Understanding The Home Valuation Code of Conduct

By Richard Hirsch, Mortgage Masters

 

 

What is the HVCC?

The HVCC is the Home Valuation Code of Conduct. The HVCC is the result of a joint agreement between Freddie Mac, the Federal Housing Finance Agency (FHFA), and the New York State Attorney General. The agreement was formed in an effort to enhance the independence and accuracy of the appraisal process. Unfortunately, that has not been the case. This past year, the HVCC has quietly transitioned from a mere proposal into concrete national policy which has altered the core aspects of real estate appraisals.

 

As a result of the HVCC, many appraisals are now being outsourced to 3rd parties, many of whom do not have a working knowledge of the geographical areas they are appraising. As a result, buyers are being subjected to higher appraisal costs, inaccurate valuations, and the elimination of the longstanding benefits of one-on-one business relationships with local Realtors, mortgage originators, and appraisers. Because of the formation of the HVCC, local market value decisions have now been shifted to unfettered and often uninformed appraisal management companies located hundreds, if not thousands of miles away.

 

It’s likely that local real estate transactions are being derailed by so-called appraisal reviewers, hourly workers who have absolutely no working knowledge of the community where the appraised home is located. This practice hurts home buyers, sellers, Realtors, and mortgage originators.

 

The Good News

Although many banks are now outsourcing appraisals to management companies as part of the HVCC, regulations do allow mortgage lenders such as Mortgage Master to use their own in-house, approved appraisers to perform home appraisals with the following caveat:

 

“Lenders may use in-house appraisers, provided they are completely independent of the sales staff and their compensation does not depend on their estimates or on loan closings.”

 

Bottom Line

It is extremely important for homebuyers to determine whether potential lenders use an appraisal management company or have in-house appraisers. This choice can mean the difference between a loan closing and a loan unraveling.

 

 

Rich Hirsch

Mortgage Master Inc.

 

Phone: 908-410-9066

eFax: 908-325-0018

 

rhirsch@mortgagemasterinc.com

 

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This entry was posted on Friday, July 10th, 2009 at 3:58 pm and is filed under Buying a home in this market, From Contract to Close, Mortgage Industry News, Selling a home in this market. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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