Home
Valuation Code of Conduct
Editor’s Note: The recently
implemented Home
Valuation Code of Conduct is intended to enhance the independence and
accuracy of the home appraisal process and provide added protections for
homebuyers, mortgage investors and the housing market. In response to
complaints from real estate consumers and brokers regarding the Code,
the Real Estate Commission has announced its support for legislation requiring
appraisal management companies operating in
September 23, 2009
The Federal Housing Finance Agency
Dear
Sir or Madam:
To assist your agency in monitoring and evaluating the
effectiveness of the Home Valuation Code of Conduct implemented May 1 by the
U.S. Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal
National Mortgage Association (Fannie Mae), the North Carolina Real Estate
Commission has directed me to share with you its observations and experiences
with regard to the Code and to respectfully offer its suggestions for
improvement. The Real Estate Commission
is a governmental agency charged with protecting the interests of real estate
consumers in our State. The Commission
recognizes and appreciates your efforts through the Code to address some of the
more egregious abuses visited upon the public by the unscrupulous acts of
certain mortgage lenders. However, like
your agency, we have found when adopting rules and implementing new
legislation, some innocent misunderstandings and intentional attempts to
exploit ambiguities in them are perhaps unavoidable.
With regard to the Code, prospective
homebuyers have complained to us that lenders assert that under “new rules” the
lenders must order appraisals through appraisal management companies. We have also received complaints from buyers,
sellers and real estate agents that appraisers assigned by such companies to
perform the appraisals are not familiar with or sufficiently informed about the
real estate market where the property is located to make accurate
appraisals. We are, in fact, aware of
cases where appraisers have traveled from other states and of cases where
appraisers attempted to perform appraisals without consulting MLS sales
data. Further, despite the apparent
intent of the Code to distance lenders from the appraisal process, we have
learned that some lenders own or have an ownership interest in the appraisal
management companies they use.
Although the Real Estate Commission does not at this time support
a proposed moratorium on the continued implementation of the Code and we are
aware that bulletins and other supplemental information about the Code have
been published, it recommends for your agency’s consideration that the Home
Valuation Code of Conduct itself be amended to:
1. Clarify that
lenders need not engage appraisal management companies;
2. Prohibit lenders
from engaging appraisal management companies which are owned, controlled by, or
affiliated with the lender;
3. Expressly require
lenders to engage, whether directly or indirectly, appraisers who are
state-licensed and that the appraisals performed by such appraisers conform to
the minimum requirements of state laws and rules and the Uniform Standards of
Professional Appraisal Practice; and
4. Expressly require
appraisers who are engaged to perform appraisals to be familiar with the market
where the property is located and to have access to and use the best available
data for that market in performing the appraisal.
We hope our suggestions are received in the helpful spirit in
which they are intended and that you will you not hesitate to contact our
office if we can be of any assistance to your agency with this or any related
matter.
Sincerely yours,