PARAMOUNT MORTGAGE - LENDER'S BLOG

New Appraisal Rules Effective May 1st

The rules are changing in the residential mortgage market for lenders and appraisers. The Fannie Mae/Freddie Mac Home Valuation Code of Conduct (HVCC), otherwise known as the "Code," will become effective on May 1, 2009. It will affect all lenders, correspondent lenders, and servicers selling loans to Fannie Mae and Freddie Mac.

These government-sponsored enterprises hold or guarantee some $1.5 trillion in mortgages. After the Code goes into effect, both have agreed to purchase only loans by residential lenders who verify the independence of those that appraise their property.

The agreements are in response to pressure by New York Attorney General Andrew Cuomo as part of a yearlong investigation of alleged fraudulent home appraisals ordered by lenders, brokers and their sellers. Some housing experts blame inflated or false residential appraisals, among other excesses, for causing or worsening the housing and mortgage industry crisis.

The Code will require strict adherence to a code of conduct designed to eliminate fraud and produce more accurate values for homes on the market.

Some of the major points in the code of conduct include:
  • Required use of the Market Conditions Addendum (Fannie Mae form 1004MC/Freddie Mac form 71) - Appraisers must report on the primary indicators of market condition for properties in the subject neighborhood by noting the trend of property values (increasing, stable, or declining) plus other key market factors.
  • Appraiser independence safeguards - An expected appraised home value cannot be conveyed to the appraiser.
  • Requirements that the borrower receive a copy of the appraisal - A "copy" must be made available prior to a three day period before closing, unless waived.
  • Appraiser engagement restrictions - Prohibits lenders from accepting appraisal reports completed by an appraiser selected, retained or compensated in any manner by a real estate agent or other third party.
  • Prohibitions against improper influences on appraisers - Employees in the sales or loan production functions of the lender can have no involvement in the operations of the appraisal functions and play no role in selecting, retaining, recommending, or influencing the selection of any appraiser.
  • Appraisal audit requirements - Quality control must be implemented.
  • Independent Valuation Protection Institute (IVPI) - This portion of the code is invalid until the IVPI is in full operation.
The Code does not apply to loans that are insured or guaranteed by a federal agency, such as FHA and VA loans at this time. However, this could change in the near future. There is no geographic limitation for application of the Code. Appraisers must be certified by the state in which the property is located.

For more information check out the FAQs here.
Link:New Rules
Posted by Customer Service on May 1st, 2009 9:29 AMPost a Comment (0)
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