October 19, 2010 by 12 Comments


This morning, the Federal Reserve replaced the Home Valuation Code of Conduct (HVCC).  The HVCC was a much-maligned system of rules governing home appraisals that were designed to increase the independence of appraisers from interested parties in a real estate transaction.  The new Dodd-Frank financial regulatory reform bill required an overhaul of the HVCC.

The Federal Reserve’s new rule is an optional interim rule.  There is a comment period for the next 60 days, after which time the rule will be finalized.  Compliance with the rule is optional until April 1, 2011 to allow the industry time to adapt.

The new regulations run 132 pages, and I will not attempt to cover all facets of them here.  Briefly summarized, the new rules address these issues (for full detail, see pages 7-8 of the linked PDF):

  • Coercion and prohibited extensions of credit
  • Conflicts of interest
  • Mandatory reporting of appraiser misconduct
  • Customary and reasonable rate of compensation for fee appraisers

Yesterday, Fannie Mae released new appraiser independence guidelines in preparation for the replacement of the Home Valuation Code of Conduct (HVCC), saying:

“The revised requirements pose no significant changes to core principles of the HVCC and incorporate language to clarify questions that arose in the implementation of the HVCC”.

For a complete listing of the Appraiser Indepdence Guidelines, click here to see the release on Fannie Mae’s website.

I think most people agreed with the spirit of the HVCC, but disliked its implementation.  The HVCC was perceived as unfairly reducing appraiser compensation, thus driving many appraisers from the industry.  The new rules are intended to solve some of the problems that arose as a result of the HVCC.  What is your opinion of the HVCC or the new rules?  Will the overhauled rules be effective?  Let me know in the comments section below.

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  • peterg@homesightllc.com' Peter says:

    What is important is that AMCs owned the big, federally chartered banks will be excluded from state regulation. States had to scramble to enact laws to regulate AMCs since the feds did not do anything to stop their predatory behavior. The big banks AMCs are the worst.

  • peterg@homesightllc.com' Peter says:

    typo on my comment…should read “AMCs owned BY the big banks”

  • kwestjohn@cox.net' Kevin Westjohn says:

    This ruling is a joke, if the HVCC has already sunset and the new rules and regulations do not have to be followed untill April 2011, What do we do for the next six months?

    This is typical of the financial oversight committee, They were the ones who ignored the fact that Fanny Mae and Freddie Mack approved loans to people with a credit score of 560 AND NOT CHECKING EMPLOYMENT OR ANY ABILITY TO PAY THE LOANS. Why not walk up to any freeloader on the street and hand over the cash to buy a house? Same difference.

  • villius2000@yahoo.com' Jon Hammond says:

    6 months until implementation and another 6,000 appraisers lost.

  • owltree@comcast.net' Owl Tree says:

    OLD POLICY (“HOME VALUATION CODE OF CONDUCT”): Appraisal managment company collects $400 fee. Bids out appraisal to the appraiser that will do it the fastest and cheapest. Low-ball appraiser wins bid by agreeming to do the appraisal for sweat-shop wage. Low-ball appraiser slaps together sloppy report. Borrower’s home value is now pegged to the most proximate foreclosure…….NEW POLICY (“APPRAISER INDEPENDENCE”). No change, except that is now has a new name.

  • owltree@comcast.net' Owl Tree says:

    Seriously, there is no change. Borrowers will continue to pay a higher fee, but appraisers will continue to be paid less. The margin will continue to be pocketed by Appraisal Management Companies, who are owned by the Too Big Too Fail Lenders. Appraisers will still not be able to work for themselves….they will be utterly dependent on appraisal management companies. They will continue to win orders not based on their experience, or their distance to the property, but rather, by how much they are willing to let the AMC’s take out of the appraisal fee. Anyone who thinks the new policy will lead to better appraisals or lower costs for the consumer needs to wake up and discover yet another bank-congress ripoff in action. And you can thank Mario Cuomo, Barney Frank, and Chris Dodd for billions of dollars in lost real estate equity as good homes are now values according to foreclosures.

  • mcdjoann@yahoo.com' JoAnn says:

    In California the appraisers are also basically doing the termite inspection. Their appraisal form has a spot where they indicate whether the property needs a termite report. The problem is that they have no license or training to determine this, and it is directly against the Pest Control Act. So in addition to not being able to work for themselves, they have the added liability of potentially missing termite damage on a report they indicated did not need a termite report. Bad spot to be in.

  • davidf104@aol.com' Retired Appraiser says:

    To sum it up in a nutshell:

    The appraisal profession was successfully hijacked by bankers who are now earning BILLIONS each year in appraisal fees. The banks tried for years to hijack the real estate sales profession but were blocked at every turn by Realtors. The appraisal profession never had a chance. The independent fee appraisers turned out to be independent fool appraisers and in the end no organization equaled no representation. No representation led to the end.

    This profession is done for. AVMs will pick up the slack more and more each year as experienced appraisers leave the business. There will always be a need however for $25 driveby inspections to make sure the house actually exists. McDonald’s will likely experience a severe worker shortage at that point.

  • aztecm@aol.com' former CA appraiser says:

    I am one of the CA appraisers that is sick over how my fee went from $350-400 for a basic residential appraisal to now being 200-300 (most toward 200). In addition my local work is gone, and I am sent far and wide with no trip fee. I can spend half a day driving and 50 bucks in gas to make 200 before I get home and spend half a day typing, then more time reviewing whiny AMC comments.
    The homeowner pays the same thing to the AMC that we used to get directly, but gets much lower quality since the AMC’s don’t pass along the full fee.
    Most appraisals I see now seem to also have pictures taken off the Multiple Listing Service, rather than the required drive by inspection of the comparables.
    Pretty easy to see who sends the trainee to inspect, then pull old street pics of the comps off internet sources.
    Garbage fee breeds garbage appraisers willing to break the rules.
    I quit appraising rather than participate in this.
    I plan on letting my license expire on renewal.
    No point in paying to be part of this anymore.

  • info@mtnappraisals.com' Peter says:

    4/1/2011 is here and two of the AMC’s I’ve had to work for (I have to live) claim that they can use the same $200 fee they’ve been paying because its now the customary fee for the area. If we all refused to work for so little, they’d have to up their fees. Lets start an appraiser movement. Lets not stand for it any longer. Aren’t you mad enough yet or do you want to wait until they’re right.

  • Zacarian@live.com' Edgar says:

    i am sick and tired of hearing appraisers cry so much. I have never had a better time working with AMC’s. My fees range from 280-325. I am not even certified. I can do one or two a day if i like. That’s is decent income. Also, back in the days appraisers were getting paid to type bad reports because there was no oversight. My previous appraiser who thought me was incompetent, i didn’t learn anything from him. My point is, now the quality of appraisals has improved and we are not constantly pushed around by agents and brokers. Why is this loser complaining about termite section. That is better, the more responsibility you have the more the worth of your appraisal goes up, if you don’t know how to check for termintes go read a book and learn. Stop crying kids grow up.

  • ganzync@aol.com' Ness says:

    My home was appraisal and he did not include the abandoned oil tank and the visual mole and oil smell . He used home values from the south side with stone fronts instead of red brick fronts .100.000.00 – I requesting a 2nd appraisall .
    Any good appraisal companies for Philadelphia , pa
    Urgent !!!!!

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