Pending Legislation would end HVCC

Dennis Norman

Last month the U.S. House of Representatives passed H.R. 4173, the “Wall Street Reform and Consumer Protection Act of 2009″, which contained a provision that would “sunset”, or put an end to, the Home Valuation Code of Conduct, which, since it went into effect back in May of last year has been controversial to say the least.

Today this bill was read by the Senate and referred to the Senate Committee on Banking, Housing and Urban Affairs.

The bill would establish the Consumer Financial Protection Agency and give the director the authority to make rules to protect the consumer, including rules to assure “appraisal independence”. The bill gives the director 60 days from the date of enactment of this legislation to establish such appraisal rules and calls for the Home Valuation Code of Conduct (HVCC) to sunset at the time the new rules go into effect. Granted, the new rules could cause just as many problems and be just as controversial as the HVCC but hopefully not.

The specific section of the bill that addresses HVCC and appraisal independence follows:

SEC. 4312. APPRAISAL INDEPENDENCE REQUIREMENTS.

(a) PROMULGATION OF REQUIREMENTS=Director shall lead a Negotiated Rulemaking Committee under the Federal Advisory Committee Act and the Negotiated Rulemaking Act to promulgate appraisal independence requirements for residential loan purposes, and such Committee shall promulgate such requirements not later than the end of the 60-day period beginning on the date of the enactment of this title.

(b) CERTAIN REGULATION REQUIREMENTS—Regulations promulgated by the Negotiated Rulemaking Committee under this section—

(1) shall not prohibit lenders, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation from accepting any appraisal report completed by an appraiser selected,retained, or compensated in any manner by a mortgage loan originator—

(A) licensed or registered in accordance with section 1501 et seq. of the SAFE Mortgage Licensing Act of 2008; and

(B) subject to State or Federal laws that make it unlawful for a mortgage loan originator to make any payment, threat, or promise, directly or indirectly, to any appraiser of a property, for the purposes of influencing the independent judgment of the appraiser with respect to the value of the property, except that nothing in this section shall prohibit a person with an interest in a real estate transaction from asking an appraiser to—

(i) consider additional, appropriate property information;

(ii) provide further detail, substantiation, or explanation for the appraiser’s value conclusion; or

(iii) correct errors in the appraisal report; and

(2) shall include a requirement that lenders and their agents compensate appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.

(c) SUNSET.—Effective on the date the appraisal independence requirements are promulgated pursuant to subsection (a), the Home Valuation Code of Conduct announced by the Federal Housing Finance Agency on December 23, 2008, shall have no force or effect.

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