In May of this year the Home Valuation Code of Conduct (HVCC) became law. If and when you get a new conventional loan under Fannie Mae or Freddie Mac guidelines, the HVCC will come into play.

What is HVCC?

In summary, the Home Valuation Code of Conduct says “No employee, director, officer, or agent of the lender, or any other third party acting as joint venture partner, independent contractor, appraisal management company, or partner on behalf of the lender, shall influence or attempt to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion, compensation, instruction, inducement, intimidation, bribery, or in any other manner.”

On the surface that all sounds really good doesn’t it. It has far reaching ramifications for the Homebuyer, Seller, Real Estate agents, Appraisers, Lenders and to an extent even escrow companies.

For anyone unfamiliar with the "normal" appraisal ordering process it was simply this: when your loan processing has reached the point where it seems an approval is assured, your Loan Officer or your Loan Processor would complete an Appraisal Request form, fax it to the Appraiser. The appointment is set, the inspection done, the appraisal is completed and delivered.

Lender Changes can mean Increased Costs: Experienced homebuyers know that sometimes it’s necessary to change lenders in midstream. As a Mortgage Loan Officer I can tell you that there are a number of reasons why one might find it necessary to change lenders. Under HVCC, a different lender selection means a new appraisal must be ordered. Prior to HVCC, the existing appraisal could be used as long as the appraiser was approved with the new lender.


Homebuyers choosing to stay with the original Lender: When the need to change lenders is apparent, the homebuyer may choose to stay with the original lender to reduce appraisal cost and meet the agreed close of escrow date.

Just think back to when you purchased your first or second home. You couldn’t wait to move in. This can be costly over the 30 year loan term. It can be costly even if you stay the average 5 to 7 years. Some homebuyers won’t listen to their Loan Officer. They won’t do the math. They may sacrifice interest rate to save the 2nd appraisal fee and delays in closing escrow. If so, they will pay dearly over the coming years should they accept a higher rate instead of using a lender with a lower rate.

Regardless of what happens during the escrow process, the homeowner can get a leg up on their mortgage by adopting a mindset of Mortgage Acceleration using the award winning Money Merge Account system from United First Financial, (Ernst & Young’s Entrepreneur of the Year award winner for the mountain region in 2008).

Length of Loan Closings Extended: It is expected that a loan that could have previously been closed in 30 days will now close in 45 to 60 days or longer. Brokers are already experiencing these delays. There are ramifications to this reaching far beyond inconvenience. Longer rate locks are more expensive for the borrower. Purchase contracts may need to be re-negotiated if the close date needs to be extended. This could result in possible contract cancellation.

We say that in Real Estate all things are negotiable. The three options here then would be (1.) Seller wins-Buyer loses or, (2.) Buyer wins-Seller loses and (3.) the ever popular win-win scenario. All these scenarios will be in play from transaction to transaction. There are many other possibilities. Most are negative.

The Appraisers must give up a portion of their income: When I first heard about HVCC, I assumed the appraisers would enjoy these new guidelines for a number of reasons which I won’t go into here. I was mistaken!

Since the Loan Officer or Real Estate agent is prohibited from speaking with the appraiser at any time the appraiser must now get his business from a third party company. I am told that the appraiser has to give up a portion of his income to that third party company. I haven’t confirmed this with my appraiser contacts; after all, I am not permitted to speak with them.

Appraisers may actually lose business: The lender may opt to do an “AVM” instead of a full appraisal. The AVM (Automated Valuation Model) is what we call a “computer appraisal” and is faster and less costly. Use of AVMs by Lenders mean reduced business for Appraisers. Time will tell how many lenders will utilize the AVM process.

Since the loan originator (Mortgage Broker and staff) can no longer select appraisers with proven competence or communicate with appraisers the loan processing will be interrupted and delayed. The unfortunate outcome of this was covered above in “How does HVCC affect the Homebuyer.” Delays, additional costs to the buyer and in some cases additional costs to the broker which will, no doubt, be passed on to the consumer.

HVCC was created for a number of reasons, protection for the Buyer/Borrower being only one of those reasons. It was created and installed, “under the radar,” with a minimum of input from the very industries it affects. HVCC seems to have placed an additional financial burden on all parties related to the selling, buying and financing of real estate in this country.

As Americans, I’m sure we will all adjust and adapt as we settle in with the new Fannie Mae and Freddie Mac HVCC guidelines. It will be costly and it’s not going to be fun for anyone involved.

Homebuyer funds are readily available from Mortgage Brokers and Lending Institutions so go ahead and buy your home. Have your Loan Officer pre-qualify you for a FHA loan prior to starting the search for your new home. HVCC does not apply to FHA loans. FHA guidelines are a bit different from Conventional lending. Your Loan Officer will guide you through the pre-qualification process for your FHA loan. Be prepared to provide credit, income, asset and employment documentation in addition to any other documentation which may be needed for your particular financial situation. FHA loan limits will easily accommodate most buyers but not all. This is another reason for the pre-qualification process.

Once you have closed escrow and are in your new comfortable home consider calling "yours truly" to get a full understanding of how much of your hard earned money you will be able to keep when using the Money Merge Account system of Mortgage Acceleration. Most homeowners using the Money Merge Account payoff their mortgages (and all other debt) in one-third to one-half the normal time. This is accomplished with no change in your monthly mortgage payment and with little to no change in your lifestyle. Get your Free No-Obligation Analysis today.

The complete 4 page .pdf file outlining the HVCC can be found here.


Bill Beavers is a Mortgage Loan Officer with Assured Mortgage Company in Fresno, California and a Division Manager/Independent Agent with United First Financial home of the Money Merge Account system of mortgage acceleration. 559-783-2547

bill at impaidoff.com

http://www.impaidoff.com/Money_Merge_Account.html