Tuesday, April 7, 2009

Lenders Not Yet Ready for HVCC

UPDATE#1 - Fannie HVCC FAQs Below
UPDATE #2 - Freddie HVCC FAQs Added Below

........no kidding, and few if any are ready for the May 1, 2009 deadline.

From HousingWire.com:

Survey: Lenders Not Yet Ready for HVCC

It’s not garnering as much press as it perhaps should, but new appraisal guidelines set forth in the Home Valuation Code of Conduct are set to go into effect on May 1 — and a recent study suggests that while U.S. mortgage lenders are confident their systems will be ready, few say they have actually completed system upgrades designed to ensure compliance.

That’s the finding from a recent survey distributed to more than 1,000 key industry personnel by mortgage technology company FNC, Inc. — the company’s client base includes major mortgage banks as well as regional and community banking outfits.

As the result of legal action almost a year ago, New York Attorney General Andrew Cuomo announced an agreement with Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency (formerly OFHEO) to establish a Home Valuation Protection Program. The program demands significant changes to the real estate appraisal process for residential mortgage transactions and includes the Code of Conduct.


Since the National Association of Mortgage Brokers (NAMB) has withdrawn their lawsuit against against Federal Housing Finance Agency (FHFA) Director James B. Lockhart over the Home Valuation Code of Conduct (HVCC), there are rumors of some groups seeking a delay in the implementation scheduled for May 1, 2009.

For a number of reasons, I agree with a delay in the implementation of the Home Valuation Code of Conduct. There are just too many unsettled procedural matters with the HVCC

  • One of the pillars necessary for implementation of the HVCC is the Independent Valuation Protection Institute. Without the IVPI there is no enforcement mechanism, hotline, or means of verifying compliance. Delaying implementation would allow creation of the IVPI or establishing an alternative framework
  • Many state legislatures are in the process of enacting laws to regulate Appraisal Management Companies. In other states, the regulatory agencies are in the process of promulgating rules and procedures to deal with Appraisal Management Companies. Delaying implementation would allow these states to finalize their actions
  • To this day, the fact that the HVCC resulted from improper influence on appraiser independence by a Federally regulated lender and a rogue Appraisal Management Company cannot be reconciled with the apparent endorsement of unregulated Appraisal Management Companies as the “protector” of appraiser independence by the HVCC. Delay would allow a reconciliation of this glaring conflict. (See Story on New York AG Complaint and link to suit HERE)
  • Fannie Mae has adopted policies that protect the brokerage fees from downward negotiation in certain transactions (short sales). Delay of implementation would permit efforts to protect appraiser’s fees from downward negotiation by Appraisal Management Companies. At the very least, it would allow time to arrange for full and transparent disclosure of valuation related fees in closing documents (AMC fee, Appraisal Fee, etc)

There’s more, but it should be clear that a delay would benefit real estate brokers, appraisers, mortgage brokers and consumers.

UPDATE #1 - Fannie believes they're ready. Fannie HVCC FAQs

My favorite:

Independent Valuation Protection Institute (IVPI)

Q55. What is the status of the IVPI?

The structure of the IVPI has not yet been determined and the IVPI has not yet been established. Therefore, the provisions in the Code regarding the IVPI are not yet effective.

Appraiser Active Question #1

Given the financial condition of Fannie Mae and Freddie Mac, when is the IVPI expected to be funded?

Appraiser Active Question #2

When is the IVPI expected to be created?

Update #2 - Freddie believes they're ready. Freddie HVCC FAQs


Unknown said...

Amen Frank - I agree 100%. I also think that because of the several "misrepresentations" about the implementations of this "law" (which the federal government did NOT enact but was implemented by A STATE AG) that the government should stop it. However, due to the various "unknowns" (government regulators overlooking obvious problems - "elected officials" probably high dollar investors - and so forth) that nothing will happen, unfortunately, and that it will go into effect.....SADLY

Unknown said...

I agree with you completely Frank - Where is the IVPI? Will it ever come to action? (I doubt it)

Why was all this rushed through without the "proper time span for comments"? Me thinks there's too many back pockets that have gotten bigger.