8 Things Everyone Should Know About the Home Valuation Code of Conduct

Florida mortgage brokers and Realtors take note. We’re in full swing now with the new Form 1004MC - “MARKET CONDITIONS ADDENDUM to the APPRAISAL REPORT” – will be required on all Florida appraisal reports for single to 4-family home loans dated on or after April 1, 2009. If you’ve still not heard about the Home Valuation Code of Conduct (HVCC) – which is tied to the competition of Form 1004 MC – it requires appraisers to provide more information about market trends, supply and demand, marketing times, prior listings, and the like.

There’s a lot to the HVCC, but at the least, Florida mortgage professionals and Realtors should become familiar with it – at least on a cursory level.

Listed below are the most frequently asked questions regarding appraisal-ordering procedures and what now must be included on an appraisal report.

Note: At a minimum, you should know that lenders must order an appraisal through an Appraisal Management Company who in turn, assigns the appraisal order to ANOTHER appraiser- or the mortgage company’s independent person who has nothing to do with the origination of the loan.

1. What is an Appraisal Management Company?

Appraisal Management Companies (AMCs) are third party, independent companies formed for the specific purpose of being a middleman in the appraisal ordering process. Regulators will tell you that AMCs are set up to provide a layer of “impartiality” between lenders and appraisers. They’ll also find it difficult to argue that this additional layer of management is already resulting in increased appraisal costs.

2. Can my Florida Mortgage Broker talk to the appraiser?

Lenders and mortgage professionals must provide appraisers with a copy of the purchase agreement but are prohibited from speaking with the appraiser about value. However, there is nothing in the HVCC rules prohibiting real estate agents from discussing the transaction with the appraiser.

3. What’s the buzz about the fact that “value trending” appraisals must now include a trending analysis on the appraisal report?

In addition to traditional sales comps, appraisers must now provide a “trending analysis.” It’s a new form where they must include the following information:

Sales Price compared to Listing Price (shown as a percentage)
months of housing supply
days on the market
sales activity compared to the overall sales
seller concessions and
number of sales of foreclosed properties

4. What if the value comes in lower than the sales price?

The real estate agent needs to provide additional information or comps to support the value to the lender.

The lender in turn, sends to the appraisal management company, who gives it to the appraiser. Sound like a Chinese Fire Drill? Call it what you will. In any case, expect delays.

5. Can an appraisal be assigned to another lender?

Yes, but the lender who ordered the appraisal must agree to the transfer.

Given the time and effort involved in jumping through the hoops of this new 3 ring circus, I’m not sure too many lenders are going to be real quick about assigning appraisals for use by their competitors.

6. Can the borrower/client pay for the appraisal at the door?

No, it must be paid by credit card by the lender ordering the appraisal. The fee will then be added to borrower closing costs.

7. What’s the 3-day appraisal notice to the borrower all about?

The borrower has 3 days to “review” the appraisal and the loan cannot be closed until the 3-day waiting period has elapsed. However, the borrower can sign a waiver if they wish to close earlier than the 3-day waiting period.

The appraisal report can be sent to them by email or if no email address, a printed copy by the appraisal management company.

8. Are FHA and VA Loans Required to Use the HVCC Appraisal Process?

No. HVCC applies to conventional loans only. FHA, VA and USDA loans are exempt from this rule.

This said, Lenders that fund FHA loans have the option of requiring an appraisal to incorporate the HVCC process , so banks may choose to have the FHA appraisal orders routed through the same appraisal management companies they already use.

HUD Mortgagee Letter 2009-09 Adopts Use of 1004MC Market Conditions Addendum (appraisalnewsonline.typepad.com)
How Will The Home Valuation Code of Conduct (HVCC) Impact Las Vegas FHA Loans? (myfhamortgageblog.com)
New Las Vegas FHA Appraisal Guidelines April 1, 2009 (myfhamortgageblog.com)
FHA Changes Appraisal Requirements For Declining Markets (fhaloanadvice.com)
When is a Second Appraisal required on FHA Jumbos? (raincityguide.com)

I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage broker, I’m your guy. Call me at 863-604-3019 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!

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