Does The Home Valuation Code of Conduct Apply To Reverse Mortgages?

image Fannie Mae recently announced that all single family mortgage loans (except government-insured loans) that are originated after May 1, 2009, and delivered to Fannie Mae must comply with the new Home Valuation Code of Conduct (HVCC).  Currently, this doesn’t apply to HECMs but people I’ve spoken with wouldn’t be surprised if it changes in the future. 

The HVCC was agreed to in March by the GSEs after negotiating with New York Attorney General Andrew Cuomo, who had threatened to sue both GSEs over alleged fraudulent appraisals.

The code requires that appraisers are selected and assigned a on a blind basis via independent third party platforms (appraisal management companies).  The hope is that this “firewall” between originators and appraisers will prevent inflated housing values being assigned to borrowers home values.  Whether or not this will actually happen remains to be seen.

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Business Week wrote about the HVCC in Housing Appraisals: Still Blowing Bubbles? which discusses the flurry of new appraisal management companies being started by some of the same subprime players that helped inflate the real estate bubble in the first place.

In the BW article, Bill Garber, director of government affairs at the Appraisal Institute, worries that subprime foxes have been invited into the appraisal henhouse. The new industry wide rules "have transferred the [improper influence] problem to these appraisal management companies, which are not regulated by anybody," Garber warns. 

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  • The HVCC does not require the use of an third party or appraisal management company if impartial selection can be accomplished through other means. For example, a qualified person in the lenders organization, not involved in loan production, can nominate an appraisal panel from which assignments can then be made on a blind basis. It also allows a lender to to have an ownership interest in an AMC to which appraisal assignments can be made. What it prohibits is brokers or other loan production personnel selecting or recommending appraisers.

    A bigger worry in the use of AMC’s is that the appraiser doing the work only gets a portion of the appraisal fee. There is fear that this will lead to higher appraisal fees or substandard work by inexperienced appraisers.

  • Currently Countrywide uses this very process. Their appraisal organization is LandSafe, but LS turns a list of all of their appraiser over to a 3rd party organization and the 3rd party chooses who will do each loan, even on HECMs. Just FYI.

  • Using a third party company to select an appraiser may meet HVCC, however, it does not alway give the job to the best qualified person. In some cases the selection process has excluded some professionals because of the fee structure. Some Appraisal companys Pay under market rate therefore some professionals have not signed on with these companies.
    Also, if the selections process is random, or first responder, the clients may not receive the best possible service. Your client’s appraisal may be given to someone that is not from the area and may not be familiar with that market. Lower fee can create an under value appraisal.
    This may not be the intent of HVCC, it is a reality.
    Trust but verify…

  • The difference in quality between one appraisers’ work and that of another can be huge. If someone is doing wrong, yank their license and/or put them in jail. The Govt. continues adding layer upon layer of rules and compliance, this makes the process less profitable on the lending side as well as hurts the client. The parallel to this can be seen in the Medicare Advantage business today.

    I have used appraisers in the past that were awful and took forever. You find someone else and they do a great job. From the loan officers’ view, the clients’ view, and the end investor, a consistently good appraisal works for everyone.

  • I have used Land Safe valuation appraser because the lender insisted we have to use this company.. We could use an appraser we worked with who was a review apraser for Many banks. He had to agree to take 200.00 which he refused. We were assigned a Land Safe appraser who turned out to be in training with the story that it wuld be revued by her supperior. She put the property on the wrong she did not adjust for deep water dock. left out msny extra values. I was told that waterfront dosen’t have to be counted because many times the don’ even see the propertis. We used a diffrent lender and appraser and property came in 325,000 more. Fha qualifed appraser will be taken of the list if they end upver stating properties. Our underwriters can reduce value if they don’t agree with the apprased values.

    Problem with this idea in areas wher theres only 2 local apprasers you could end up with an appraser who is unfamilar with the area. but they are the next one in the line. We need to track performance and if we find bad ones take away the ablity to do FHA apprasrs.
    This wioll give banks more opportunity to start apprael companies to contorl values.
    What about the compassion to our seniors many times I had an appraser call me to ask if we want them to continue because value was coming in low and didn’t wfeel they should continue. But if your only reciving 200 0r 250 and did your prlimanry work you ight want to get your money regardles of it works or not. Getting paid for your work can make you more compasinate to some one less fortunate.

    This is the worst Idear I have heard yet. Same way we had trouble with Land Safe title who were inexerence.

  • LandSafe is OWNED by Countrywide ya dunces!! This means that in order to submit a loan to CW, you have to use a LandSafe approved appraiser. This is NOT the same as the HVCC. By the way Countrywide doesn’t exist anymore anyway, move on.

  • A former New York Post reporter just wrote up a really interesting piece on BofA’s continued appraisal problems with Landsafe – published at ml-implode.com. Buhl also sheds a unique tidbit about how Cuomo got the GSE’s to play along in his HVCC agenda. She trys to let the reader decided if HVCC will work to stop conflict of interest- my take is it’s doubtful.

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