HVCC and It's Influence on Today's Appraisal Standards

Mortgage and Lending with Guaranteed Rate NMLS# 2611 NMLS #151088

The Home Valuation Code of Conduct (HVCC) was implemented in May 1, 2009 by the Federal Housing Finance Agency (FHFA).  It was designed as an attempt to improve the independence of appraisers.  It contained provisions that prohibit lenders and third parties from influencing appraisals to arrive at a certain value.  

According to NAR, the HVCC establishes standards on solicitation, selection, compensation, conflicts of interest and appraiser independence. Mortgage brokers and real estate agents are prohibited from selecting appraisers. Lenders are permitted to use “in house” staff appraisers to conduct appraisals. However, the loan production staff is prohibited from:

1) Selecting, retaining, recommending, or influencing the selection of an appraiser for an appraisal assignment or for inclusion on an appraisal roster 


2) Having any substantive conversation with an appraiser or appraisal management company regarding valuation, including ordering or managing an appraisal assignment.

HVCC also came with a number of other provisions.  One includes that the borrower cannot pay the appraiser directly.  HVCC also required all the borrower must receive a copy of their appraisal no later than 3 business days prior to the closing date.

When introduced, HVCC only covered loans delivered to Fannie Mae and Freddie Mac.  On September 18, 2009, HUD announced that FHA loans would have to comply with HVCC beginning January 1, 2010.  That date wast later pushed to February 15, 2010.

It soon became a very controversial agreement.  It's not surprising that it wasn't long before the complaints began.  This is due in part because many mortgage companies moved to the use of appraisal management companies (AMC) to handle all appraisal orders.  This also led to a number of complaints from independent appraisers.  Many appraisers began to claim that they were being cut out of the market.  Real estate agents and buyers and sellers complained because of value issues.

Fast forward to 2010.  New legislation known as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was passed on July 15, 2010.  It was signed into law on July 20, 2010 by President Obama.  That set into motion a plan to eliminate HVCC in 90 days. 

Appraiser Independence replaced HVCC on October 15, 2010.  There have been some changes from HVCC, but not any many as some might think.  In a statement issued by Fannie Mae, "the revised requirements pose no significant changes to core principles of the HVCC and incorporate language to clarify questions that arose in the implementation of the HVCC."

While the name has changed, it's clear that most core principles of HVCC remain in place today. 




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Comments (8)

Laura Warden Nordin
Century 21 Camco Realty - Albuquerque, NM
30-year Top Producer in Greater ABQ Real Estate

Thanks for the very informative post. And it sure seems accurate that those "revisions" must have been very minor...


Sep 05, 2011 11:07 AM
Rodney Mason
Guaranteed Rate NMLS# 2611 - Atlanta, GA
VP of Mortgage Lending - AL, FL, GA, SC, & TN

Laura....The revisions were definitely minor.

Sep 05, 2011 02:14 PM
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

"While the name has changed, it's clear that most core principles of HVCC remain in place today."

And therein lies the crux; nothing's changed.  Once lenders regained control of value by assigning appraisals to their own AMCs, there was no way in #%!! they were going to relinquish it - ever!  JMHO

Sep 05, 2011 05:14 PM
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Rodney, I appreciate this Post, sadly the "real issue" has not been resolved. Out of Area Appraisers unfamiliar with the territory.... centralized farming out of Appraisals...just like the BPO's...go figure. I was hoping they would come up with some improvements, but I am naive...

Sep 18, 2011 05:27 PM
Will Nesbitt
Nesbitt Realty at Condo Alexandria - Alexandria, VA
Nesbitt Realty is a family-run brokerage.


Great article. Very informative and useful information to have.

Sep 19, 2011 03:19 AM
Rodney Mason
Guaranteed Rate NMLS# 2611 - Atlanta, GA
VP of Mortgage Lending - AL, FL, GA, SC, & TN

Donne....The AMC model is here to stay for awhile.

Endre....We really don't have an out of area appraisal issue here.  Most of the Atlanta appraisers know the entire metro area.

Will....Thanks for stopping by.


Sep 20, 2011 06:26 AM
Connie Harvey
Pilkerton Realtors - Brentwood, TN
Realtor - Nashville TN Real Estate

Rodney, I've just recently read about HVCC and am still trying to understand it.

Sep 21, 2011 06:38 AM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Rodney, I'm not sure I understand it all. I know the lenders can't pick appraisers and NY now has an electronic rotating system so we can get ones from out of town. I always meet them with comps and other data they won't have.

Sep 21, 2011 05:17 PM