As most people in the mortgage lending industry know, May 1, 2009, was the compliance date for the Home Valuation Code of Conduct (HVCC) which sharply drew the lines that no one from the loan production side of lending was to have any part of the appraisal ordering function. This was only for Fannie Mae and Freddie Mac funded real estate mortgages and was a huge change for many who provided that type of loan. The transition was relatively seamless and Fannie defended its position strongly as it provided data proving that appraisal quality had improved. The roller coaster of emotion was very vocal as relationships between the mortgage broker and the appraiser were disrupted. A quiet segment of the appraisal industry approved and felt that this separation should have been provided in 1991 when appraiser licensing was first mandated. Ninety days after the signing of the Dodd-Frank Act in July of 2010, the Home Valuation Code of Conduct was retired by Congress, but Dodd-Frank actually strengthens the HVCC's original purpose. Where the original HVCC did not have "teeth", Dodd-Frank does. There will be 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.
Over the past few years, lending standards have become much more rigorous, especially as lenders are being pressured by Fannie/Freddie to buy back loans in default. These buyback requests are being initiated by Fannie/Freddie as a failed home loan's file is reviewed. Additionally, the agencies are reviewing active appraisals in their files with a critical eye, and if the appraisal does not meet current Appraisal Standards or USPAP, the buyback (cram down) is forced on the local lender. This has become a much larger and serious issue to the community bank/credit union.
The Home Valuation Code of Conduct has now been retired by Congress with the Dodd-Frank Act. With that in mind, SAMCO Appraisal Management Company does not have the HVCC, or excerpts of the HVCC with comments, posted on our website. The important idea to remember, however, is that the HVCC is alive and well with the Fannie Mae Appraiser Independence Requirements (Announcement SEL-2010-14) and Freddie Mac Bulletin 2010-23 New Guide Exhibit 35. HVCC started the appraiser independence movement with the recognition there had been pressure placed on appraisers by loan officers and processing staff to "make deals work". Within a short time, six other regulations/laws were passed by the United States government, the Government Sponsored Entities (GSEs), HUD, and the agencies that provide the regulations and oversight for most of the residential and commercial lending in the country. The intent is clear, and it's across the board. There is to be a complete separation of the appraisal ordering with no contact between the appraiser and the loan production and processing staff. In addition, a comprehensive, detailed, and measured USPAP and Appraisal Standards review process is to be initiated for all mortgage loans and an ongoing quality and service score is to be provided for every appraiser.