On May 1, 2009 all mortgage brokers & mortgage lenders must implement new procedures for ordering appraisals under the federal Home Valuation Code of Conduct. This law was established by the New York state Attorney General and Fannie Mae & Freddie Mac, now known as the Federal Housing Finance Agency. The purpose of this regulation is to ensure the integrity and independence of the appraisal process. Listed below are 10 “key points” of the Code.
- HVCC (the Code) takes effect May 1, 2009 and applies to all conventional loans sold to Fannie Mae and Freddie Mac. Rules currently do not apply to FHA or VA.
2. Property appraisals cannot be ordered by third parties, including mortgage brokers & real estate agents.
3. A copy of the appraisal must be promptly sent to the borrower and no less than three days before closing; however, borrowers may waive the 3-day rule.
4. Appraisals can only be ordered by an appropriately trained person who works in an area that is wholly independent from sales or loan production.
5. Personnel working in sales or production cannot have substantive communications with the appraiser, including management of the order.
6. Lenders must perform Quality Control testing on 10% of appraisals, automated valuation models (AVMs) and desktop evaluations.
7. Lenders cannot utilize any appraisal report prepared by an appraiser who is employed by the lender, its affiliate or partly/wholly-owned entity.
8. Lenders cannot utilize an appraisal report prepared by an appraisal company that partly/wholly owns the lender or affiliate.
9. Where a partial or full interest between a lender and an appraisal company exists, the lender must comply with all of the above rules and also ensure:
a) there is no target value provided to the appraiser by the lender, its employees, agents or management company;
b) the appraiser’s compensation is unrelated to value or loan closing;
c) the lender and the appraiser/appraisal company have adopted certain policies and implemented the Code;
d) there is an annual external audit of compliance with the lenders appraisal functions; and
e) the lender and appraiser recognize the establishment of the Independent Valuation Protection Institute (IVPI).
10. Where a partial or full interest between a lender and a settlement provider exists, the lender must
a) adopt written policies and
b) recognize new regulatory oversight by IVPI.
Note: the above is only a partial listing of rules pertaining to the Home Valuation Code of Conduct. These new procedures are meant to help borrowers, what they will end of doing is making more mortgage deals not work. If an appraiser was doing their jobs prior to this overkill they did not need additional regulations making the mortgage process more difficult than it already is.
Thu, Apr 9, 2009
Credit Cards, General