House of Representatives lawmakers working on finance reform have approved an amendment to proposed consumer protection legislation that will retire the current appraisal rules that went into effect last May. The old law, known as the
Home Valuation Code of Conduct (HVCC) will be phased out if this new bill is passed.
HVCC was intended to establish an "
arms length" relationship between lenders and appraisers. But as lenders started using middlemen, known as appraisal management firms, to select appraisers the quality of appraisals suffered. National appraisal management firms, not familiar with local markets, often selected ill-qualified appraisers who produced low quality and inaccurate appraisals. As a result home purchase deals fell apart when the bad appraisals came in.
This amendment will redefine the rules to protect the integrity of appraisals. It should provide appraiser selection methods and rules to achieve more accurate appraisals. There are provisions to allow communication of sellers, buyers and brokers with appraisers.
There are also provisions dealing with compensation for appraisal services. Many appraisers have been forced to accept lower fees when appraisal management firms are involved with the current HVCC rules. And... unlike the old HVCC, this law will apply to all loans. HVCC applied only to HUD loans like Fannie Mae & Freddie Mac gauranteed mortgages.
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