What is the HVCC?

HVCC is the acronym for Home Valuation Code of Conduct.  While this is a law that pertains to how both mortgage brokers and lenders run their business, HVCC directly affects you, the consumer, by driving up costs for getting a new mortgage.

The HVCC is a law that was created with the intention of making sure that appraisers were not being influenced by lenders or mortgage brokers.  This law came about because the New York State Attorney General, Andrew M. Cuomo sued Fannie Mae and Freddie Mac (the two larges purchasers of mortgages) saying that they did not control the appraisal standards enough on loans they were purchasing.  As a result of the lawsuit all loans that would be purchased by Fannie Mae and Freddie Mac after May 1^st must have the appraisal ordered through an appraisal management company or AMC.  (Just a note, these AMCs are not regulated in any way.)

The whole idea behind the HVCC is the government is trying to prevent lenders/brokers and appraisers from conspiring together on mortgage transactions, but here is what we have seen HVCC do so far:

1. Average cost of an appraisal has gone up.
2. Appraisers are getting paid substantially less per appraisal which is causing a mass exodus of good appraisers from the industry.
3. Many appraisals are being done be inexperienced appraisers who don’t even know the area they are appraising.
4. Many appraisals are coming in undervalue, not because the value is not there, but because the appraiser did a poor job on the appraisal.
5. Turn around times on appraisals have at least doubled, so this adds lots of time to the loan process.
6. If there is a problem with the appraisal, no one except the AMC can talk to the appraiser about it.
7. Because these AMC companies are nothing but order takers, they do not have the ability to communicate challenges to the appraisal so changes are very unlikely.
8. HVCC has done nothing but cost consumers more time and money and has not made the mortgage industry any safer.

There is a light of hope here though.  On June 26^th, H.R. 3044 was introduced into legislation.  H.R. 3044 calls for an 18 month moratorium on HVCC.  The hope would be that after the 18 months, HVCC will be thrown out all together or at least changed in such a way that it achieves what it intended too.