About the HVCC

Just what is the purpose of the HVCC?

Enacted May 1, 2009, the Home Valuation Code of Conduct (HVCC) is a set of rules for the mortgage financing and real estate appraisal industries. The intended function of the HVCC is to safeguard appraiser independence and prevent stress from being placed on appraisers to generate a sought after property value. In the end, these safeguards are intended to protect consumers. Although there’s been considerable argument about the unintended repercussions of the HVCC, conformity is required for all financial loans backed by Fannie Mae or Freddie Mac.

So what can I expect to change because of the HVCC?

Absolutely nothing changes in the actual appraisal reports we generate. We’ve always aimed at ensuring precise, independent valuations in our appraisal reports. This is the core value of our business. We’ll continue to do that running forward and we’re prepared and qualified to make sure every little thing we do is in accordance with the HVCC.

The process of ordering appraisals has changed, however. If you are a homeowner in need of an appraisal of your house, a lawyer needing a property appraisal, and even if you’re working for a small community bank or credit union and will continue to communicate directly with appraisers, click here -ORDER- to order an appraisal now.

If you are a mortgage loan officer or a home mortgage broker who isn’t allowed to order appraisals right from an individual appraiser and are searhing for an HVCC-compliant appraisal ordering system or service, I recommend using the Mercury Network -Click Here- for ordering HVCC-compliant appraisals. I’m actually registered on Mercury Network, and it’s the fastest, most compliant and effective way to order appraisals from me or any appraiser without the need of overhauling your whole appraisal ordering process.

Because I’m already a Mercury Network member, after you submit your own Mercury Network profile, you can add me to your appraiser panel, if you choose to. Mercury Network’s Intelligent Selection System (ISS) allows you to order appraisals “blind”, based on pre-set ordering criteria to help you be certain you are ordering appraisals with complete HVCC-compliance. You’ll probably also appreciate Mercury Network’s pre-populated status message and text box-driven communications which give you a review path for every transaction. To order using Mercury Network, -Click here-.

Where did the HVCC come from?

The HVCC came to be from a settlement between the New York State Attorney General, OFHEO and Fannie Mae and Freddie Mac. In 2007 New York Attorney General Andrew Cuomo filed suit against First American Corporation as well as its appraisal management subsidiary, eAppraiseIT, accusing them of permitting Washington Mutual to stress appraisers to adjust values, and even hand-pick which appraisers should be used in WaMu’s appraisal reports.

Attorney General Cuomo then subpoenaed Fannie and Freddie in order to understand more about loans bought from banks like WaMu and the valuation processes they used. One of the results of the investigation was the HVCC, which was arranged and passed by Fannie and Freddie. From May 1, 2009 forward, every loan eventually funded by Fannie and Freddie has to be in compliance with the HVCC.

Just what are the specifics of the HVCC?

The HVCC specifically forbids any party from coercing, suggesting, or influencing appraisers by any means to produce a specific or desired value for a residential property.

Exclusively the lender or a party permitted by the lender can engage the appraiser and order an appraisal which will be supported by Fannie Mae or Freddie Mac. Mortgage brokers and real estate agents, without lender permission, are not permitted to engage appraisers or order appraisals. Also, inner loan production personnel or any other individual who is paid on a commission basis are not permitted to engage the appraiser or have any substantial communications with the appraiser.

A unique exception has been given for organizations which, because of their small size or limited staff, would be unable to ascertain absolute lines of independence. These smaller institutions will have to clearly display that they have applied prudent safeguards to isolate its collateral assessment process from influence or interference from their loan production process.

Every one of the loans backed by Fannie Mae or Freddie Mac must adhere to the HVCC. The policy does not apply to FHA and VA insured loans, or to appraisals ordered for non-lending purposes.

Loan providers have to make sure the borrower receives a copy of the appraisal report at least 72 hours prior to the loan closing. The lender, not the appraiser, must provide the copy to the borrower, at no additional cost. This permits the buyer to read through the report and determine whether or not to move forward with the purchase.

You can read the full HVCC on Freddie Mac’s website by clicking here: Home Valuation Code of Conduct

Mortgage Brokers and Appraisals

On March 31, Fannie Mae and Freddie Mac released an update of answers to questions frequently asked (FAQ) about the HVCC, including whether or not a mortgage broker is allowed to order an appraisal directly from an appraiser. The answer is obviously “no” and that has never changed. And yet, inside of that same HVCC FAQ update, the question of “Web portals” was addressed. Around the context of appraisal management, Mercury Network falls inside of the Web portal category.

The 16th question-and-answer found in the Freddie Mac HVCC FAQ states:

Question: May a lender direct a broker to use a Web portal set up either by the lender, or by the lender’s authorized agent, through which the broker inputs a request for an appraisal and then triggers the lender’s system to order an appraisal?

Answer: Yes. A lender may direct a broker to use a Web portal in this manner.