Effective May 1, 2009, the Home Valuation Code of Conduct (HVCC) became an integral component of the lending function to ensure the valuations provided by professional appraisers are independent and free from coercion or influence. The Code is intended to maintain integrity in the loan origination process and protect the lender and borrower from inflated and fraudulent appraisals. As the Code became reality, it has impacted the established business processes requiring internal adjustments to roles and responsibilities within the lending organization. All lending institutions are ultimately responsible for ensuring that they comply with HVCC; this underscores the importance of partnering with an experienced and knowledgeable team to assist you in navigating the Code’s requirements.
The HVCC’s key purpose is to ensure that appraisers and the appraisal process effectively function as a part of sound underwriting for financial institutions. Sellers of loans to Fannie Mae and Freddie Mac are required to provide assurances that the HVCC has been fully implemented within their organization and adopted for all single family mortgages delivered on or after May 1, 2009. Presently, the HVCC does not apply to loans insured or guaranteed by FHA and VA. Our warranty ensuring each appraisal is HVCC compliant is summarized below.
Our Representation and Warranties Protecting our Customers.
Secure Collateral, a division of Equity National and an independent, third party appraisal management company, warrants that the referenced appraisal report (ID #) has been carefully reviewed and stands by the accuracy and quality of the report. This warranty extends 5 years after the effective date of the Secure Collateral Appraisal report and is subject to the following:
“Value Warranty”
The warranty applies to 1 to 4 family properties with values up to $750,000. The actual value of the property subject to the Appraisal (“Subject Property”) is not less than the opinion of value set forth in the Appraisal by more than a 10% variance, or 15% variance if value is greater than $500,000. The Appraisal complies with all applicable Guidelines and HVCC compliant. The Appraisal and/or Security Collateral’s appraisal review has accurately identified and communicated to the client any potential marketability concerns.
Indemnification. Subject to certain conditions, Secure Collateral will indemnify and hold the Client harmless with respect to any Loss that is a direct result of the breach by Secure Collateral of any of its representations and warranties.
The major points of concern for all lending institutions are as follows and are the principle elements of the Code that each lender must address and meet for compliance.
Protecting Appraiser Independence
- Appraiser Selection Process
- Communications between Loan Production and the Appraiser
Appraiser’s Compensation
- Who pays the Appraiser?
- Who can collect from the Borrower?
Borrower Interaction
- Who provides the appraisal to the Borrower?
- Communications with the Borrower
Portability of the Appraisal
- Who is the client?
- Mortgage broker’s role
- Can the appraisal be used by a different lender?
- Quality Control
- Quality Control testing
- Dispute process
- Independent Valuation Protection Institute