The Dodd-Frank law mandates interim regulations by late October to eliminate the Home Valuation Code of Conduct (“HVCC”). The FRB to is required issue interim regulations within 90 days of Dodd-Frank’s date of enactment (July 21, 2010) defining acts and practices by home lenders and others that could violate appraiser independence. Upon publication of those rules, the HVCC will sunset.
The HVCC applies to all loans backed by the GSEs, and has been a bête noire for mortgage bankers and realtors who believe that its appraiser independence requirements have led to slow and inaccurate appraisals— sometimes even resulting in homebuyers being unable to get financing. Nonetheless, the Dodd-Frank law includes detailed new appraisal independence requirements which will supplant the much-maligned HVCC. In addition, regulators, including the new Consumer Financial Protection Bureau are given broad authority to set appraisal rules. In our opinion, appraisal standards will continue to be an unsettled battleground.