The trend now in the appraisal service industry is to issue certificates of non-influence to attract clients and lenders.
The Home Valuation Code of Conduct issued in May this year did not require appraisal management companies to issue certificates of non-influence to their clients or lenders, but the AMCs took it upon themselves to issue these certificates to prove that they are updated with HVCC regulations and that they are complying with the regulations, thereby retaining their clients and attracting more of them.
Under HVCC regulations, the appraisal process conducted by AMCs must not be influenced by any officer, director, agent, employee or representative of the lender by any means including compensation, extortion, bribery, intimidation or inducement. Further documents issued by the Fannie Mae, Freddie Mac and the FHA explained specific instances that are not allowed and types of behavior which are considered acts of influencing the appraisal results.
This regulation arose from the contention that many appraisers colluded with lenders during the housing boom and inflated their home appraisals so that homebuyers can buy higher-priced homes and that those with no money or less money for down payments can buy homes.
Although AMCs differ in how they phrased their certificates of non-influence, the contents of the certificates are the same.
Among the things they are certifying are the fact that their appraisers are not in contact with the lenders and brokers, that the identity of the appraiser is not known to the loan officer while the appraisal is being conducted and completed, and that the AMC did not influence the assigned appraiser in any way, such as providing an estimate of the proposed home loan amount.
The certification also declares that the lender or client does not specify certain appraisers and that the AMC is the one choosing the appraiser to do a certain work based on his ability, experience, familiarity with a local market and area of expertise.
The AMC also certifies that the client, lender or broker submitted the appraisal order through the AMC?s online appraisal ordering system, thereby eliminating any possibility of extra negotiation between the client and the AMC.
If you are a prospective appraisal client, you might want to examine the contents of the non-influence certificates of AMCs or their HVCC compliance policies. Compliance with the HVCC is important especially if you are planning to take out a loan guaranteed by government agencies.
