Home Valuation Code of Conduct Explained

The Home Valuation Code of Conduct is a set of rules that lenders must follow to ensure that appraisals are conducted fairly and independently.

Lenders must not pressure appraisers into inflating the value of a property, and they must not use appraisals as a way to circumvent other lending requirements.

Appraisers must also avoid conflicts of interest, such as having a financial stake in the sale of a property or being influenced by the seller or buyer.

In addition, appraisers must provide clear and accurate documentation of their findings, including the methods and data used to arrive at a property's value.

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A code of conduct for home valuations is crucial to ensure transparency and fairness in the process.

Home valuers must disclose any potential conflicts of interest, such as having a financial stake in the sale of the property. This includes any relationships with the seller, buyer, or other parties involved in the transaction.

The code of conduct also requires home valuers to maintain confidentiality and keep all information related to the valuation private. This means they cannot share sensitive information with anyone without the client's consent.

Home valuers must use their professional judgment and expertise to provide an accurate and unbiased valuation. They must also follow industry-recognized standards and guidelines for valuations.

Inaccurate or misleading valuations can have serious consequences, including financial losses for buyers or sellers. Home valuers must take all necessary steps to ensure the accuracy and reliability of their valuations.

The code of conduct also requires home valuers to keep up-to-date with industry developments and best practices. This includes attending training and professional development courses to stay current with the latest techniques and technologies.

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The Home Value Code of Conduct was established by the New York state Attorney General and Fannie Mae & Freddie Mac, now known as the Federal Housing Finance Agency, on May 1, 2009.

The purpose of the regulation is to ensure the integrity and independence of the appraisal process. This is crucial in maintaining the trust and fairness of the home buying and selling process.

The Home Valuation Code of Conduct, or HVCC, applies to conventional loans sold to Fannie Mae and Freddie Mac, and takes effect on May 1, 2009. FHA and VA loans are exempt from these rules.

Property appraisals cannot be ordered by third parties, including mortgage brokers & real estate agents. This is to prevent any potential conflicts of interest.

A copy of the appraisal must be promptly sent to the borrower and no less than three days before closing. Borrowers may waive the 3-day rule if they choose to do so.

Appraisals can only be ordered by an appropriately trained person who works in an area that is wholly independent from sales or loan production. This ensures that the appraisal is unbiased and based solely on the property's value.

Lenders must perform Quality Control testing on 10% of appraisals, automated valuation models (AVMs) and desktop evaluations. This is to ensure that the appraisals are accurate and reliable.

The lender cannot utilize any appraisal report prepared by an appraiser who is employed by the lender, its affiliate or partly/wholly-owned entity. This is to prevent any potential conflicts of interest.

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