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New Lender Appraisal Protocals - Home Valuation Code of Conduct (HVCC)

By
Mortgage and Lending with Guild Mortgage Company

Effective May 1, how all Lender's have to order appraisals has changed dramatically, and in my professional opinion, not for the better.  In an  between FNMA, Freddie Mac, and the Federal Housing Finance Agency all lenders now have to comply with the "Home Valuation Code of Conduct".  The purpose of this new approach is to eliminate any appearance of "undue influence" and potential for a conflict of interest that would impede the appraiser's ability to provide a fair market opinion of value.  Consequently, anyone associated with the transaction that has the potential for compensation resulting from the transaction is essentially barred from any direct contact with appraiser. Moreover, the underlying theory is that this new policy will lead to better quality appraisals that going forward both Lenders and investors of mortgage backed securities can rely upon.  While this may seem reasonable to some in a theoretical sense, in practice, this notion is seriously flawed and doomed to failure.  Why, because it already has been beta tested to a large degree by many large Institutional Lenders for nearly a year and the results demonstrate the "EBAYization of appraisal orders to the lowest bidder.  Most often the lest qualified rookie appraisers undercut the seasoned pros to get the orders.  The net result is that many homeowners, home-buyers, Real Estate Agents, and Loan Officers will see more transactions butchered by appraisers who don't know the market and won't care to ever find out.  I suspect HVCC will implode and go away in the next 6 to 12 months after all the affected stakeholders see the true adverse impact of this brain-dead approach.