Back on March 3rd, the same day NY AG Andrew Cuomo announced that Fannie Mae and Freddie Mac had signed off on the the Home Valuation Code of Conduct, our appraisal organizations began a campaign of public support for the plan.
Scott Austin wrote on Appraisal Scoop on March 12th:
"Appraisers expect the organizations who represent them will choose the correct side of issues, those which will strengthen the ability of the appraisal profession to perform in a manner worthy of the public trust."
"Yet every appraiser with whom I have spoken has been incredulous that the coalition of appraisal organizations did not immediately stand in opposition to the so-called "agreement" brokered last week between New York Attorney General Andrew Cuomo and Fannie Mae/Freddie Mac to implement their "New Home Value Protection Code" including the "Home Valuation Code of Conduct" (HVCC)"
Instead of overwhelming opposition, the coalition of appraisal organizations wrote a letter of support, on the same day the Attorney General held a press conference announcing the agreement, for a plan which may have grave, albeit unintended, consequences for the appraisers for whom the agreement is intended. Additional consequences will extend to the borrower and lender.
Unlike the appraisal organizations, the various appraisal blogs were abuzz with condemnation for the agreement, not for its good intentions, but rather for its unintended consequences. Chief among those consequences being lower quality appraisals, and a likely mass exodus of the most skilled residential appraisers from the industry.
How did the appraisal organizations miss the red flags? How is it that the appraisers in the field see a doomsday scenario, and the organizations that represent them see blue skies ahead?
Now, in the eleventh hour of the 90-Day comment period, our Appraisal Organization leadership and other self-appointed committees have deluged Fannie, Freddie, and US with new plans! Is this just a case of too-little-too-late or was this intentional?
In an effort to help everyone get up to speed on all of the "Johnny Come Lately" plans and proposals, I've collected and uploaded many of them to Appraisal Scoop's servers.
To read these plans . . .click here!
The CRN (Collateral Risk Network) unanimously supports the cause of Appraisal Independence. We have developed suggestions for modification that are intended to be rational responses that will cause the least disruption in the marketplace yet will ensure appraisal independence. We do anticipate that if the modifications occur as suggested herein that January 1, 2009 is a reasonable time frame to implement the “code”. Our suggestion, however, is to define the IVPI in terms of structure, role, personnel, authority and funding sources before moving forward. Download Collateral_Risk_Network_response.pdf
Overall, our organizations (AI, ASA, ASFMRA, NAIFA) support the Parties’ efforts to address breakdowns in appraisal independence. We applaud the Parties for addressing an issue of longstanding concern to the appraisal profession, and we see great benefit with many aspects of the new HVCC if executed correctly. This Agreement has forced all facets of the mortgage lending industry to examine their risk management activities and elevate the importance of collateral valuation issues. We strongly believe these issues did not receive due attention in recent years, and this Agreement does much to correct this glaring oversight and chart a new path for improved appraisal practices.
We do, however, have serious concerns about certain aspects of the Agreement that could be harmful to the delivery of residential appraisal services and, possibly, to the mortgage underwriting process itself. The HVCC, as written, could eliminate many of the strongest protectors of the process; namely, competent, unbiased real estate appraisers. Download AI_ASA_ASFMRA_NAIFA_HVCCFinal.pdf
MBA believes the Agreements and Code pose serious procedural and substantive concerns that present safety and soundness risks to the GSEs and financial institutions generally. Despite the Agreement’s effect on lenders and the housing finance industry, there was no opportunity for industry or public comment prior to the development of the Agreements and Code. For these reasons, MBA urges OFHEO to open the process to revise the Agreements and Code in conformance with the requirements of the Administrative Procedures Act (APA), following consultation with federal financial institution regulators, or at a minimum, mitigate these risks by incorporating the following Code modifications. Download mba_on_hvcc.pdf
4/18/2008 - The Arizona Board urges that the ramifications of using appraisal management companies be carefully considered. It has been the Board’s experience that complaints regarding appraisal management companies are not subject to any oversight or regulation. To that end, the Board is concerned that the integrity of the primary and secondary markets will not improve if current practices by these companies do not change. The focus of these companies appears to be primarily speed and cost with little or no emphasis on quality of the appraisal or experience and competence of the appraiser. To ensure a greater emphasis on a quality product to restore public trust, it is imperative that appraiser management companies be regulated, either federally or required of all states at the state level. Download Arizona_Board_of_Appraisal_HVCC.pdf
4/22/2008 - The Title and Appraisal Vendors Management Association (“TAVMA”) appreciates this opportunity to provide comments on the proposed Home Valuation Code of Conduct (“Code”) for appraisals. TAVMA has a unique perspective on the appraisal issues that the Code addresses since many of its members are large appraisal firms, vendor management companies (“VMCs”) and appraisal management companies (“AMCs”) that provide real estate appraisals. TAVMA has followed the issue of appraisal independence closely for many years and has provided drafting comments for both state and federal proposals on the issue. Download tavma_coment_hvcc.pdf
The Independent Community Bankers of America (ICBA) welcomes the opportunity to comment on the Home Valuation Code of Conduct. The Code of Conduct comes from an agreement reached with the New York State Attorney General, Fannie Mae, Freddie Mac and the Office of Federal Housing Enterprise Oversight to strengthen the independence of the appraisal process. The Code of Conduct would impact mortgages that Fannie Mae and Freddie Mac buy or guarantee. Download ICBA_HVCC_Response.pdf
ICBA sees significant flaws in the Code of Conduct that make it unworkable and overly burdensome for community banks for reasons described below. The Code of Conduct conflicts with appraisal independence guidelines and requirements already addressed in laws and regulations governing insured depositories, without observable benefits to institutional safety and soundness. This letter, which reflects the views of ICBA members on specific elements of the Code of Conduct, supplements a letter sent to James B. Lockhart III, Director of the Office of Federal Housing Enterprise Oversight, dated April 30, 2008 and signed jointly by ICBA and other financial trade associations.
