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HVCC :: Require Appraiser Independence in Loan Origination


Provides new guidelines on ordering appraisals for FHA-insured mortgages and reaffirms existing policy on FHA requirements regarding appraiser independence and geographic competence. Mortgage brokers and commission based lender staff are prohibited from ordering appraisals. FHA does not require the use of Appraisal Management Companies or other third party providers, but does require that lenders take responsibility to assure appraiser independence. While FHA’s existing policies regarding appraiser independence are consistent with the Home Valuation Code of Conduct (HVCC), FHA will adopt language from the Code to ensure full alignment of FHA and GSE standards.

This is part of the new measure that will be effective January 1st, 2010. It is bad news for most mortgage brokers and real estate appraisers. It means more regulation, more bureaucracy, more inefficiency, more hidden costs.

It means lower quality appraisals.

At least, this will be what it means if the consequences of this new measure resemble what happened to conventional – as opposed to FHA – appraisals once the HVCC regulations went into effect, namely, the use of Appraisal Management Companies to order appraisals.

In response to this bureaucratic nonsense, there is a body of mortgage bankers, real estate appraisers, and lawyers that have come together to fight the HVCC, or, at the very least, hold it back from complete domination of the industry.

For the time being, however, brokers and appraisers have to come up with a creative way to assure appraiser independence without having to use AMCs. Any ideas?


December 28, 2009 10:45 am

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