October 15, 2010
Appraiser Independence Requirements
Fannie Mae has been working with the Federal Housing Finance Agency, Freddie Mac, and key industry participants to develop Appraiser Independence Requirements to replace the Home Valuation Code of Conduct (HVCC).
The Home Valuation Code of Conduct (HVCC) was directed to "sunset" 90 days after the signing into law the Dodd-Frank Act. Fannie Mae and Freddie Mac worked with the Federal Housing Finance Agency and other industry participants to develop the Appraiser Independence Requirements to replace the Home Valuation Code of Conduct. Fannie and Freddie were very specific and adamant that these new requirements "maintained the spirit and intent of the HVCC". In Fannie's Selling Guide Announcement SEL-2010-14, Fannie went on to state that the new revised Appraiser Independence Requirements posed no significant change to the core principles of the HVCC. Nothing was removed from the Selling Guide that was in HVCC, but language was added that clarified questions that came up after over a year of HVCC implementation.
The HVCC provided that, among other things, only a creditor or its agent (AMC) may select, engage, and compensate an appraiser and that a creditor must ensure that its loan production staff do not influence the appraisal process or outcome. While the Dodd-Frank Act does sunset the HVCC, it actually strengthens the HVCC's original purpose. Where the original HVCC did not have "teeth", Dodd-Frank does. There has been a hotline established for complaints and a Consumer Financial Protection Bureau to investigate those complaints. The "Bureau" has the authority to assess substantial penalties for violations. This is what the HVCC proposed but did not have the financial ability to initiate.
The Dodd-Frank Act and the Federal Reserve Interim Final Rule clearly support the spirit of the HVCC and actually strengthen it by creating the Consumer Financial Protection Bureau. All of the above strengthen the firewall between lender and appraiser, which is the intent of the federal regulators. Highlights of the Appraiser Independence Requirements follow below with a link to the complete announcement.
SAMCO's professional staff ensures that each appraisal meets these requirements. This takes experience knowing appraisal standards, USPAP, and the ability to work closely with appraisers. Appraisal management is now much more than the appraisal ordering process.
Click here for Fannie/Freddie's complete Appraiser Independence Requirements.
Highlights of the Appraiser Independence Requirements include the following:
Appraiser Independence Requirements
I. Appraiser Independence Safeguards
A. An “appraiser” must be, at a minimum, licensed or certified by the State in which the property to be appraised is located.
B. No employee, director, officer, or agent of the Seller, or any other third party acting as joint venture partner, independent contractor, appraisal company, appraisal management company, or partner on behalf of the Seller, shall influence or attempt to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion, compensation, inducement, intimidation, bribery, or in any other manner including but not limited to:...
IV. Appraiser Engagement
B. There must be separation of a Seller’s sales or Mortgage production functions and appraisal functions. An employee of the Seller in the sales or Mortgage production function shall have no involvement in the operations of the appraisal function.
(1) Certain parties are prohibited from:
(a) Selecting, retaining, recommending, or influencing the selection of any appraiser for a particular appraisal assignment or for inclusion on a list or panel of appraisers approved or forbidden to perform appraisals for the Seller; and © 2010 Fannie Mae, October 15, 2010. This document is incorporated by reference into the Fannie Mae Selling Guide.
(b) Having any substantive communications with an appraiser or appraisal management company relating to or having an impact on valuation, including ordering or managing an appraisal assignment.
These parties are:
(i) All members of the Seller’s Mortgage production staff;
(ii) Any person who is compensated on a commission basis upon the successful completion of a Mortgage; and
(iii) Any person whose immediate supervisor is not independent of the Mortgage production staff and process.
C. Any employee of the Seller (or if the Seller retains an appraisal company or appraisal management company, any employee of that company) tasked with selecting appraisers for an approved panel or substantive appraisal review must be: (1) Appropriately trained and qualified in the area of real estate appraisals; and (2) In the case of an employee of the Seller, wholly independent of the Mortgage production staff and process.