Background History regarding Dodd-Frank & HVCC
Enacted May 1, 2009, the Home Valuation Code of Conduct (HVCC) is a set of rules for the mortgage lending and real estate appraisal industries. The intended purpose of the HVCC is to protect appraiser independence and prevent pressure from being applied to appraisers to produce a desired property value.  The Dodd–Frank Wall Street Reform and Consumer Protection Act adapted most of the HVCC agreement, and the HVCC was then retired. This link will take you to Wikipedia's entry for this bill. Go to 4.14 Title XIV "Mortgage Reform and Anti-Predatory Lending Act, then to Subtitle F regarding Appraisal Activities. Ultimately, these safeguards are intended to protect consumers. Even though there has been considerable debate about the unintended consequences of the HVCC, compliance is required for all loans backed by Fannie Mae or Freddie Mac. If your appraisal needs do not involve a mortgage, none of the HVCC applies.

What can I expect to change because of compliance with Dodd Frank?
Nothing will change in the actual appraisal reports I produce. I've always focused on ensuring accurate, independent valuations in my appraisal reports. It's the core value of my business. I'll continue to do that going forward and I'm ready and qualified to make sure everything I do complies with all applicable rules and regulations in appraisaland.

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?
The HVCC was born from an agreement between the New York State Attorney General, OFHEO, Fannie Mae and Freddie Mac. In 2007 New York Attorney General Andrew Cuomo filed suit against First American Corporation and its appraisal management subsidiary, eAppraiseIT, accusing them of enabling Washington Mutual to pressure appraisers to change values, as well as hand-pick which appraisers should be used for WaMu's appraisal reports.

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?
The HVCC specifically prohibits any party from coercing, suggesting, or influencing appraisers in any way to produce a specific or desired value for a residential property.

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
On March 31, Fannie Mae and Freddie Mac released an update of answers to questions frequently asked (FAQ) about the HVCC, including whether or not a mortgage broker is allowed to order an appraisal directly from an appraiser. The answer is clearly "no" and that has not changed. However, within that same HVCC FAQ update, the question of "Web portals" was addressed. Within the context of appraisal management, Mercury Network falls within the Web portal category.

The 16th question and answer located in the Freddie Mac HVCC FAQ states:
Question: May a lender direct a broker to use a Web portal set up either by the lender, or by the lender's authorized agent, through which the broker inputs a request for an appraisal and then triggers the lender's system to order an appraisal?
Answer: Yes. A lender may direct a broker to use a Web portal in this manner.

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