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[HVCC Watch] Amendment to CFPA of 2009 Snuck In – Return To Old Days?

Oops! Wrong HVCC (not Huron Valley Corvette Club).

We’re talking Home Valuation Code of Conduct [1] and its quickly running its own course (sorry).

Last week, an amendment was added to the Consumer Financial Protection Act of 2009 that would effectively “Sunset” the Home Valuation Code of Conduct or “HVCC” (pronounced “Havoc”).

From Valuation Review [2] magazine:

An amendment was added late Wednesday Oct. 21 to the Consumer Financial Protection Act of 2009 [3] that would sunset the HVCC, allow appraisals to be ordered by mortgage brokers again and would make a new Negotiated Rulemaking Committee responsible for creating one set of appraisal independence requirements across all the federal agencies.

This amendment was championed by the National Association of Mortgage Brokers [4] (NAMB) who were dead set against HVCC [5] for very different reasons than the best appraisers in the industry are. Regardless, HVCC is a systemic accident waiting to happen.

Setting aside the weak production quality, this video is a great source of clarification [6] about the misunderstands surrounding HVCC.

Mortgage brokers were targeted by HVCC as providing undue pressure on appraisers for overvaluation. Systemically, thats absolutely true – of course there are always exceptions. But you can’t rely on the honor system for a financial system structure – thats what where we just came from.

Mortgage brokers get paid when the transaction closes. Guess what kind of appraiser thrived in this kind of environment? Form-fillers.

However, removing mortgage brokers from the process enabled AMC’s which are even more problematic, providing low biased appraisals. Simplistic assessments [7] of the removal of HVCC as a good thing for appraisers is short sighted.

How about the public getting a lending system that has a neutral appraisal environment so the parties getting paid don’t game the system? That means that appraisers shouldn’t be getting assignments from individuals whose commission depends on the outcome. If HVCC is removed and we revert to the prior way of doing business, its a missed opportunity to give consumers fair valuations.

To demonstrate how detached from reality Freddie Mac is, they seem to think HVCC has improved appraisal quality? [8]

This is an opportunity to break free of the past and break free of HVCC and replace it with a better way.