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GSEs Release Appraiser Independence Rules to Replace HVCC

The industry has long been awaiting a replacement for the Home Valuation Code of Conduct (HVCC). On Friday, ""Fannie Mae"":https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/sel1014.pdf and ""Freddie Mac"":http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1023.pdf issued new _Appraiser Independence Requirements_ to supplant the controversial HVCC, but both GSEs say the new appraiser rules make ""no significant changes to core principles of the HVCC.""


The Appraiser Independence Requirements, developed in coordination with the ""Federal Housing Finance Agency"":http://www.fhfa.gov, ""maintain the spirit and intent of the HVCC and continue to provide important protections for mortgage investors, homebuyers, and the housing market,"" according to a statement from Fannie.

The new directive, effective immediately, establishes standards for solicitation, selection, compensation, and practitioner independence when it comes to home appraisals. The goal is to ensure appraisers' work is conducted autonomously, without pressure from lenders and real estate agents to manipulate property valuations.


As stated in the ""new appraiser requirements"":https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/air.pdf, an appraiser must be, at a minimum, licensed or certified by the state in which the property to be appraised is located.

No employee or agent of the seller is allowed to influence the development or results of the appraisal ""through coercion, extortion, collusion, compensation, inducement, intimidation, or bribery,"" which may include withholding timely payment for the appraisal report, threatening to terminate future business, or conditioning ordering or payment of an appraisal report on the outcome.

A seller is not allowed to obtain or use a second appraisal in connection with a mortgage financing transaction unless there is reason to believe the original appraisal is ""flawed or tainted.""

Sellers must provide the borrower with a copy of the appraisal report on the subject property at no additional cost and at least three days prior to the closing of the mortgage. However, the borrower can be required to reimburse the seller for the cost of the appraisal.

The seller cannot accept any appraisal report completed by an appraiser selected, retained, or compensated by any other third party, including mortgage brokers and real estate agents. And there must be separation of a seller's sales/mortgage production functions and appraisal functions. In other words, an employee of the seller in sales or mortgage production shall have no involvement in the appraisal.

""We will continue to review our appraisal independence requirements to address market developments and regulatory actions taken pursuant to the Dodd-Frank Act, which may include rules relating to conflicts of interests and fee disclosure by appraisal management companies,"" Fannie and Freddie said.

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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