Home Valuation Code of Conduct (HVCC) is an Agreement between Andrew M. Cuomo, Fannie Mae and Freddie Mac. The Agreement with the attorney general of New York is expected to fundamentally alter the way in which appraisals are ordered and managed. The changes will also create a watchdog to monitor the appraisal business to be known as the Independent Valuation Protection Institute (IVPI).

Because Fannie Mae and Freddie Mac are buying most home loans being made today, the terms they dictate to banks and mortgage companies become de facto industry standards. The changes are scheduled to go into effect May 1, 2009.

As defaults and foreclosures have surged recently, regulators and industry analysts have raised pointed questions about the independence of appraisers.  Because they rely on banks and brokers to give them additional business, appraisers often feel pressured to value a home at prices that match or exceed loan amounts.

Mr. Cuomo’s deal on appraisals is unusual in that it has the blessing of the regulator that supervises Fannie Mae and Freddie Mac.  Mr. Cuomo and other state officials have often squabbled with federal officials over who should police the mortgage business, and how.  Negotiations over the agreement have been taking place for some time and finally intensified. Mr. Cuomo, who was secretary of housing and urban development in the Clinton administration, said the new rules were important to restoring the confidence in the mortgage market.

“The appraisal is the linchpin of the system,” he said. “But the appraisal was the most susceptible to pressure.”

Under the new rules, lenders who want to sell loans to Fannie Mae or Freddie Mac must maintain, separation between loan production, and the appraiser to ensure appraiser independence.  The revised HVCC also prohibits a lender from relying on an appraisal where the broker had a role in selecting, retaining, or compensating the appraiser.

Following a public comment period, the Home Valuation Code of Conduct has been modified and will be effective for single-family mortgage loans (except government-insured loans) that are originated on or after May 1, 2009, and delivered to Fannie Mae and Freddie Mac.

For further education on this industry changing topic please view;

 
Fannie Mae/Home Valuation Code of Conduct & FAQ

Freddie Mac/Home Valuation Code of Conduct & FAQ

Revised HVCC/PDF