This may be a little “inside baseball” for Realtors, lenders and appraisers but the recently signed Financial Regulation Reform bill changes how home purchase appraisals are done.
The bottom line is the new system should be good for Arizona home sellers. We expect to see more accurate Arizona home appraisals.
When home prices busted, some people blamed appraisers saying they were in cahoots with the lenders who selected them to do their appraisals. So the Home Valuation Code of Conduct (HVCC) was created in which lenders had to use the next appraiser in line, so to speak.
This system, however, often caused bad appraisals when appraisers worked in areas they didn’t have much, if any, experience… but where the appraisers selected were the next appraisers in line.
In addition, the appraisers themselves were being paid significantly less under the HVCC system which some blamed for the shotty appraisals.
If you had a bad appraisal when selling an Arizona home, the HVCC system could have been part of your problem.
New Home Appraisal System
The newly enacted bill, unlike HVCC, allows Fannie Mae or Freddie Mac to accept any appraisal report completed by an appraiser selected or paid by a mortgage loan originator.
The reform also stipulates that the new standards will include a requirement that lenders and their agents pay appraisers at market rates.
The new standards will still subject loan originators to any state or federal laws that prohibit it from making payments, threats or promises to an appraiser to influence the work. But nothing in the standards will prohibit a person with an interest in the transaction from asking the appraiser to consider other information, provide further detail or correct errors in the appraisal.
The HVCC will be eliminated in a few months.
On the Other Hand
With home prices phenomenally lower than a few years ago and continuing to fall in some parts of metro Phoenix, expect Arizona home sellers to continue to be ticked at Arizona appraisers.