Congress Tackles Home Appraisal Rules

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Oops, they did it again. Government entities have drawn a well-deserved reputation for passing rules that later come back to bite potential beneficiaries.

The latest version of that ongoing saga is the recently enacted Home Value Code of Conduct. Real estate agents hate it, homeowners are frustrated by delays caused by it, and now Congress is having second thoughts about the whole thing.

Back in May 2009, the Federal Housing Finance Agency enacted the HVCC, ostensibly to build a wall between lenders, real estate agents and third-parties that might be in position to influence appraisals.

Unfortunately, smaller home appraisers were caught in the crossfire, as larger appraisal management companies — often owned by mortgage lenders — began to cut the small appraiser out of the market. Such companies offered lower prices than the independent appraisers were charging, but real estate agents and mortgage brokers complained that the appraisers hired by the larger appraisal companies were inexperienced and often were unfamiliar with the local communities where they were making appraisals.

In July 2009 — within 60 days of the new rule’s enactment — the National Association of Realtor’s Jed Smith issued survey results from NAR members on the impact of HVCC on home appraisals. He found that 69% of realtors surveyed reported home appraisal delays of more than eight days after the new rules were put into place.

That’s a big reason why realtors and mortgage brokers are lobbying hard for HVCC to be killed off, and they want to use the new financial reform bill to bury it.

An amendment to kill the HVCC is currently being debated in Washington, as part of the ongoing negotiations over financial reform. The joint U.S. House-Senate Committee are wrangling over two versions of the financial reform bill. The House bill already contains language that would kill HVCC — it instead favors overhauling home appraisal regulations, such as requiring appraisal management companies to register with the government, and giving more power and funding to states to enforce appraisal rules.

The amendment was introduced by Rep. Gary Miller (R-Calif.), who wants legislation that would call for an 18-month moratorium on the HVCC. By and large, Miller is arguing for one set of standards to govern the entire home appraisal industry.

Here’s what Miller said in introducing the HVCC amendment:

“While I am supportive of ensuring accurate appraisals, I have repeatedly expressed concern that the HVCC has potential to increase costs to consumers, significantly hinder a consumer’s ability to obtain legitimate and reliable appraisals, and adversely impact small business professionals who work in the very neighborhoods where these consumers are looking to purchase homes.”

If the House amendment terminating the HVCC passes, the Code of Contact would be jettisoned 60 days after President Obama signs a financial reform bill — in whatever shape it takes — into law.

That would make realtors happy.

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