Update1 Lawmakers Call to End HVCCby Tim Manni
UPDATE1: Earlier this week we reported that the National Association of Realtors was receiving serious complaints from agents saying Fannie and Freddie’s new home appraisal system was hurting home sales. Other industry groups have begun adding to the criticism.
Responding to claims that the Home Valuation Code of Conduct (HVCC) is only further damaging the housing market, two lawmakers have introduced a bill that would suspend the HVCC.
From National Mortgage News:
The National Association of Mortgage Brokers claims the HVCC is delaying closings and costing it business. Brokers also have complained about being forced to pay high fees to appraisal management companies. “This ill-thought out code is basically damaging the economy. It will rob consumers of the low rates that are available now,” said NAMB executive director Roy DeLoach. However, it’s unclear where the bill goes from here. The legislation was introduced on Thursday night by Rep. Travis W. Childers, D., Miss., and Rep. Gary G. Miller, R., Calif.
While we wait to learn more, we think Julie Messina’s conclusion works well: “I don’t know if there will be a HVCC moratorium or not. But we owe it to our communities to tweak the Code so it is fair for everyone. Only then can we restore health in the housing finance industry.”
(Original story published on 6/23/09): Since its implementation back on May 1, the Home Valuation Code of Conduct (HVCC) — a new set of standards for the solicitation, selection, and compensation of home appraisals for any mortgage owned or guaranteed by Fannie Mae or Freddie Mac — has received near constant criticism from realtors, appraisers, and mortgage professionals.
According to National Mortgage News, the HVCC “encourages the use of appraisal management firms that do not always use local appraisers. Real [estate] agents are complaining that appraisals are being conducted by non-local appraisers who are using non-comparable properties and relying on computer models, [the National Association of Realtors (NAR) Chief Economist Lawrence Yun] said. Mortgage brokers also are complaining that appraisals are taking longer and causing some transactions to fall through.” Yun told reporters that “We are getting bombarded by members across the country who say that sales are falling apart.”
In separate, but related, news, existing-home sales — “the premier measurement of the residential real estate market” — rose for the third straight month, according to the NAR. Yun said the increase was expected for several reasons. Not only do the spring and summer seasons bring the highest volume of home sales, but the combination of historically-low mortgage rates, cheap home prices, and the $8,000 tax credit have all drawn potential buyers off the sidelines.
Whether your interpretation of May’s existing-home sales numbers are positive (like Real Time Economics) or more skeptical like the NAR’s, critics of the HVCC say that, bottom line, home sales would be even better without it.