Home Valuation Code of Conduct
Many borrowers are frustrated with the changes that have occurred lately in the mortgage world. The most recent change is something called the Home Valuation Code of Conduct (HVCC). It’s a set of rules which govern appraisals for loans that can be sold to Fannie or Freddie. This went into effect May 1.
The new code of conduct prevents mortgage brokers from hiring appraisers or even talking to them. Mortgage lenders may hire independent appraisers directly or through middlemen called appraisal management companies, which take a cut of appraisers’ fees. Many appraisal management companies are owned by big banks. There is the belief that banks’ ownership of appraisal management companies creates a conflict of interest that could raise prices paid by borrowers.
The HVCC is trying to prevent brokers and lenders from pressuring appraisers to to appraise a house at a certain value that will allow the loan to be approved. But it also forbids legitimate conversations between appraisers and brokers.
Although the appraisal process DID result in inflated valuations at times, this change is another level of government control which will add costs for borrowers.