From:

Appraiser News Online Headlines

Archived Issue: June 2008
Vol. 9 , No. 11/12

Bank Regulators Elevate Preemption Threat of Home Valuation Code of Conduct
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Four of the five federal bank regulators have called for the withdrawal of the Home Valuation Code of Conduct and the Home Valuation Protection Program and Cooperation Agreements saying they could “unnecessarily undermine the safe and sound extension of mortgage credit, reduce the availability of mortgage credit to many consumers, and ultimately lead to less reliability and accuracy in real estate appraisals.” The agreements, entered into by the New York Attorney General, Fannie Mae, Freddie Mac and the Office of Federal Housing Enterprise Oversight, require mortgage lenders seeking to sell single-family mortgage loans to the GSEs to adopt the HVCC and to comply with certain practices imposed by the Code. In a joint letter, the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Office of Thrift Supervision, and National Credit Union Administration cited concerns of insufficient information collection and analysis and the fact that the Agencies’ rules already address the issues of appraiser independence and protection from coercion.

Writing separately, the Federal Deposit Insurance Corporation echoed those concerns stating that the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the Uniform Standards of Professional Appraisal Practice “promote effective appraisal processes for mortgage underwriting and can be enforced by the federal banking agencies if institutions fail to comply.”

The FDIC said that the Code and Agreements “would overlay this long-standing set of federal regulations and professional appraiser practice” potentially with “unintended costs and consequences.” Specifically, since both bank-affiliated and independent appraisal firms can be subject to undue influence, according to the FDIC, “it is not clear that forcing business along rigid organizational demarcations is more suitable.”

Instead, the FDIC recommended “permitting flexibility for appraiser independence that would accommodate professional practice standards and could be appropriately scaled to correspond with the wide variety and size of mortgage lending institutions.”

The FDIC stopped short of calling for a withdrawal of the agreement but promoted the use of notice-and-comment rulemaking instead of a sweeping carte blanche enforcement and supported the recent announcements that OFHEO may pursue amendments to the Code and Agreements based on the comments received by the April 30 comment period deadline.

The four other regulators stated that, if not withdrawn, “the Agreements and Code should be revised to exempt federally regulated lenders, and the implementation of the Agreements and Code should be deferred until the significantly adverse consequences are prevented and other material legal and policy concerns… are satisfactorily addressed.”