What is HVCC and AIR?
On May 1, 2008, Fannie Mae and Freddie Mac, the country's
largest sources of home financing, will implement the Home Value
Code of Conduct. Both Fannie and Freddie fund residential
mortgages by purchasing loans directly from lenders. In order
for lenders to continue to sell their loans to these government
sponsored entities, lenders must certify that the loans being sold
met the conditions of HVCC.
The code was designed to provide separation between the
loan originator and the real estate appraiser. Fannie
and Freddie have since replaced HVCC with Appraiser Independence
Regulations (AIR). Though very similar from it's cousin HVCC
- AIR has some subtle differences and AXIS complies with the
document:
Appraiser Independence
Requirements (AIR)
I. Appraiser
Independence Safeguards
A. An "appraiser" must be,
at a minimum, licensed or certified by the State in which the
property to be appraised is located. B. No employee, director,
officer, or agent of the Seller, or any other third party acting as
joint venture partner, independent contractor, appraisal company,
appraisal management company, or partner on behalf of the Seller,
shall influence or attempt to influence the development, reporting,
result, or review of an appraisal through coercion, extortion,
collusion, compensation, inducement, intimidation, bribery, or in
any other manner including but not limited to:
(1) Withholding or threatening to
withhold timely payment or partial payment for an appraisal
report;
(2) Withholding or threatening to
withhold future business for an appraiser, or demoting or
terminating or threatening to demote or terminate an appraiser;
(3) Expressly or impliedly
promising future business, promotions, or increased compensation
for an appraiser;
(4) Conditioning the ordering of an
appraisal report or the payment of an appraisal fee or salary or
bonus on the opinion, conclusion, or valuation to be reached, or on
a preliminary value estimate requested from an appraiser;
(5) Requesting that an appraiser
provide an estimated, predetermined, or desired valuation in an
appraisal report prior to the completion of the appraisal report,
or requesting that an appraiser provide estimated values or
comparable sales at any time prior to the appraiser's completion of
an appraisal report;
(6) Providing to an appraiser an
anticipated, estimated, encouraged, or desired value for a subject
property or a proposed or target amount to be loaned to the
Borrower, except that a copy of the sales contract for purchase
transactions may be provided;
(7) Providing to an appraiser,
appraisal company, appraisal management company, or any entity or
person related to the appraiser, appraisal company, or appraisal
management company, stock or other financial or non-financial
benefits;
(8) Removing an appraiser from a
list of qualified appraisers, or adding an appraiser to an
exclusionary list of disapproved appraisers, in connection with the
influencing or attempting to influence an appraisal as described in
Paragraph B above (this prohibition does not preclude the
management of appraiser lists for bona fide administrative or
quality-control reasons based on written policy); and
(9) Any other act or practice that
impairs or attempts to impair an appraiser's independence,
objectivity, or impartiality or violates law or regulation,
including, but not limited to, the Truth in Lending Act (TILA) and
Regulation Z, or the Uniform Standards of Professional Appraisal
Practice (USPAP).
II. Acceptability of
Subsequent Appraisals
A Seller must not order, obtain,
use, or pay for a second or subsequent appraisal in connection with
a Mortgage financing transaction unless: (i) there is a reasonable
basis to believe that the initial appraisal was flawed or tainted
and such basis is clearly and appropriately noted in the Mortgage
file, or (ii) such appraisal is done pursuant to written,
pre-established bona fide pre- or post-funding appraisal review or
quality control processes or underwriting guidelines, and so long
as the Seller adheres to a policy of selecting the most reliable
appraisal, rather than the appraisal that states the highest value,
or (iii) a second appraisal is required by law.
III. Borrower Receipt of
Appraisal
The Seller shall ensure
that the Borrower is provided a copy of any appraisal report
concerning the Borrower's subject property promptly upon completion
at no additional cost to the Borrower, and in any event no less
than three days prior to the closing of the Mortgage. The Borrower
may waive this three-day requirement if such waiver is obtained at
least three days prior to the closing of the Mortgage. The Seller
may provide the Borrower at closing, a revised copy of an appraisal
and information as to the nature of any revisions, so long as the
revisions had no impact on value.
The Seller may require the
Borrower to reimburse the Seller for the cost of the
appraisal.
