Up to this point, much has been written and discussed about the proposed Home Valuation Code of Conduct . . . but little has been written about the the second part of the agreements . . .the Independent Valuation Protection Institute!
The agreements among Fannie Mae, Freddie Mac, the Office of Federal Housing Enterprise Oversight and New York Attorney General Andrew Cuomo also call for the creation of an independent organization to implement and monitor the new appraisal standards.
Fannie Mae and Freddie Mac are to provide $24 million to fund that new entity which will implement and monitor the code, called the Independent Valuation Protection Institute.
Here's what the agreement says:
FORMATION OF THE INDEPENDENT VALUATION PROTECTION INSTITUTE
2. The parties hereto acknowledge that the integrity of the valuation processes involve federal and state laws and regulations as well as market practices and standards. This complex area requires a high level of expertise and coordination to ensure truly sound, accurate, independent and reliable appraisals.
3. To that end, the parties agree that an independent entity, the Independent Valuation Protection Institute (the “Institute”), will be established to monitor and study this area. The Institute may, from time to time, propose amendments to the Code which the parties to this Agreement will review and consider.
5. Appraisers themselves will be able to contact the Institute if they believe their independence has been threatened in any way, including by undue pressure. Appraiser complaints will be handled in confidence to protect the appraisers from possible retaliation.
- The Institute, in its judgment, will mediate complaints or forward complaints to federal or state regulators.
- The Institute, in its judgment, may also forward complaints to state or federal law enforcement agencies for possible investigation or prosecution.
6. The Institute will be headed by a Board of Directors. Membership on the Board shall consist of experts in the fields of real estate finance, loan origination, law enforcement, compliance review and real estate appraisal and valuation. Members of the Board shall have no financial connection whatsoever with Fannie Mae, Freddie Mac or any loan originators with whom Fannie Mae or Freddie Mac engage. This prohibition will apply to any subsequent securitizer contributing to the Institute. The Institute shall hire a full time professional staff. The Attorney General’s Office and OFHEO must both approve the membership of the Board.
7. The Institute shall report publicly on the results of its activities to the Attorney General’s Office and OFHEO on a bi-annual basis.
8. The Institute may be affiliated with an existing academic, professional association and/or industry organization.
9. Fannie Mae agrees to fund the Institute, along with Freddie Mac, for a period of not less than five years at an annual cost to each as follows: year one - $1 million; year two - $2 million; year three – $3 million; year four - $3 million; and year five - $3 million.
To the extent other entities agree to participate in the Home Value Protection Program, the respective contributions of Fannie Mae and Freddie Mac may be reasonably reduced. The Institute may, upon a showing of good cause to the Attorney General’s Office and OFHEO, request that additional funds be allocated in years one and two from funds reserved for years three through five.
Author: Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 23 years of appraisal experience in Central, IL and hosts the Appraisal Scoop blog and the WinTOTAL Users Group an email forum for appraisers.