home valuation code of conduct (HVCC)^(US)

A code of practice that has been established for appraisals carried out when a loan is to be delivered to either Federal National Mortgage Association (FNMA or Fannie Mae) or the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac). Any appraisal report obtained in connection with a mortgage that is purchased by either entity must be made in accordance with the HVCC. The Code was established under an agreement with the regulator of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA), and the New York Attorney General's office. The primary aim of the Code is to eliminate conflicts of interest, fraud and other misconduct in the mortgage industry. The Code is effective for single-family mortgage loans that are originated on or after January 1, 2009, and delivered to Fannie Mae or Freddie Mac (there are small differences in respect of each of these entities, but the standards are fundamentally the same). Certain loans are excluded from the provisions, including government-insured loans (such as FHA or VA loans), certain mortgages to Native American's and Guaranteed Rural Housing Mortgages.

    An appraiser must be licensed or certified by the State in which the property to be appraised is located. It prohibits a lender, or its representative, from influencing in any way the development, result, or review of an appraisal report. This does not prohibit the lender (or any third party acting on behalf of the lender) from requesting that an appraiser (i) provide additional information or explanation about the basis for a valuation, or (ii) correct objective factual errors in an appraisal report. In underwriting a loan, a lender is prohibited from using any appraisal report prepared by an appraiser employed by the lender, an affiliate or any entity that, in whole or in part, owns or is owned by the lender. Any lender making a loan that is to be originated and delivered to Fannie Mae or Freddie Mac shall certify, warrant and represent that the appraisal report was obtained in a manner consistent with the Code of Conduct. Also, the lender must ensure that the borrower has received a copy of the report not less than three business days prior to the closing (for which it may require a reimbursement of the actual cost of the appraisal), unless the borrower expressly waives this requirement.

    The HVCC is being replaced by the Appraiser Independence Requirements, which is required under the the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, § 1471 (15 USCA § 1639E) to protect the independence of appraisers and the integrity of their appraisals; extend these important protections for home buyers, mortgage investors, and the housing market; and reinforce government-sponsored entities' commitment to responsible lending and mortgage quality standards.

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