So HVCC is Over? – Nope, it Still Lives On – Fannie Mae’s Appraisal Policy Broken Down

Breaking Down Fannie Mae’s Appraisal Rules

Have you heard of the Home Valuation Code of Conduct (HVCC)? If you are a lender or Realtor, of course you have. What I wanted to do with this post is breakdown Fannie Mae’s policy now that HVCC has expired. Basically the Code lives on and has been slightly rewritten from the original. Unlike HVCC, Fannie’s policy has the force of law behind it. This new policy is clearly illustrated in Fannie Mae’s Appraiser Independence Requirements, Fannie, Freddie Mac, the Federal Housing Finance Agency and others developed this specifically to replace HVCC.

So whether you are a homeowner trying to refinance into a lower rate or Realtor trying to make sure your purchase transaction doesn’t fall apart due to the appraisal – You should familiarize yourself with the policy’s eight sections.


(Please Note that Fannie Mae’s use of “Seller” refers to the lender completing the loan and is not referring to the seller of a property in a purchase transaction)

Section 1 and 2

These sections discuss two key aspects:

  1. The appraiser must be licensed or certified in the state where the property is located.
  2. No one affiliated with the lender, appraisal-management company or any other partner of behalf of the seller can influence the final appraisal value in any way.

Section two states that a seller can’t order or obtain a second appraisal for a mortgage-financing transaction unless there is strong reason to believe the original appraisal is flawed or tainted, or unless the second opinion is a pre-established review or quality control process.

Section 3

This section states that borrowers must receive their appraisal at least three days prior to closing. This section also makes it clear that borrowers can waive the three-day requirement but only if their waiver is received at least three days prior to closing.

In addition, at closing, sellers must provide the borrower any appraisal revisions and information about why the changes were made. The revisions, however, can’t impact the value determination.

Section 4

In the fourth section of Fannie’s policy, it deals with appraiser-engagement rules. It declares that lenders – or a thirst party specifically authorized by a lender – are responsible for choosing qualified appraisers and for delivering payment to those appraisers.

The lenders’ sales or mortgage-production personnel must be separated from the personnel in charge of appraisal functions. This section also states clearly that no one related to sales and mortgage production can have any substantive communication with appraisers relating to or having an impact on value.

Section 5 and 6

In Section five, it clarifies the use of appraisal reports by in-house appraisers or affiliated appraisers are allowed as long as lenders comply with the appraiser-independence requirements and provisions.

Section six discusses appraisal-transfer rules. It states that a lender may deliver a mortgage with an appraisal created by an appraiser that was chosen by another lender as long as that appraisal was prepared in compliance with the appraiser-independence requirements.

Sections 7 and 8

Section 7 discusses the requirements for appraisal-misconduct reporting. The final section defines a requirement for lenders to implement this policy by creating written policies, procedures and training for their employees.

In closing, Fannie’s policy from Fannie’s perspective is designed to enable appraisers to be free of coercion and influence, while promoting better transactions for everyone who relies on their value judgments.
Check out this News Video on what some are doing to get the home value they feel it is worth

Michael DietrichNMLS ID 334183 – 651.206.3377