Home Value Code of Conduct (HVCC)

The mortgage industry is certainly undergoing many changes to help provide home buyers with better information when it comes to financing a home.

Based on an agreement between the Federal Housing Finance Agency, the regulator of Fannie Mae / Freddie Mac, (the largest purchasers of conventional mortgage loans in the United States), we now have the HVCC. Here are the ten things that any party associated with a home loan appraisal cannot do to influenced or direct the results of a mortgage appraisal:

1. Withholding payment for an appraisal report.
2. Threatening to withhold future business for, terminating, or demoting an appraiser.
3. Offering express business, implied future business or increased compensation.
4. Conditioning the order of an appraisal report or the payment of compensation based on a preliminary value estimate from an appraiser.
5. Requesting that an appraiser provide and estimated or desired valuation prior to the completion of an appraisal report, or requesting that an appraisal provide estimated values prior to the completion of an appraisal report.
6. Providing to the appraiser an anticipated or desired value for a subject property, except that a copy of the sales contract may be provided.
7. Providing to an appraiser or appraisal Management Company, stock or other financial benefits beyond the stated and agreed compensation.
8. Listing or delisting an appraiser without notice and the requirement to provide evidence of misconduct in the event of delisting.
9. Ordering a second, automated appraisal if you did not like the first one, unless there is clear evidence of flawed information. .
10. Any other acts which impair the appraisers ability to perform an independent valuation, including violations of Truth in Lending, Regulation Z, or any number of other state and Federal laws and regulations.

The sum total of the HVCC act is to take the real estate / mortgage industry back to pre-1990 conditions. Be as it may, if you are a buyer, be prepared to extend your closing time a few days, and expect to pay a little more to close your mortgage loan.

Frequently Asked Questions

1. How do these new requirements impact applications taken prior to their effective dates?
   
   For HVCC, applications with an identified property prior to May 1, 2009 are not impacted. 
   
   For HERA, applications with an identified property prior to July 30, 2009 are not impacted.
   
2. Do the timing requirements for the issuance of the initial disclosure and re-disclosure, and fee collection apply to investment properties?
   
   No. These requirements only apply to primary residence and second home transactions.
   
3. The final TIL must be received 3 business days prior to closing. Is that 3 full days?
   
   Remember, we must allow 3 business days for mailing, then the homebuyers have the 3-business-day review period required to determine if they are comfortable with their loan choice. Closing can occur on the third business day after receipt.
   
4. What if the homebuyer adds a home equity loan or line of credit after the initial application? How are disclosures impacted? 
   
   Home equity loan: The initial disclosure period starts over and all disclosures must be issued for the home equity loan. 
   
   Home equity line of credit: There is no impact.
   
5. What if the homebuyer is delayed in paying his or her upfront fees?
   
   If the upfront fees are not provided by the homebuyer in a timely manner, this will likely impact the lender's ability to order certain vendor services (e.g., the appraisal) and move forward with processing the loan until the upfront fees are received. This could affect our ability to provide the best level of service and to meet the desired closing date.
   
6. Can last minute/rush deals still be accommodated?
   
   The new regulations and investor guidelines definitely redefine "rush." The minimum number of days to close a transaction is 7 business days after application (or 7 business days after the initial disclosures are issued). Remember, however, this would be a best-case scenario. If the APR increases by more than .125%, a PreClosing TIL will be required and will add an additional 7 business days to the timing. This allows 3 business days for mailing and provides the homebuyers with the time required to determine if they are comfortable with their loan choice. It is wise to plan on a minimum of 30 days to close.
   
7. Can the credit report fees be collected at the time of applications?
   
   Yes. The credit report fee is the only fee that can be collected at application.
   
8. When a phone application is taken, can a post-dated check, credit card or other payment information be collected and held until upfront fee payment is allowed?
   
   No. Fees or payment information can not be collected prior to the allowed upfront fee collection date which is the next business day after the initial disclosures are received. If this is an in-person application, issuance of disclosures and collection of upfront fees may happen on the same day.
   
9. Can fees be collected at an in-person application?
   
   During an in-person application, fees may be collected after the homebuyer is provided his or her initial disclosures (TIL) and required signatures are received.
   
10. How do you know if the initial APR has to be re-disclosed?
    
    An APR increase of more than .125% from the initial TIL requires the lender to update and re-issue — and the homebuyer to receive — the new and final APR via the Truth in Lending (TIL) disclosure a minimum of 3 business days prior to the close date. If the change is less than 25%, then no re-disclosure is required.
    
11. For the purpose of these new disclosure timelines, what is considered a business day? Which holidays will not be included as business days?
    
    Most major banks recognize, all weekdays and Saturdays as a business day unless it is a Federal holiday. Federal holidays include: New Year's Day, Memorial Day, Independence Day, Labor Day, Veteran's Day, Thanksgiving Day, and Christmas Day.
    
12. Let's say there are two homebuyers applying for a loan, however, only one is present at the in-person application. In this scenario, would the home mortgage consultant be allowed to collect upfront fees at the time of application from the homebuyer who is present?
    
    Fees cannot be collected until both parties have received the initial disclosures. If the in-person applicant is provided with two copies at application, receipt of disclosures by the second party will need to be verified prior to collecting fees.
    
13. How does the new fee collection regulation impact Builder Best® and Builder Best Expanded Options loans?
    
    Builder Best locks allow for rate locks prior to fee collection. If the disclosures are ovemighted, they are considered "received" the next business day, allowing the fees to be collected the following business day. Remember the home mortgage consultant is required to collect the Builder Best fee/deposit within 35 days of the lock period.
    
14. Fees may not be collected from the homebuyer until the next business day after the initial disclosures are received (unless an in-person application was taken). Can seller-paid fees be collected before that time?
    
    For example, it is common in some areas that the seller pays the appraisal fee. No, the homebuyer on the application must have received the initial disclosures before the seller can pay the appraisal fee on their behalf.
    
15. Can the TIL re-disclosure be sent within the 7-business-day period from when the initial disclosures are issued?
    
    Yes, the required re-disclosure of the PreClosing TIL can be sent within the first 7-business-day period.
    
16. Can the loan be locked at the time of application if fees have not been collected yet?
    
    Yes.
    
17. Do these regulations and investor requirements only impact purchase transactions or are refinances subject to these same guidelines?
    
    Both purchase and refinance transactions are impacted.
    
18. Is the 3-business-day right of rescission still in effect?
    
    Yes, the right of rescission is still in effect for refinance transactions. The loan can close 7 business days after any TIL re-disclosure is issued, then the right-of-rescission period begins. The loan can fund after the rescission period expires.