August 9, 2010 by MSI
Last June
we wrote about the Home Value Code of Conduct, a joint initiative between
Freddie Mac, the Federal Housing Finance Agency (FHFA), and the State Attorney
General of New York, which was enacted to protect the independence of
appraisers and offer additional protection for consumers, mortgage investors
and the housing market. Two of the primary changes in the regulations, which
went into effect May 1, 2009, were:
- Mortgage
lenders were required to use third parties, Appraisal Management Companies (AMCs)
for any appraisal needs, and
- Lenders
were prohibited from having any conversations with the appraiser during the
appraisal process.
While the
goal of HVCC was to protect all of the invested parties in the transaction, the
regulations caused delays in the process through the addition of the AMC
middleman, independent appraisers were forced to align with an AMC, and it
drove up appraisal costs with the addition of the AMC, who now had to earn
revenue for the work they were doing in assigning and managing the appraisal
request from the mortgage lender.
Now, due
to the recent signing of the Dodd-Frank Act, the HVCC will officially be
eliminated within the next 90 days and replaced by a new set of appraisal
independence standards that will be finalized within the next 60 days.
Highlights of the forthcoming changes include:
- Fannie Mae
or Freddie Mac will be able to accept any appraisal report completed by a
selected appraiser or paid by a mortgage lender
- Lenders
will be required to pay agents at market rates
- Loan
originators will be subject to state and/or Federal laws that prohibit them
from making payments, threats or promises to influence the report
There
aren’t many in the real estate, mortgage or appraisal industry who will be sad
to see the HVCC eliminated, except perhaps for the AMCs, but we will all have
to wait until at least September to see the final guidelines and restrictions –
stay tuned.
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