New Appraisal Rules Adopted by Fannie Mae & Freddic Mac

As of May 1st, the Federal Housing Finance Agency has mandated that loan officers CANNOT select or pay appraisers. The Home Value Code of Conduct (HVCC), as it’s called, outlines appraisal-related practices to which lenders must adhere with respect to so-called “conventional” or “conforming” loans that they want to sell to Fannie Mae or Freddie Mac. It’s intended to remove conflicts of interest some feel are inherent in the loan officer/appraiser relationship.

In the coming months these new rules from HVCC potentially mean appraisals and perhaps escrow periods may take longer. Instead of the current practice of a loan officer ordering directly from the appraiser , the HVCC model is that a bank has a stable of appraisers, a loan officer submits an appraisal order, and any appraiser in the stable will be randomly assigned to the order. Banks will either have internal appraisal divisions or be contracted with an appraisal management company, therefore, leaving the loan officer at the mercy of the process regarding turn around times considering the FHFA (using Fannie and Freddie) has to approve each bank’s entire appraisal process.

Lag time may be inevitable, but proponents say the new rules will result in more-reliable appraisals, less fraud, lower costs and minimal disruption. As opposed to critics who expect less-accurate appraisals, delays in loan processing, higher costs and general misery for all concerned.

CalBRE #01224570

2 comments On New Appraisal Rules Adopted by Fannie Mae & Freddic Mac

  • This is a really interesting area of regulation and I think your post is really clearly written and helpful! It’s unfortunate that the consumer (the buyer) really loses in either situation. The loan officer/appraiser relationship has always been full of graft (and how could it not be with two parties mutually incentivized?) and banks have clearly been unable to manage it internally, leading to widespread detrimental effects in the form of overvalued portfolios. But “appraisal management company” doesn’t really instill consumer confidence either; institutional incompetency ahoy.

  • As an appraiser, I disagree with Megan, with the banks controlling the appraiser, then how can said appraiser be truly neutral? There was a class action suit filed by appraisers against Wamu whom it is alleged were kicking appraisers out of their “stable” for not coming up with enough value. I am getting out of the business as I just expect more of the same. I mean just look at the financial mess the country is in right now because of the financial institutions. The consumer loses, the appraiser loses (as banks are already taking $100-$200 of the appraisal fee for administrative purposes) and the loan officer loses because of the lag time. I think these new rules are shameful and hypocritical and once again the only winner is the financial institution.

Leave a reply:

Your email address will not be published.

Site Footer