IV. Appraiser
Engagement
A. The Seller or any third party specifically authorized
by the Seller (including, but not limited to, appraisal companies,
appraisal management companies, and Correspondent lenders) shall be
responsible for selecting, retaining, and providing for payment of
all compensation to the appraiser. The Seller will not accept any
appraisal report completed by an appraiser selected, retained, or
compensated in any manner by any other third party (including
Mortgage Brokers and real estate agents). B. There must be
separation of a Seller's sales or Mortgage production functions and
appraisal functions. An employee of the Seller in the sales or
Mortgage production function shall have no involvement in the
operations of the appraisal function.
(1) Certain parties are prohibited
from:
(a) Selecting, retaining, recommending, or influencing the
selection of any appraiser for a particular appraisal assignment or
for inclusion on a list or panel of appraisers approved or
forbidden to perform appraisals for the Seller; and
(b) Having any substantive
communications with an appraiser or appraisal management company
relating to or having an impact on valuation, including ordering or
managing an appraisal assignment.
These parties are:
(i) All members of the Seller's Mortgage production
staff;
(ii) Any person who is compensated on a commission basis
upon the successful completion of a Mortgage; and
(iii) Any person whose immediate supervisor is not
independent of the Mortgage production staff and process.
Seller personnel not described in Section IV.B (1)(i) through
(iii) above are not subject to the restrictions described above,
and may engage in communications with an appraiser. In addition,
any party, including the parties described in Section IV.B (1)(i)
through (iii) above, may request that an appraiser provide
additional information or explanation about the basis for a
valuation, or correct objective factual errors in an appraisal
report. (2) If absolute lines of independence cannot be achieved as
a result of the Seller's small size and limited staff, the Seller
must be able to clearly demonstrate that it has prudent safeguards
to isolate its collateral evaluation process from influence or
interference from its Mortgage production process. C. Any employee
of the Seller (or if the Seller retains an appraisal company or
appraisal management company, any employee of that company) tasked
with selecting appraisers for an approved panel or substantive
appraisal review must be: (1) Appropriately trained and qualified
in the area of real estate appraisals; and (2) In the case of an
employee of the Seller, wholly independent of the Mortgage
production staff and process.
V. Use of Appraisal Reports by
In-House Appraisers or Affiliated Appraisers
A. In underwriting a Mortgage, the Seller may use an
appraisal report:
(1) Prepared by an appraiser
employed by:
(a) The Seller;
(b) An affiliate of the Seller;
(c) An entity that is owned, in
whole or in part, by the Seller; or
(d) An entity that owns, in whole
or in part, the Seller.
(2) Prepared by an appraiser
employed, engaged as an independent contractor, or otherwise
retained by an appraisal company or any appraisal management
company affiliated with, or that owns or is owned, in whole or in
part, by the Seller or an affiliate of the Seller, provided that
the Seller complies with the provisions of these Appraiser
Independence Requirements. B. The Seller also may use in-house
staff appraisers to: (1) Order appraisals; (2) Conduct appraisal
reviews or other quality control, whether pre-funding or
post-funding; (3) Develop, deploy, or use internal Automated
Valuation Models; or (4) Prepare appraisals in connection with
transactions other than Mortgage origination transactions (e.g.,
Mortgage workouts), if the Seller complies with the provisions of
these Appraiser Independence Requirements.
VI. Transfer of Appraisals
A Seller may deliver to Fannie Mae
a conventional Mortgage with an appraisal prepared by an appraiser
selected by another lender, including where a Mortgage Broker has
facilitated the Mortgage application (but not ordered the
appraisal). The Seller delivering the loan to Fannie Mae makes all
representations and warranties to Fannie Mae regarding the
appraisal set forth in the Mortgage Selling and Servicing Contract,
the Selling Guide and related documents, including the
representation that the appraisal is obtained in a manner
consistent with these Appraiser Independence Requirements.
VII. Referrals of Appraisal
Misconduct Reports
Any Seller that has a reasonable
basis to believe an appraiser or appraisal management company is
violating applicable laws, or is otherwise engaging in unethical
conduct, shall promptly refer the matter to the applicable State
appraiser certifying and licensing agency or other relevant
regulatory bodies.
VIII.
Compliance
Sellers must adopt written policies and procedures implementing
these Appraiser Independence Requirements, including, but not
limited to, adequate training and disciplinary rules on appraiser
independence, including the principles detailed in Section I.
Additionally, Sellers must ensure that any third parties, such as
appraisal management companies or Correspondent lenders, used in
conjunction with the sale and delivery of a Mortgage to Fannie Mae
are also in compliance with these Appraiser Independence
Requirements.