HVCC: Why Should YOU Care?

You may or may not have heard about HVCC.  You'll have the opportunity to learn about it first hand if you obtain a conventional mortgage.  In a nutshell, mortgage originators and processors (anyone considered to be in "production") are no longer allowed to order appraisals or know who the appraiser willbe until AFTER they receive the appraisal.  HVCC just went into effect in May, I wrote a post about my experience at Rain City Guide where a Real Estate Agent asked me:

If I understand you correctly:

  1. We don’t know who the appraiser is
  2. We cannot contact the appraiser even if we knew.   [Note:  the real estate agent CAN contact the appraiser if they somehow know who it is…the loan production staff cannot].
  3. We have no idea when the appraisal will be done.

The Home Value Code of Conduct was created as a result of the New York Attorney General investigating Washington Mutual (once a large bank) and eAppraiseit (an appraisal management company) for manipulating appraisers to produce higher values. 

HVCC was suppose to create a professional distance between mortgage originators and appraisers so that an appraiser could perform their task without pressures to produce a higher value.  Appraisals now go through an appraisal management company (which take on average 40% of the appraisal fee from the appraiser) to create this distance and supposedly reduce any conflicts of interest.  However, the code was amended to allow AMCs (appraisal management companies) to be owned by the very banks who are ordering the appraisals. 

From Fannie Mae's HVCC FAQs update on May 9, 2009 (Question 36):

Q. May an AMC Affiliate with, or that owns or is owned in whole or part by the lender or a lender-affiliate, order appraisals?

A: Yes, an AMC affiliated with, or that owns or is owned in whole or part by the lender or a lender affiliate, may order appraisals…

This smacks of the WaMU eAppraiseit scenario all over again!

So big bank owns an AMC where they order all their appraisals through and if a mortgage originator is brokering a loan to that big bank, the appraisal may be ordered through that AMC.  Big bank/title company collects an average of 40% of the appraisal fee from the appraiser just for ordering the appraisal.  If an appraisal cost $500; the AMC keeps $200 just for controlling and placing the order.  The appraiser, who once collected $500 for producing the report now receives $300.  Many appraisers are having to increase appraisal fees in order to make a living since AMCs are stripping them of 40% of their income. 

Instead of being able to select an appraiser by their qualifications, experience or expertise in a certain area; it's a crap-shoot based on which appraisers are participating (agreeing to lower compensation) with the AMCs.  

From CNBC's Diana Olick on the impact of HVCC:

"As many brokers expected, the HVCC is also resulting in some lower appraisals. Since the appraisers now may be unfamiliar with the local market, they will err on the lower side. Of course it may also be that the lack of a relationship with the lender is removing the 'expectation' of a certain appraised value. If the appraisal comes in lower than the sale price, then the deal is off."

HVCC does not allow second appraisals to be ordered due to low appraisal as it's considered "value shopping".  

With a refinance, no value can be provided to the appraiser–I can't even let the appraiser know what the home owner thinks the value of their home may be.  The home owner, if the appraisal comes in low, is out the appraisal fee (typically around $500).  

The National Association of Mortgage Brokers has been trying to battle this code with strong political opposition.  (NOTE to Mortgage Originators: NOW is the time to belong to your local chapter of NAMB if you care about the future of your industry).

The intentions of HVCC to stop the strong-arming of appraisers to create false values are good.  The results are terrible and many of us are trying to have this reversed.  I encourage you to please sign this petition and to contact your representatives in Congress.   

HVCC is going to hurt the consumer and will only help pad the pockets the owners of the Appraisal Management Companies.  


  1. It is looking like we should be factoring an additional 15 days to compensate for the appraisers assigned by the AMC. Also, I am hearing they are coming in from out of town to do local appraisals.

  2. Greg and Brian, I think it’s a very good idea to allow for more time with AMCs…especially in this initial phase.

    At Mortgage Master, since we are a correspondent lender, we have set up our own appraisal department where no-one in production staff has access or knows who the appraiser will be until we receive it. At least we are able to maintain some quality control since the appraisers are all FHA approved and have been approved by Mortgage Master. It’s still not how I would like to see things… I can no longer work with the same appraiser that I’ve used for 9 years!

    With the AMCs, it’s a lottery who will be your appraiser–I’ve heard of scenarios where the appraiser was not at all familiar with the area.

  3. By the way, it’s not uncommon for me to have to state with a Letter of Loan Commitment that it’s still subject to appraisal or underwriting review of appraisal (if we’ve just received it).

  4. Thanks for writing this article Rhonda! After 2 weeks there are over 29000 signatures at http://www.hvccpetition.com

  5. That is fantastic, AJ! I hope our elected officials listen to our voices instead of their major campaign contributors.

  6. Valerie Kupets says

    Hey Rhonda! You may remember me from WA Title days, so long ago…
    I have a transaction that just got the HVCC treatment. A terrible, erroneous, sloppy appraisal, using the worst comps available, to arrive at a value so low all parties are shocked. The bedroom count is wrong…adjustments were made the wrong direction…it’s like the twilight zone. When we contested it, the processor contacted the AMC but came back with their explanations and denials and other bizarre things, saying they’d take another look but nope, sorry, can’t use that comp because Mapquest says it’s too far, can’t use this comp because the sale is 7 months old. Yet the comps in the appraisal were 11 and 9 months old. It didn’t make sense and the processor unfortunately didn’t seem to care.
    Anyway, I tried to sign the petition but got an error. I’ll try again tomorrow. I sincerely hope modifications to the HVCC are coming..soon. Thanks for the article Rhonda, it’s excellent 🙂

  7. Mark Walser says

    This depends on the AMC. Many of the concerns you brought up are valid concerning quality and non-local appraisals. FHFA just addressed this problem in their recent HVCC update on 7/22. The AMC I work for doesn’t have this problem since we allow our clients to use their trusted appraisers and manage the compliance and appraisal assignment that way. This results in an appraisal that is always localized, high quality, and done by somebody the client has already approved. We also manually review it and warranty the appraiser’s work.

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