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.