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Lawmakers Heed Industry Group's Call For 18-Month HVCC Moratorium

Realtors are becoming increasingly vocal about the implementation of the new ""Home Valuation Code of Conduct"":http://www.freddiemac.com/singlefamily/pdf/122308_valuationcodeofconduct.pdf (HVCC) by Fannie Mae and Freddie Mac. The ""National Association of Realtors"":http://www.realtor.org (NAR) ""sent a letter"":http://www.realtor.org/wps/wcm/connect/fa4235804e9499a4SD8b7cdbd7836abc56/HVCC_Moratorium_Lockheart.pdfxMOD=AJPERES&CACHEID=fa4235804e9499a48b7cdbd7836abc56 , on behalf of its 1.2 million members, to the GSEs' regulator and New York Attorney General Andrew Cuomo, who helped to institute the HVCC, urging an 18-month moratorium on the new appraisal standards.
Last Thursday, House lawmakers put the weight of a bill behind a proposed suspension of HVCC. Representatives Travis Childers (D-Mississippi) and George Miller (R-California) introduced bipartisan legislation - ""H.R. 3044"":http://www.govtrack.us/congress/bill.xpdxbill=h111-3044 - which would institute NAR's 18-month moratorium on the HVCC rule.
Effective May 1, 2009, HVCC establishes standards for solicitation, selection, compensation, conflicts of interest, and appraiser independence for any mortgage sold to Fannie Mae or Freddie Mac. Under HVCC, Realtors and mortgage brokers are prohibited from selecting appraisers. Lenders are allowed to use ""in house"" staff appraisers, but the loan production staff is prohibited from selecting, retaining, recommending, or influencing the selection of an appraiser and from discussing the assignment with the appraiser beyond requests to consider additional data or to correct errors.
According to NAR, after two months in place, HVCC is causing delays in closings and canceled sales, resulting in artificially low existing home sales. The association says the fallout from HVCC-related appraisal problems is threatening a housing recovery and could lead to further declines in home prices, even more foreclosures, and higher borrowing costs.
""Problems arising from the implementation of HVCC may reverse positive momentum at a time when the real estate industry is just starting to show signs of a rebound in many markets,"" NAR said in the letter.
NAR says its members have raised concerns that business relationships they have spent years nourishing are now prohibited by the new protocol. In addition, Realtors say with HVCC's communication restrictions, it has become increasingly difficult to contact an appraiser, even when warranted by exception circumstances.
Realtors are also disquieted by the fact that appraisal management companies (AMCs) could be in a position to put independent appraisers out of business, and are now assigning appraisers to locations regardless of their geographic competency. NAR said it supports giving federal mortgage regulators the power to adopt nationwide standards for AMCs and to promulgate licensing requirements of AMCs to states.
NAR says it favors independence for appraisers and integrity in the appraisal process, and applauds Attorney General Cuomo and both GSEs for their efforts to address appraisal fraud in the mortgage industry. But while this is the primary aim of HVCC, NAR says there are critical concerns that a moratorium would give time to address, namely lender ownership of AMCs and the conflict of interest this poses, as well as AMCs' increased role in the real estate appraisal process.
NAR made a similar request to the GSEs to delay HVCC on April 20, before the code took effect, citing lack of guidance, blurring of regulatory lines, and unpreparedness of lenders as reasons the new appraisal protocol should be pushed out. The association has also published an """"HVCC Myths and Facts"":http://www.realtor.org/wps/wcm/connect/f57e63804e57784890e4b3d4f1772a7a/HVCC+Flyer+6.16.09.pdfxMOD=AJPERES&CACHEID=f57e63804e57784890e4b3d4f1772a7a"" document to help clear up some common misconceptions about the guidelines within the industry.
The ""National Association of Mortgage Brokers"":http://www.namb.org (NAMB) has been a bit more harsh in its commentary on HVCC than NAR. Earlier this month at the National Association of Real Estate Editors (NAREE) conference in Washington, NAMB President Marc Savitt called HVCC ""the most dangerous thing facing the housing finance industry today.""
Savitt applauded Congress' introduction of H.R. 3044, urging lawmakers to pass the bill as soon as possible ""to ensure that more borrowers will not be negatively impacted by this de facto rule.""
Savitt continued, ""In the period of time since its implementation, the HVCC has increased costs to consumers and decreased the quality of appraisals and has provided a level of uncertainty in an ailing housing market. Tens of thousands of consumers have already been robbed of their opportunity to enjoy historically low rates by Attorney General Andrew Cuomo’s rule.""

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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