HVCC CONTINUES TO DRAW FIRE

It’s the hottest topic in residential real estate today. The Home Valuation Code of Conduct (HVCC) is a new set of appraisal-related practices that lenders must follow in connection with loans they want to sell to Fannie Mae or Freddie Mac. These new practices are intended to reduce the incidence of appraisal fraud and prevent inappropriate pressure being placed on appraisers to inflate home valuations in home purchase and loan refinance transactions.

While the intent of the HVCC is not only good, in fact essential to the process of providing stability to residential lending, there have been many unintended consequences. The use of appraisal management companies, in particular, has resulted in unreliable valuations. There are several reasons for this but, in general, the independent third-party firms are providing lower quality appraisals. This has caused countless bona fide transactions to fall through. The impact has been to de-stabilize further the very same market the HVCC was intended to steady.

Much criticism has been heard about the HVCC from the National Association of Realtors, the Home Builders Association and from many individual legislators. Revised HVCC guidelines are supposed to be issued to help correct the problem, but relief has not arrived yet.
While lenders are not able to have direct contact with appraisers under HVCC, Realtors may provide and discuss comparable sales with appraisers. Given the wide disparity in the condition of properties that are selling and being used as comparable sales, it is highly recommended that Realtors do so.