Brokers: Repeal The Home Valuation Code of Conduct

Armen Hareyan's picture

Three advantages I have as a mortgage broker over a large bank are speed, pricing and service. If you really think about it, those are the three components that separate any service business from another. The recently implemented Home Value Code of Conduct (HVCC) legislation has succeeded in worsening speed, pricing and service received for any individual obtaining mortgage financing.

The Home Value Code of Conduct will also succeed in putting many small business owners, (real estate appraisers) out of business. This change in the way banks do business stems from guidelines set by New York State attorney general Andrew Cuomo. HVCC guidelines do not apply to FHA financing where a borrower typically borrows 96.5% but only applies to Fannie Mae and Freddie Mac financing where the borrower typically borrows 80% financing. (You would think it would be the other way around)

The Home Valuation Code of Conduct (HVCC) is legislation that passed in March 2008 and became effective on May 1st, 2009. From that moment forward all real estate appraisals for Fannie Mae and Freddie Mac mortgage loans are now ordered through the bank’s appraisal management company rather than by the mortgage originator. The intent of this legislation is to prevent “persuasion” coming from the mortgage originator on the value of the property. Prior to this, a financial institution would call up their favorite appraiser and place the order. What’s the big deal you ask? Here are examples of how this legislation, raises price for the consumer and lowers service levels and will help to effectively put many small business owners out of business.

Appraisers, like mortgage people or realtors have been struggling for the last several years due to the difficult market. This legislation effectively takes away 40% of the appraisers business. I have known appraisers who have done a fine job for 25 years. They focus on service and doing the job in a timely manner and being as accurate as possible. Now their base of repeat customers can no longer call them up and use them on a Fannie Mae or Freddie Mac transaction. How would you like it if you were an AC technician and you had 200 customers, then one day the state tells you that you no longer can visit those people unless the compressor company sets the appointment for you. Twenty-five years of hard work and customer service has just been thrown out the window.

The Home Valuation Code of Conduct raises costs to the customer and reduces the appraisers pay and creates inefficiencies. Where $350 used to be the going rate for an appraisal now the cost is $400. The appraisal management company skims $100 of the top just for picking a random appraiser. If the bank tries to honor the old price, this means the appraiser who once made $350 per job is now making $250 per job. Now we are more likely to have a less experienced appraiser, who doesn’t care about service because there is no link between doing a fine job and his next order. He is less likely to put as much time into the job because he is getting paid less. Turn around times which used to be five days are now two weeks. This may force the mortgage broker to extend the lock which costs the consumer even more money and frustration. Just last week, I had a purchase where the sloppy appraiser misread the contract price. I had no way of telling him he made a mistake. The bank never fixed the mistake and it cost my client an additional $800 out of pocket. Under the HVCC, if a customer chooses to switch lenders, they have to start all over and pay for a brand new appraisal from a different random guy. It used to be we could transfer an appraisal from one bank to another if we found a better interest rate for the customer.

There is a petition going around that is a protest to this HVCC legislation. Please sign it on line. I have placed it on my web site and I am also placing it at the bottom of this article. This is just another example of how government intervention doesn’t necessarily always help the big picture. Another example of how mortgage brokers are being portrayed as the villains in this whole mortgage meltdown. Another example of how the large lending institutions, with their lobbyists, are pushing out the small business owner.

You can add your name to the petition at

Written by Preston Ware
First South Mortgage
Tel: 704-542-8057
Email is

Add new comment