HVCC – Not Yet Gone and Certainly Not Forgotten

Since news of the Dodd-Frank Wall Street Reform and Consumer Protection Act swept across America this summer, it seems that the only provision that met with almost universal support from the mortgage industry is the elimination of the Home Valuation Code of Conduct (HVCC) – the appraiser independence provisions whose unintended consequences have been plaguing transactions for nearly a year now.  In the bill is contained a well known and much celebrated provision that automatically sunsets HVCC.  Less well-known, however, is the clause that says the HVCC sunset will not occur until regulations are released to enforce the appraisal independence provisions required under the Dodd-Frank bill – currently scheduled to be “on or about October 21, 2010”.  In other words, anyone who thought we were going back to the pre-HVCC business model is mistaken.

If you’ve been around the industry since HVCC went into effect, you know that there have been multiple petitions circulating concerning the law and countless columns written by mortgage and real estate professionals about the problems with HVCC and how to fix them.  Although the fixes seem second-nature to those of us who make our careers in home sales and/or finance, the concern has always been that the people issuing the regulations are not industry professionals.  While that in and of itself is not a problem, we must hope that they listen to input from the professionals who have witnessed first-hand the problems that have been caused directly by HVCC.  Some of those problems include higher costs to consumers and appraisers working outside areas with which they are familiar resulting in less accurate reports and increased processing time for loans.

On Friday, in a little-noticed release from Fannie Mae, we got a glimpse of how things are progressing.  In the notice, Fannie reminds all of its lender partners that HVCC remains in effect until new regulations are released and that “Fannie Mae is working with the Federal Housing Finance Agency (FHFA) to develop and adopt appraiser independence requirements that will replace HVCC.”  Fannie Mae states that it has received input from key industry participants.  The statement in the release that warrants some concern (if you are an industry professional) is the one that says, “Updated requirements are expected to be substantially similar to the current provisions.”  We’re wondering what “substantially similar” means.  We’ll have to wait until “on or about October 21, 2010” to find out.  You can be certain that we’ll have a post as soon as the news hits the wire.

Stay tuned.

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