New Appraiser Code of Conduct

The new HVCC, Home Valuation Code of Conduct, rules became effective in May. The intent of the new rule is to keep appraisers from altering property values to please lenders. The code was initiated after New York Attorney General Andrew Cuomo prosecuted the giant home-mortgage lender Washington Mutual in 2007 for working in collusion with a large appraisal firm.

The new rules Summarized:

• Anyone associated with producing a mortgage cannot select the appraiser judging the property


• To comply with the new regulations, which cover all Fannie Mae- and Freddie Mac-backed loans, lenders have turned to “appraisal management” companies, which typically select appraisers from a pool.

How these changes affect YOU:

• The National Association of Mortgage Brokers estimates that the new code has added an average of $711 to the cost of getting a mortgage because of added fees for second appraisals and extended loan locks.


• Appraisers will now determine values for homes in areas in which they are unfamiliar i.e. an appraiser may work in one county but may be asked to go to another county to determine the value of a home.


• Under the new system, appraisal requests now go through the management companies, which retain as much as 40 percent of the appraisal fee. The appraisers that take these assignments via the appraisal management companies, accept nominal fees and may not take the time to adequately research a market

The National Association of Realtors has asked ranking members of Congress, and the conservator overseeing the government-supported mortgage backers Fannie Mae and Freddie Mac, for an 18-month moratorium on the new system.

New Programs Target Low-Income Buyers

Under the federal Neighborhood Stabilization Program, many new state and local initiatives are expected to roll out in the next few weeks that will help middle- and low-income families Buy foreclosed homes in hard-hit neighborhoods.

In all, about $5 billion is available, including $50 million in technical assistance to get the programs up and running. Some of the Regulations include:

• Participation is limited to households earning no more than 120 percent of the median income
• 25 percent of the money will go to families earning less than half the median.
• The funds must be used for primary residences in communities with the highest incidences of foreclosures and subprime loans.
• There also will be a lease-to-own program.

The Neighborhood Stabilization Program was authorized last summer, but it has been rolling out slowly because the volume of paperwork.

Source: CNNMoney.com