Proposed HVCC Will Harm Consumers and Limit Role of Indepependent Appraisers

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Congress Urged to Safeguard Key Role of Independent Appraisers

Washington, DC – A plan under consideration in Washington will drastically curtail the valuable role of independent appraisals in home sales and harm consumers. The plan, known as the Home Valuation Code of Conduct (HVCC), was designed to prevent lenders and mortgage brokers from coercing appraisers into providing inflated property valuations.  Unfortunately, as written, it will actually harm independent appraisers, who have no financial incentive and act as the “auditors” of housing transactions.  If approved by federal regulators, the HVCC is scheduled for national implementation in January 2009.

Tens of thousands of independent appraisers throughout the country are expressing their concern to lawmakers and regulators in Washington.  They have formed a loose coalition to urge Congress to protect consumers by safeguarding the critical role of appraisers in providing fair property valuations.

“While I support the concept of the HVCC, the current version will decimate our profession and actually is a big step backwards for consumers.  It creates a dangerous, unbalanced playing field certain to result in lower quality, less accurate valuation of the nation’s housing, right at the time that we need accuracy and stability the most” said David Biggers, chairman, a la mode, inc., one of the real estate industry’s most mission critical and innovative technology companies.  “Accurate, independent valuations protect the interests of consumers, lenders, taxpayers, and investors.”

The HVCC forces lenders to engage regulated appraisers through unregulated appraisal management companies (AMCs), which retain almost 50 percent of the fees paid by lenders. This means that independent appraisers – who represent tens of thousands of small businesses across the country – could lose half of their revenue if the current version of the HVCC is implemented. These small business people are responsible for more than $6.4 billion in revenues to the U.S. economy, according to Federal Financial Institutions Examination Council’s Appraisal Subcommittee.  Beyond the immediate loss to the appraisers, there is a negative impact to the economy, estimated to exceed $5.8 billion, adding a significant impact to the overall financial downturn 1. 

Physical inspections of properties may be curtailed
Unless amended, the proposed Code will result in lower quality and less accurate appraisals by creating a system that does not require a physical inspection of properties. Instead, it creates a preference for the use of less reliable automated valuation models, known as AVMs.

“We are concerned that major portions of the Code will undermine, rather than enhance, the quality and reliability of appraisals,” Comptroller of the Currency John C. Dugan recently wrote to the Office of Federal Housing Enterprise Oversight, the agency that oversees Fannie Mae and Freddie Mac.    “We have significant concerns that compliance with the Code will disrupt mortgage appraisal processes that generally are functioning well for depository institutions and consumers.”

“AVMs have been criticized by government agencies, including the National Credit Union Administration and others, because they are simply not accurate,” said Biggers.  “They do not take into account special details that can have a substantial impact to the value of a home, and could result in consumers getting inflated or deflated appraisals.”

Data derived from the Federal Financial Institutions Examination Council’s Appraisal Subcommittee’s (ASC) database of appraisers, the number of estimated active appraisers, number of appraisals performed annually, fee per appraisal and an economic impact multiplier of 1.8.


About a la mode

Founded in 1985, a la mode develops desktop tools, mobile tools, web sites for real estate professionals, mortgage brokers, and appraisers. a la mode’s flagship product, WinTOTAL form-filling software for appraisers leads the residential appraisal industry. a la mode’s Mercury Network, a vendor management platform for lenders, provides the most experienced local appraisers in an HVCC-compliant, easy-to-use loan ordering and management application. a la mode’s mission-critical products are used by hundreds of thousands of appraisers, agents, inspectors, and lending professionals to complete the nation’s real estate transactions.  The company’s state-of-the-art offices are located in Salt Lake City, Oklahoma City, and Washington, DC.  To learn more, visit