Background History regarding Dodd-Frank & HVCC
What can I expect to change because of compliance with Dodd Frank?
The process of ordering appraisals has changed, however. If you're a homeowner looking to refinance your mortgage, your lender will order the appraisal. If you're a homeowner in need of an appraisal of your home for non mortgage related needs, or an attorney wanting to arrange a property appraisal, I invite you to contact me directly. If you work for a small community bank or credit union, you may continue to communicate directly with appraisers, and I welcome your calls.
If you're a mortgage loan officer or a mortgage broker who isn't allowed to order appraisals directly from an individual appraiser and are seeking an HVCC-compliant appraisal ordering system or service, I recommend looking at different portals for compliance, such as ETrac, or AIMS.
Where did the HVCC come from?
Attorney General Cuomo then subpoenaed Fannie and Freddie in order to learn more about loans purchased from banks like WaMu and the valuation processes they used. As I understand it, Fannie & Freddie were willing to sign on the HVCC rather than open their books to Cuomo. As a result, the HVCC was agreed upon and approved by Fannie and Freddie. From May 1, 2009 forward, every loan eventually funded by Fannie and Freddie must be in compliance with the HVCC.
One should understand that no legislation was involved in the creation of the HVCC. An agreement was made between the attorney general of New York and the executives at Fannie & Freddie. Because these mortgage giants are involved in so many loan products, a deal made in a back office has this wide reaching impact upon the appraisal business. With the Dodd-Frank adapting and codifying HVCC, much of the landscape in appraisaland remains the same.
What are the specifics of the HVCC?
Only the lender or a party authorized by the lender can engage the appraiser and order an appraisal that will be backed by Fannie Mae or Freddie Mac. Mortgage brokers and real estate agents, without lender permission, are not allowed to engage appraisers or order appraisals. Also, internal loan production staff members or any other person who is compensated on a commission basis are not allowed to engage the appraiser or have any substantive communications with an appraiser.
A specific exception has been made for institutions which, because of their small size or limited staff, would be unable to establish absolute lines of independence. These smaller institutions are required to clearly demonstrate that they have implemented prudent safeguards to isolate its collateral evaluation process from influence or interference from it s loan production process.
All loans backed by Fannie Mae or Freddie Mac must abide by the HVCC. The code doesn't apply to appraisals ordered for non-lending purposes. FHA insured loans and VA loands are on the same foundation as Dodd-Frank applies.
Lenders are required to ensure that the borrower receives a copy of the appraisal report at least three days before the loan closing. The lender, not the appraiser, must provide the copy to the borrower, at no extra charge. This allows the buyer to read the report and decide whether to go forward with the purchase.
For details on Dodd-Frank Financial Reform, check out this blog from Harvard, Harvard Law Blog
Brokers and Appraisals
The 16th question and answer located in the Freddie Mac HVCC FAQ states:
Got a Question?
Do you have a question relating to real estate appraisals? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.