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The END of the Home Valuation Code of Conduct (HVCC)


The Financial Services Reform Act (signed by the president on July 21, 2010) offers modernization provisions that affect those in the real estate valuation industry. The Bill creates a new Bureau of Consumer Financial Protection that takes over from HVCC, which ends in November 2010.


The provisions work on several levels to protect consumers and appraisers from coercion and abuse. It is also designed to increase the use of appraisals (written by licensed and certified people not generated by computer vendors) in real property transactions.


Some of the highlights of the Bill include:


Protection for the Consumer:

*Ensures that consumers receive a FREE COPY of the appraisal no later than (3) days PRIOR TO CLOSING.


*Prohibits exclusive reliance on BPO’s (Realtor - Broker Price Opinion(s)) in all loan originations.

Note: Realtors SET the (asking) Price – Appraisers SET the (documented) Value.


*Creates transparency and reliability threshold for automated valuation models (AVM’s) generated by the fallacy of computers.


Protection for the Appraiser:

*Requires that appraisers be paid a “reasonable and customary” fee by lenders, agents and management companies, as determined by:

            Third-party research

            Academic studies

            Federal Agency fee schedules


*Makes appraiser independence requirements a part of Federal Law, creating civil monetary penalties for violation of appraiser independence.


*Mandates that appraisals (written by licensed and certified people) are used in certain “higher risk” mortgage backed real estate transactions.


*Requires regulation of appraisal management companies at the Federal and State level.


The first round of regulatory rule making has begun. Regulators must enact interim regulations and finalize arrangements by Oct 21, 2010.