Analysis:  Final HVCC code, and new Federal Reserve regs

In the past few weeks, there have been two significant announcements of proposed regulatory changes affecting appraisers: (1) A new “final” HVCC code overseeing the appraisal processes of the GSEs, issued by FHFA, and (2) a new set of interagency guidelines for various other banking entities operating under the supervision of the Federal Reserve, the OCC, the FDIC, the OTS, and the National Credit Union Administration.

There are numerous details still to be analyzed in both sets of regulations, but the initial impressions of our legal team in DC as well as from our inhouse staff is that the two share disturbing similarities in terms of the sweeping exemptions granted to lending institutions and GSEs, allowing them in essence to pick and choose when the rules do or don’t apply. The exemptions are so far-ranging, in fact, that it’s not an exaggeration to suggest that the rules really don’t apply at all.

In short, the new regulations aren’t necessarily good news, nor bad news (or at least worse news). The loopholes in them prevent either one from actually having any beneficial effect in reducing lender pressure, but they also make them somewhat irrelevant since they can be so arbitrarily – and likely infrequently—applied. The real damage was done by the first set of HVCC notices sent by Fannie, Freddie, and the former OFHEO (now FHFA), which sent lenders scurrying for cover with AMCs handling most of their work.

In early January, when your inbox isn’t as full and the holiday distractions have subsided, we’ll be sending you a detailed Appraisal Press analysis covering both sets of regulations, as well as suggestions on what you might want to do to respond. Much like the first round of the HVCC, the Fed regulations do include a commentary period which ends in late January. We will be providing an official response to the agencies which are parties to the new Fed regulations, and will of course share that with you.

Until then, if you’d like to read more of the actual announcements and regulations themselves, here are some valuable links:

On the HVCC, from the FHFA:
FHFA announces Home Valuation Code of Conduct (PDF)
Final Text of the HVCC, December 23, 2008 (PDF)

On the new Federal agency guidelines from the OCC, FRB, FDIC, OTS, and NCUA:
Agencies Seek Comment on Proposed Interagency Appraisal and Evaluation Guidelines 
Proposed Interagency Appraisal and Evaluation Guidelines (PDF)