Christopher Shearer
Pursuant to the Home Valuation Code of Conduct (HVCC), on May 1, 2009 lenders will no longer accept appraisal reports completed by an appraiser selected, retained, or compensated in any manner by any realtor, mortgage broker, customer or any other third party.
Lenders will only accept appraisal reports from a pre-approved list of appraisers or appraisal management companies.
Impact on Consumers
The HVCC negatively affects consumers by increasing the costs of an appraisal, reducing consumer choice and adversely impacting a consumer's ability to obtain a reliable and quality appraisal.
The HVCC increases the time to fund loans for consumers which necessitates longer rate locks or extensions of existing locks thereby increasing costs to consumers. In the case that a new lender or broker is chosen, a new appraisal will be necessitated, increasing the time to fund.
The HVCC creates a heightened risk for consumers by requiring the use of unregulated Appraisal Management Companies (AMCs) for appraisals. The original investigation that prompted the HVCC's creation was of an AMC and Washington Mutual Bank alleging that they engaged in practices of pressuring appraisers on behalf of Washington Mutual.
The exclusive use of AMCs limits competition in the marketplace, leaving the consumer at a disadvantage.
The AMC model is flawed and will produce poor quality work that will create a continuation of the declining housing market.
Regulation Z addresses Inflated Appraisals
In July 2008, the Federal Reserve Board issued a final rule through reforms to Regulation Z prohibiting all mortgage brokers, mortgage lenders and their affiliates "from coercing, influencing, or otherwise encouraging appraisers to misstate or misrepresent the value of a consumer's principal dwelling."
The final rule by the Federal Reserve, which addresses appraisals and appraisal guidelines set forth by the federal regulatory agencies, prohibits improper influence on appraisers and works to ensure appraisal independence.
The final Fed rule was subject to the Administrative Procedures Act (APA) and Regulatory Flexibility Act (RFA). The HVCC did not go through the Administrative Procedures Act (APA) or the Regulatory Flexibility Act (RFA) as required of rules issued by administrative agencies of the federal government.
The HVCC changes the standards of who may perform appraisals -- something the Federal Reserve decided against when reforming Regulation Z. During consideration of the appraisal standards set forth in the Regulation Z final rule, the Board addressed this issue and declined to find that "any particular procedure for ordering an appraisal necessarily promotes" fraudulent appraisals. Rather, the Board found that "coercion of appraisers" whether by lenders or brokers "is an unfair practice," and determined that the appraisal provisions in Regulation Z should apply equally to lenders and brokers alike.
The Federal Reserve's appraisal standard implementation date is October, 2009.
Considering the negative impact on consumers and the Federal Reserve's recent regulation on appraisals, the HVCC should either be repealed or delayed for 12 months. Contact your Florida Representatives in Congress today and ask them to sign Congressman Miller's letter! Help stop HVCC today!
Now is the time to contact your Representatives in Congress regarding HVCC!
Contact your Representatives and ask them to sign the letter to FHFA Director Lockhart requesting for FHFA to:
1) Repeal the HVCC in its entirety; or
2) Delay implementation of the Agreements by 12 months.
Please call your Florida Representative in Congress and ask them to sign Rep. Miller's letter re HVCC. If the Florida Member of Congress agrees, you can ask that the Florida Member of Congress call Miller's office at (202) 224-3121 to add their name to the letter. Please do not call Rep. Miller's office directly. Any questions regarding this process should be directed to FAMB at (800) 289-9983.
If you do not know the phone number for your Florida Representative in Congress, you can call the House operator at (202) 224-3121. The operator will connect you to your member. If you don't know who you Representative is, you can look it up at the following site: http://www.house.gov/. The "Find Your Representative" function is on the top left corner of the page. You will need the name of your Representative prior to calling the House operator.
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