Application of HVCC

• The HVCC applies principally to conventional or conforming loans that the lender wants to sell to Fannie Mae or Freddie Mac, the two U.S. government-backed mortgage companies. The code may or may not apply to other types of loans, depending on the lender's policies and practices. The code became effective May 1, 2009.
  
  

How It Works

• The key point to know about the HVCC is that most lenders have interpreted it to mean they need to order their appraisals through appraisal management companies, although that's not technically required in the code itself. The appraisal management company assigns the work to a roster of appraisers on a more or less random basis. Neither lenders nor mortgage brokers can order appraisals from favorite appraisers they prefer to work with on loans that are covered by the HVCC.
  
  

Mortgage Brokers' Concerns

• Many mortgage brokers, appraisers and real estate agents dislike the HVCC because of some of its impact on their businesses. Mortgage brokers are constrained in their ability to call up appraisers and ask for preliminary estimates of the home's value before the borrower completes a formal loan application.
  
  

Appraisers' Concerns

• Appraisers have suffered a decline in their income due to the involvement of appraisal management companies, which come between the lender and appraiser (some of these companies are owned in part by the lenders) and take part of the appraisal fee paid by the borrower. Real estate agents have expressed concerns over appraisers who are from out of their area or are inexperienced.
  
  

Effects on Borrowers

• The effect of the HVCC on borrowers is more difficult to tell. An unbiased appraisal is certainly in the borrower's best interest. But some home buyers and sellers have been concerned about so-called "low appraisals" that they believe have been caused by the new code. A "low appraisal" is something of a misnomer, but essentially means that the appraiser's opinion of the home's value is less than the agreed-on sales price for the property. Buyers can't obtain financing if the appraisal doesn't support the sales price. The HVCC has also been blamed for delays in home loan approvals and closings.