Freddie Mac and Fannie Mae will implement a revised Home Valuation Code of Conduct beginning May 1, 2009.
In an attempt to increase the reliability of appraisals, the revised code builds on existing seller-servicer guidelines and will apply to lenders that sell single-family mortgage loans to Fannie Mae and Freddie Mac.
One major difference in the code is that lenders will have little to no communication with the appraiser, which means there won't be an opportunity to have a discussion or touch base with appraisers before they go out to appraise the house.
Despite this downside, proponents of the change say the new code is intended to help assure that borrowers, homebuyers and secondary mortgage market investors receive fair and independent property valuations.
Alternative HVCC Compliance Strategies
As laws and rules emerge on a state-by-state basis with regard to the revised Home Valuation Code of Conduct (HVCC), loan originators and appraisal companies are evaluating possible best practices to protect them from stiff penalties that have been tied to these new rules.
While one option is to work with actual appraisal clearinghouse companies, it may involve extra fees...and there are other alternatives available. One is simply the establishing of a "firewalled" department within your company, with staff ordering the appraisal who are not a part of the lending chain, or a part of the production staff and process.
I am exercising due diligence by talking with our investors and trusted appraisal sources to ensure compliance with the revised code.
To review the specific changes, take a look at the following resources:
Federal Housing Finance Agency's News release:
http://www.ofheo.gov/media/news%20releases/HVCCFinalCODE122308.pdf
Federal Housing Finance Agency's Home Valuation Code of Conduct: http://www.ofheo.gov/media/news%20releases/HVCCFinalCODE122308.pdf
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