To address various misconceptions about the Home Valuation Code of Conduct, Fannie Mae has issued its latest replies to Frequently Asked Questions about the coverage of HVCC, the selection of home appraisers and the appraisal review.
First among the clarifications is about the scope of the code. The HVCC applies only to loans for one- to four-unit single-family homes originated on May 1, 2009 or after and sold to Fannie Mae. It does not cover multifamily loans or loans insured by a federal agency, such as FHA and VA.
Fannie Mae applies the code to all states other than New York, where the development of the code started. It says also that as of date, only Fannie Mae and Freddie Mac have adopted the code.
Fannie Mae also clarifies that the HVCC does not affect its purchases of mortgage-backed securities. It will still buy securities backed by home loans that do not meet HVCC.
In relation to lenders, Fannie Mae said that lenders need to create written policies that ensure the independence of appraisers and the removal of appraisers from lists of qualified appraisers if their appraisal reports are proven to have been influenced by other parties.
The lender is also required to give the home loan applicant a free copy of the appraisal report no less than 3 business days before the closing of the home loan. The report can be in the form on an email or a document sent through overnight delivery. The lender however is allowed to charge the borrower for the appraisal cost.
But for loans to be sold to Fannie Mae, HVCC requires lenders or third parties to choose and pay the appraiser for appraisal costs.
In terms of the selection of house appraisers, Fannie Mae reiterates that HVCC has not changed the original requirements. It said that appraisers are still required to provide accurate reports, describe property and neighborhood conditions in specific terms, enumerate favorable and unfavorable elements fairly and avoid using stereotypical, racial and subjective words, phrases and remarks in their appraisal reports.
The conclusion of the report, according to Fannie Mae, must be based on real estate market data, logical analysis and sound judgment.
Additionally, appraisers are required to make a certification in the report that they have experience and knowledge of the real estate market in the area and that they have researched appropriate private and public sources of data such as tax assessment records, multiple listing services and public land records.
