how seriously the lender takes the testing. It will also depend on whether Fannie and Freddie require stringent Quality Control Tests.
Appraiser misconduct action will be conducted by state licensing agencies. What is new?
The code is primarily directed at regulating banks and other mortgage lenders and promoting appraisal independence. It’s impact on appraisers will hopefully be minimal and positive.
UPDATE: Here is Fannie Mae’s Frequently Asked Questions about the HVCC. Excellent document and well worth the read.
Manager of Appraisal Specialties
National Association of Realtors