BluefoxToday blog : HVCC appraisal regimen drawing missile strikes

HVCC appraisal regimen drawing missile strikes

Complaints against it are growing. Known as the Home Valuation Code of Conduct, or HVCC, it is only some two months old and is now being attacked from several directions. It is the required appraisal system for Fannie Mae and Freddie Mac, the giant government-sponsored mortgage investors. Just about everybody is upset about it - home builders, mortgage lenders, real estate agents and even consumers - because of low appraisals it is producing are killing deals. 

Under the new setup, designed to keep the process more honest and accurate, so-called appraisal-management companies are now sending their experts out to do the work. In the old days it was the mortgage lender who ordered an appraisal. What is often happening today, though, is that appraisers are venturing into areas they know very little about and therefore their evaluations can be way off the mark. And usually it is on the low side, to be safe. Lack of local knowledge is essential for accuracy and obviously the revamped system is doing just the opposite. Critics here have a legitimate beef.

The other major gripe, especially from the National Association of Home Builders, or NAHB, is that appraisers are using foreclosures, bank REOs and short sales as comps in their reports, thus distorting true values. This is a tough one.

Let's take Las Vegas as an example. Resale prices have plunged here to the levels of the late 1990s due to distressed property sales. This has created a wide gap between existing home prices and new home prices, putting the latter at a great disadvantage. Yet, the marketplace is all powerful and what it says should stand. In truth, it's hard to argue against using foreclosures as comps.

The housing industry is up in arms and calling for an 18-month moratorium on HVCC. This new code was sort of rushed through without too much debate and now it seems to be heading toward at least some revision by Congress. Stay tuned.



Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 17 commentsEsko Kiuru • July 04 2009 08:48PM


Our lovely government in a panic and making decisions before they investigate the possible effects.  So every item they throw money at they also throw legislation thus harming the effects of the money thrown.  We voted these people in, so we must take the blame.......

Posted by TIM MONCRIEF, Over 2,000 homes sold….. (Tim Monciref) over 11 years ago

There is no organized code of conduct.....I call it the code of doing bad things for the client.  This moratorium needs to come and seque into something permanent.

Posted by Larry Bettag, Vice-President of National Production (Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001) over 11 years ago

I don't even think its ethical to compare a traditional sale to a bank owned or REO. I know this is happening. I am referring my clients to local banks where this isn't an issue. I know this is unfortunate for mortgage brokers, but we have to do what it takes to get the deals done

Posted by Lori Lincoln And Associates, Top Agent Taunton,Dighton Rehoboth &more (Top Agent Serving Dighton Taunton, Rehoboth and more!) over 11 years ago


This is a huge problem here as well. New homes just can't be built with this stupid appraisal system.

Posted by Jon Zolsky, Daytona Beach, FL, Buy Daytona condos for heavenly good prices (Daytona Condo Realty, 386-405-4408) over 11 years ago

I can't help but blame government for yet another blunder.  They are so busy playing politics, that they fail to do a thorough and responsible job of anything else.

It reminds me of the saying, "No man's life, liberty, or property is safe while the legislature is in session. - Mark Twain.  Unfortunately Congress spends way too much time in session.


In my appraisal classes, we were taught to disregard any distressed sales and any transactions that were not at arms length.  Things certainly have changed --- and for the worse.

Posted by Gary Coles (International Referrals), Latin America Real Estate (Venture Realty International) over 11 years ago

Esko, Appraisers are using one set of standards when doing a Conventional Appraisal and another for FHA.  And before anyone says anything I know that there is a difference between the two, but that is not what I am talking about.

I just had an Appraiser that I never use do a Conventional Appraisal on one of my loans, and he de-valued the house by 2% for every month it sat on the market.  This would never happen on a FHA Loan that I can asign the Appraiser, I know that because I call a couple of the Appraiser that I would have used, and they could not believe that this Appraiser did that.

How in the world is any house going to appraise out if every Appraiser was to do that?

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 11 years ago

The system is definately flawed.  We had an appraisal order by the appraisal management company and the appraiser didn't show up. The client calls the person she is working with - the mortgage broker-and I don't even know who to call to see what happened. Was my face red! But I had warned her about the change so she understood, but that is NOT the customer service I want to provide.

 And under the system, even if I did call, it is against the rules to speak to the appraiser.  Poor appraisers, too, they just lost at least a quarter of their income because the management companies are not paying them nearly what they used to get to write an appraisal and they want the appraisal within days. A quality appraisal on an unusual property doesn't have a chance. 

Posted by minette goldsmith (SOUTHERN ARIZONA COMMUNITY BANK) over 11 years ago


Congress rushed into this one too fast, no doubt.

Posted by Esko Kiuru over 11 years ago


Something will be done soon, it appears.

Posted by Esko Kiuru over 11 years ago


The appraisal process seems to be currently in disarray.

Posted by Esko Kiuru over 11 years ago


New homes especially are taking it to the chin.

Posted by Esko Kiuru over 11 years ago


Like you say, this is largely the result of politics.

Posted by Esko Kiuru over 11 years ago


That's amazing. I wonder if those where his instructions, the 2% rule?

Posted by Esko Kiuru over 11 years ago


The management companies are making some dough now off the appraisers.

Posted by Esko Kiuru over 11 years ago

Esko, he could do it but did not have to do it.  My question to the VP of Underwriting was, if it was not madated that he do that, why would he and cause the house to under appraise?  She got him to revise it to 1% but that still caused it to under ajppraise.  It was a good thing that these people were putting 40% down so it did not cause as big of an issue as it normally would, but it should not have been an issue at all.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 11 years ago


At least it worked out okay at the end.

Posted by Esko Kiuru over 11 years ago
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Posted by nowujfcsl over 8 years ago