Fannie Mae and Freddie Mac Issue New Appraiser Independence Requirement

Carrie Bay at explains some of the new requirements:

The industry has long been awaiting a replacement for the Home Valuation Code of Conduct (HVCC). On Friday, Fannie Mae and Freddie Mac issued new Appraiser Independence Requirements to supplant the controversial HVCC, but both GSEs say the new appraiser rules make “no significant changes to core principles of the HVCC.”

The Appraiser Independence Requirements, developed in coordination with the Federal Housing Finance Agency, “maintain the spirit and intent of the HVCC and continue to provide important protections for mortgage investors, homebuyers, and the housing market,” according to a statement from Fannie.

The new directive, effective immediately, establishes standards for solicitation, selection, compensation, and practitioner independence when it comes to home appraisals. The goal is to ensure appraisers’ work is conducted autonomously, without pressure from lenders and real estate agents to manipulate property valuations.

“We will continue to review our appraisal independence requirements to address market developments and regulatory actions taken pursuant to the Dodd-Frank Act, which may include rules relating to conflicts of interests and fee disclosure by appraisal management companies,” Fannie and Freddie said.

As stated in the new appraiser requirements, an appraiser must be, at a minimum, licensed or certified by the state in which the property to be appraised is located.

No employee or agent of the seller is allowed to influence the development or results of the appraisal “through coercion, extortion, collusion, compensation, inducement, intimidation, or bribery,” which may include withholding timely payment for the appraisal report, threatening to terminate future business, or conditioning ordering or payment of an appraisal report on the outcome.

A seller is not allowed to obtain or use a second appraisal in connection with a mortgage financing transaction unless there is reason to believe the original appraisal is “flawed or tainted.”

Sellers must provide the borrower with a copy of the appraisal report on the subject property at no additional cost and at least three days prior to the closing of the mortgage. However, the borrower can be required to reimburse the seller for the cost of the appraisal.

The seller cannot accept any appraisal report completed by an appraiser selected, retained, or compensated by any other third party, including mortgage brokers and real estate agents. And there must be separation of a seller’s sales/mortgage production functions and appraisal functions. In other words, an employee of the seller in sales or mortgage production shall have no involvement in the appraisal.


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