The Home Valuation Code of Conduct, or HVCC, became law May 1. In the details of the law, Fannie Mae and Freddie Mac, won't provide funds for mortgage loans unless the appraisal follows a few new guidelines.
The new law prohibits mortgage brokers from ordering appraisals directly from, a licensed real estate appraiser or having any contact with the appraiser. Lenders are required to use third-party "appraisal management" companies that oversee the appraisal and any communication.
Under the new law, appraisals cannot be transferred across different lenders. Therefore a second appraisal fee must be paid by the buyer, if they are going to a second lender for loan.
Other problems this law has created in the current real estate market are:
· Valuation may come in low due to out-of-area appraisers being unfamiliar with local market activity. It is noticed in some cases that the comps taken are not relevant. For example if a home falls under certain good school area, the comps are taken from a neighbouring school area, based on proximity, not school boundary.
· In some cases, appraisal assignments are given on a "first come, first served" basis, replacing professional expertise with the ability to be first to reply to an appraisal request. This sets the bar of professionalism very low.
• I am seeing more delay to escrows and frustration for everyone involved.
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