Many of you have asked questions or provided me with information regarding the new rules for obtaining home appraisals and the problems association with short sales.  Your concerns, along with others from around the country, have been forwarded to NAR through the state and local associations' government affairs programs.  The information below is in response to these communications:

1. Home Valuation Code of Conduct (HVCC)

On December 23, 2008, New York State Attorney General Andrew M. Cuomo, Fannie Mae and Freddie Mac (government sponsored enterprises) announced the final agreement of the Home Valuation Code of Conduct (HVCC). The agreement establishes standards on solicitation, selection, compensation, conflicts of interest and appraiser independence. The HVCC is effective May 1, 2009, for any mortgage that will be sold to the GSEs. Federal Housing Administration (FHA) and Federal Home Loan Bank (FHLB) mortgages are not covered in the agreement.

Real estate agents, including REALTORS®, and mortgage brokers are prohibited from selecting appraisers. Lenders are permitted to use “in house” staff appraisers to conduct appraisals. However, the loan production staff is prohibited from (1) selecting, retaining, recommending, or influencing the
selection of an appraiser for an appraisal assignment or for inclusion on an appraisal roster and (2) having any substantive conversation with an appraiser or appraisal management company regarding valuation, including ordering or managing an appraisal assignment. The Independent Valuation
Protection Institute (IVPI) will establish a telephone hotline and E-mail address to receive complaints from appraisers and users of appraisal services on the improper influence or attempted improper influence of appraisers.

The agreement was first announced in January 2008. The NAR Appraisal Committee discussed the agreement and decided against adopting a formal policy position. When first announced the HVCC it included a period of time where the government sponsored enterprises (GSEs) would solicit input from
various appraisal stakeholders. The Appraisal Committee did provide feedback and comments to NAR staff for a letter drafted to the GSEs. The letter was submitted to both GSEs on April 30, 2008. NAR continues to provide information to its members on the agreement.


2. Fannie Instructs Its Servicers Not to Cut Commissions on Short Sales

On February 24, 2009, Fannie Mae sent Announcement 09-03 to its servicers instructing them not to negotiate commissions on short sales below the amount negotiated by the listing agent (unless the commission exceeds 6 percent). The requirement took effect March 1, 2009. Fannie Mae recognizes that
(a) negotiating commissions for short sales is unfair because getting a short sale to closing requires intensive work over many months, often requiring working with numerous buyers, and (b) compensating real estate agents fairly benefits Fannie Mae because agents play a crucial role in short sales.

The Announcement reminds servicers that third party approvals (i.e., private mortgage insurers) may be required and can affect commissions. NAR has asked both Fannie Mae and Freddie Mac to strengthen their policies against reducing short sales commissions, welcomes Fannie’s announcement, and has
urged Freddie to follow Fannie’s lead.