April 30, 2008 - The National Association of REALTORS® supports the independence of appraisers and the integrity of the appraisal process. We appreciate the efforts of the New York Attorney General Andrew M. Cuomo and both government sponsored enterprises (GSE), Fannie Mae and Freddie Mac, to combat appraisal fraud in the mortgage industry by entering into their recent agreement on appraisal issues.
Below are NAR's comment letters to Fannie Mae and Freddie Mac on the agreement and NAR's updated summary and Frequently Asked Questions document.
- Fannie Mae Comment Letter (PDF: 183 KB
- Freddie Mac Comment Letter (PDF: 183 KB)
- NAR Summary and FAQ (PDF: 38 KB)
The Staff of the Federal Trade Commission’s Office of Policy Planning and Bureau of Economics has file this comment on the potential effects on competition and consumers of the Code of Conduct. Download FTC_HVCC_Comment.pdf
Given the recent problems in the mortgage lending marketplace, the FTC staff generally supports efforts to improve the lending process for consumers and, in particular, supports proposals such as those contained in the Code of Conduct to protect the independence of appraisals.
The following comments on the proposed Code of Conduct are based on the staff’s consumer protection experience in the mortgage market and its research on consumer mortgage disclosures, as well as its competition experience in the real estate and other industries.
- Section I summarizes FTC law enforcement and other activities addressing unfair or deceptive practices in the mortgage lending market.
- Section II provides a brief discussion of the role of appraisals in the mortgage lending process.
- Section III identifies the relevant provisions in the proposed Code of Conduct on which this comment focuses.
- Section IV explains how these provisions raise potential concerns regarding their ultimate impact on competition and consumers in the mortgage lending market.
The American Bankers Association, American Financial Services Association, Consumer Bankers Association, Consumer Mortgage Coalition, Housing Policy Council, The Financial Services Roundtable, Independent Community Bankers of America, Mortgage Bankers Association, Real Estate Services Providers Council, Inc. (RESPRO®) issued a joint letter of response to the Director of the OFHEO. Download Joint_Lender_Response_HVCC.pdf
Dear Director Lockhart:
The undersigned are writing to register our concern with the serious legal and policy questions that are raised by the proposed Home Valuation Code ("Code"), which Fannie Mae and Freddie Mac (the "GSEs") have agreed to adopt, pursuant to a written agreement ("Agreement") with the Office of Federal Housing Enterprise Oversight ("OFHEO") and the New York Attorney General (NYAG). We agree that accurate appraisals are a critically important component of sound mortgage lending and that appraisal fraud is a factor in many cases of mortgage fraud.
We have very serious concerns with both the manner in which the Agreement and the Code have been mandated by OFHEO and the NYAG as well as the substance of the documents. (For simplicity purposes, reference herein to the "Agreement" shall include the Code.) We believe that OFHEO should withdraw its assent to the Agreement, should not permit the GSEs to implement the Agreement, and should take steps to assure that this type of rulemaking by settlement does not occur in the future. The Agreement is in violation of Title XI of FIRREA and permits the NYAG to unlawfully exercise authority that resides exclusively with the Federal Government. The method of imposition of the agreement is in violation of the Administrative Procedure Act and constitutes an unlawful delegation of authority by OFHEO to a third party. For a variety of reasons, the Agreement is not consistent with the best interests of the GSEs, the housing finance markets, and other aspects of public policy.
NAIFA Announces Position on Fannie Mae and Freddie Mac Agreement - NAIFA applauds the attempt to secure appraiser independence in the real estate financing process in the proposed agreement. Despite its laudable intent, we find that the current structure of the agreement may lead to unanticipated and potentially damaging results for borrowers, the public, real property appraisers, and users of real property appraisals. To read the entire statement, click here.
Comptroller Dugan provides the OCC's views on the agreement between the Office of Federal Housing Enterprise Oversight, the New York Attorney General, Fannie Mae, and Freddie Mac. Download OVV_HVCC_letter_20080527.pdf
The letter, dated May 27, 2008, characterizes the Home Valuation Code of Conduct (or HVCC) as having “adverse consequences … for the safe, sound, and efficient operation of national banks’ residential mortgage lending activities, as well as for the cost of mortgage credit to consumers.”
“The OCC endorses the principle that real estate appraisals must be conducted free from influence or coercion by any party,” Dugan writes in the letter. “But this objective should be achieved directly … not by dictating the corporate and internal organizational structures of lenders.”
Source: HousingWire.com
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