Home Valuation Code of Conduct Appraisal Standards Are Changing

www.OnePlaceOpenHouse.com

Written by Michael Kraus

August 3, 2010 - Last week President Obama signed the Dodd-Frank Financial Reform Bill, and while most people are not exactly sure what effect this legislation will have on the financial industry, one thing that it will surely do is have widespread ramifications on the appraisal industry because it will eliminate the Home Valuation Code of Conduct (HVCC) in 90 days.

The HVCC was brought into being in 2009 by the Federal Housing Finance Agency (FHFA). The purpose of the HVCC was to give appraisers increased independence from lenders in an effort to improve the accuracy of appraisals and preclude interested parties from influencing appraisers.

The HVCC did this by having appraisal management companies act as a buffer between appraisers and lenders. Many in the industry felt this squeezed profits on appraisal jobs to the point that veteran appraisers left the industry and appraisal quality suffered.

New standards will be developed over the next 60 days. One change that is certain is that government mortgage behemoths Freddie Mac or Fannie Mae will be able to use appraisal reports from appraisers hired by lenders or mortgage originators. According to the legislation, appraisers must be paid at "market rates". Originators will continue to be prohibited from threatening, bribing, or otherwise influencing an appraiser to get a more favorable appraisal value.

It remains to be seen exactly what other changes the new rules will engender.

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