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What is HVCC and How Does this Affect The Lenders, Borrowers, Sellers and Real Estate Agents?

Home Valuation Code of Conduct (HVCC)

The HVCC is a set of federal guidelines designed to enhance the integrity of the home appraisal process to be more reliable and restrict the interaction between mortgage lenders and appraisers. Since the HVCC went into effect, lenders can no longer work directly with appraisers. Instead, lenders must schedule appraisals through third-party appraisal management company. This adds a buffer between the lender and appraiser. The Code applies to borrowers with conventional conforming loans backed by Fannie Mae and Freddie Mac. It doesn’t apply to borrowers with FHA loans or VA loans insured by the Federal Housing Agency.

New York State Attorney General Andrew M. Cuomo, Fannie Mae and Freddie Mac (government sponsored enterprises) announced the final agreement of the Home Valuation Code of Conduct (HVCC) on December 23, 2009, to change appraiser selection criteria that will help eliminate conflicts of interest on mortgage appraisals. The agreement has the support of the Federal Housing Finance Administration (FHFA). The requirements will have a significant impact on appraisal practices by lenders as they will have to comply with the new requirements agreed-to by the government sponsored enterprises (GSE) if the lenders sell mortgages to the GSEs. The GSEs have agreed to implement the HVCC beginning May 1, 2009. During 2008, the GSEs received comments from market participants. The HVCC will be implemented establishing standards on solicitation, selection, compensation, conflicts of interest and appraiser independence. Mortgage brokers and real estate agents are prohibited from selecting appraisers. Lenders are permitted to use “in house” staff appraisers to conduct appraisals.

However, the loan production staff is prohibited from (1) selecting, retaining, recommending, or influencing the selection of an appraiser for an appraisal assignment or for inclusion on an appraisal roster and (2) having any substantive conversation with an appraiser or appraisal management company regarding valuation, including ordering or managing an appraisal assignment. The code entitles the borrower to one copy of an appraisal report, free of charge, within 3 days of the closing of the loan.


Agents may talk with appraisers and provide additional property information, including a copy of the sales contract for purchase transactions. An agent may not intimidate or bribe an appraiser and an appraiser may not disclose confidential information at any time. The language from Dodd-Frank Act is as follows:

“The requirements of subsection (b) shall not be construed as prohibiting a mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, consumer, or any other person with an interest in a real estate transaction from asking an appraiser to undertake 1 or more of the following:

  • Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support and appraisal.
  • Provide further detail, substantiation, or explanation for the appraiser’s value conclusion.
  • Correct errors in the appraisal report.” According to Freddie Mac’s appraiser independence guidelines, if an appraiser chooses to consider additional information from anyone with a financial interest in the sale or financing of the property, the information must be verified by disinterested third-party sources such as public records, MLSs or other real estate professionals who do not have an interest in the property.


Once an appraisal assignment is completed and sent to the client, Uniform Standards of Professional Appraisal Practice (USPAP) prohibits an appraiser from discussing the results of the report to anyone but the lender who ordered the appraisal, or parties designated by the lender. In order to ask an appraiser to correct errors in the appraisal report, an agent must use the lender, typically the lender, as an intermediary. The lender may choose to provide additional data to the appraiser for consideration.

The language from USPAP’s Ethics Rule is as follows:

“An appraiser must not disclose 1) confidential information; or 2) assignment [appraisal] results to anyone other than:

  • the lender;
  • persons specifically authorized by the lender;
  • state appraiser regulatory agencies;
  • third parties as may be authorized by due process of law; or
  • a duly authorized professional peer review committee except when such disclosure to a committee would violate applicable law or regulation.

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