HOME VALUATION CODE OF CONDUCT
Effective May 1, 2009, Freddie Mac no longer purchases home mortgages from sellers that do not follow the Home Valuation Code of Conduct (HVCC). Sellers must also ensure that the appraisals obtained for such loans were made in compliance with the HVCC.
According to the HVCC Fact Sheet, the new HVCC:
- Prohibits lenders and third parties from influencing or attempting to influence the development, result, or review of an appraisal report.
- Requires lenders to ensure that borrowers are provided a copy of the appraisal report no less than three business days prior to closing, unless the borrower waives the requirement. The lender may require the borrower to reimburse it for the cost of the appraisal, but the lender must provide a copy of the appraisal report to the borrower at no additional cost.
- Requires any third party specifically authorized to perform certain actions on behalf of the Seller to be in compliance with the Code.
- Requires lenders or third parties authorized by lenders to be responsible for selecting, retaining, and providing for payment of all compensation to appraisers. The Code does not allow any other third parties to perform these activities.
- A lender, in connection with the loan being originated, may accept an appraisal report prepared by an appraiser for a different lender provided that the lender obtains written assurances from the other lender that it has adopted the Code and determines that such appraisal conforms to appraisal requirements and is otherwise acceptable.
Requires absolute independence within a lender’s organization between the appraisal function and loan production and limits communication with the appraiser.
A lender’s loan production staff is prohibited from being involved in the selection of the appraiser, or having any substantive communications with an appraiser or appraisal management company about valuation.
The loan production staff consists of those responsible for generating loan volume or approving loans, as well as their subordinates. This includes an employee whose compensation is based on loan volume or the closing of a loan transaction. Employees responsible for the credit administration function or credit risk management are not considered loan production staff.