Effective January 1, 2010, mortgage brokers and mortgage bankers will no longer be allowed to order appraisals directly from an appraiser for FHA loans. FHA is not adopting the Home Valuation Code of Conduct (HVCC), but they are adopting many of the guidelines spelled out in the HVCC.

At the moment, only conventional loans need to be ordered through an appraisal management company. Although HUD makes it clear that they are not requiring the use of appraisal management companies, that is the best way to ensure that the lenders are in compliance with the new FHA rules, so most lenders will probably insist on using appraisal management companies.

This new rule will have the same effect as the HVCC - longer appraisal turn times, uncertainty regarding values, and higher costs for the buyers. However, the lending industry seems incapable of policing itself, so this is what we get. There will be the usual outcry from the National Association of Realtors, the National Association of Homebuilders, and the various lending trade associations, but change is here to stay. Until the average American family can afford to buy a house with a full doc, 30-year fixed rate mortgage (and we are not even close to that point yet), the government has made it abundantly clear that underwriting guidelines are going to continue to get tougher.