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Richard Gaylord, NAR President Comments on HVCC, Says Nothing

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Richard Gaylord, President of the National Association of Realtors has provided his response to Freddie Mac and Fannie Mae regarding the Home Valuation Code of Conduct (see below). His response includes his comments and suggestions for change to specific aspects of HVCC.

Of all the serious flaws in HVCC that stand to hurt consumers, Realtors, appraisers and lenders, Richard fails to address even one of the primary deal breakers that make HVCC a non-starter in its current form. When given the opportunity to name specific recommendations, Richard gives three specific examples:

  • Recommendation for change in verbiage regarding “partial payment”
  • Requests change in verbiage so that “licensed and trained” employees are required as opposed to “appropriately trained and qualified” employees
  • Requests change in HVCC guideline that lenders may not use appraisal company that they have a 20% or more stake in so that lenders must have 0% stake in any company they use

Fair enough, three sensible suggestions until you consider that he has failed to address any of the real issues on the table that stand to detrimentally affect consumers and real estate professionals including those he represents, Realtors. While Realtors stand a very real chance to be hurt by HVCC in its current form, Richard’s comments to the GSE’s fail to even touch on the most pressing issues within HVCC but instead waste an opportunity by nit picking verbiage. One might characterize these oversights as a clear lack of leadership in representing the best interests of consumers and Realtors.



April 30, 2008

Home Valuation Code of Conduct Response
Attn: Ray Romano, Senior Vice President, Credit Risk Oversight Freddie Mac
1551 Park Run Drive, Mail Stop D2Z
McLean, VA 22102-3110

Dear Mr. Romano:

On behalf of the 1.2 million members of the National Association of REALTORS®, I am writing to provide comments on the implementation of the Home Valuation Protection Code. NAR has approximately 30,000 appraiser members from across the country and approximately 750 retain our Residential Accredited Appraiser (RAA) and General Accredited Appraiser (GAA) designations.

NAR supports the independence of appraisers and the integrity of the appraisal process. We applaud the New York State Attorney General Andrew M. Cuomo and both government sponsored enterprises (GSE), Fannie Mae and Freddie Mac, for their efforts to address appraisal fraud in the mortgage industry. While the agreement addresses appraisal fraud, we have concerns with the implementation of the proposed “New Home Valuation Protection Code” through the newly created “Independent Valuation Protection Institute.”

The agreement signed between the New York State Attorney General and Fannie Mae and Freddie Mac expires in 28 months. The newly created Independent Valuation Protection Institute will be funded by both GSEs for 5 years. The agreement is silent on how the GSEs will operate with respect to appraisals after the agreement expires. There is no indication from any party involved in the negotiations that the agreement will continue after 28 months, if one or both of the GSEs will return to pre-agreement appraisal requirements, or if a third option will be explored. It is also unclear how the Independent Valuation Protection Institute will be funded after 5 years or if more than the $5 million allocated by the GSEs is required to fund its operations.

NAR recommends the Independent Valuation Protection Institute be affiliated with an already existing appraisal organization. This will help to ensure that the code is implemented in such a way that it adds value to the appraisal process rather than becoming a duplicative layer of bureaucracy. If properly implemented the code will compliment, rather than duplicate or contradict, already existing appraisal codes such as the Uniform Standards of Professional Appraisal Practice (USPAP). Further, the Independent Valuation Protection Institute will be better positioned to work in conjunction with appraisal organizations and state regulatory agencies to ensure the independence of appraisers and the integrity of the appraisal process.

There is concern that GSEs will increase their reliance on automated valuation. While this would appear to address appraiser influence in a transparent way, a deeper look at automated valuations generally reveals they are not able to consider qualitative factors with the same level of reliability that professional licensed and certified appraisers produce. Professional appraisal organizations and licensed and certified appraisers should work closely with the GSEs to ensure the highest quality appraisals remain the preferred method of valuation for residential real estate transactions.

The agreement reached between the New York State Attorney General and the GSEs, including the valuation code, does not address the costs of the real estate transaction. Appraisers will now have to consider their obligations to USPAP and the Appraisal Foundation and the additional burden of ensuring the Code, in conjunction with the institute, is being adhered to. This may also be an issue for lenders. The creation of a new set of standards to follow and a new oversight organization may lead to increasing cost of the real estate transaction. The GSEs and the institute should work to ensure this agreement is implemented without increasing costs of the real estate transaction.

Several items in the Home Valuation Code of Conduct should be clarified. NAR recommends the following modifications to the Code:

  • Section I. 1) should include the term “partial payment” and should read “withholding or threatening to withhold a timely payment, or partial payment, for an appraisal report;”.
  • Section V states that any employee of the lender be “appropriately trained and qualified in the area of real estate and appraisals.” The word qualified is not defined and does not necessarily mean that the employee must be a licensed appraiser. If the employee is not licensed, then the individual may be operating under the broad scope of “appraiser” without liability to be disciplined while acting like an appraiser. The employee should be licensed and certified by the state in which the property to be appraised is located. The same requirement should hold for employees of appraisal management companies as well.
  • Section VI states that lenders or affiliates of lenders cannot use an appraisal report obtained by or through an appraisal management company that is owned by the lender or affiliate of the lender and that this prohibition does not apply where the lender has an ownership interest in the appraisal management company of 20 percent or less. Lenders should be prohibited from using an appraisal report from any appraisal management company where the lender or the lender’s affiliate maintains an ownership stake. Allowing lenders to obtain appraisal reports from appraisal management companies where the lender has a stake in ownership does not meet the spirit of this agreement and does not uphold the independence of the appraisal process.

Thank you for the opportunity to present the views of the National Association of REALTORS®. These comments are also being provided to Freddie Mac and the U.S. Office of Federal Housing Enterprise Oversight. If you have any questions or comments regarding this letter, please contact our Regulatory Policy Representative Jerry Nagy at 202.383.1233 or


Richard F. Gaylord, CIPS, CRB, CRS, GRI
2008 President, National Association of REALTORS®

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Trace Richardson has written 638 articles on

I'm Trace Richardson and am the founder of LeadPress. I’m a licensed California Real Estate broker and a former equities trader previously holding the Series 7, 63, 55 and 24 securities licenses.

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5 Responses to “Richard Gaylord, NAR President Comments on HVCC, Says Nothing”

  • I own an appraisal company in Texas and have been appraising for roughly 11 years. I’m well established with numerous ethical clients that have taken years to obtain. Now my family and I are worried that HVCC will put us out of business, or at best bankrupt me because I’ll have to take a 50% pay cut. We’ve already down sized and had to get rid of receptionists and offices, and have moved into home offices due to the increasing costs of gas, insurance, and the general cost of doing business. Appraisal fees have been virtually the same for 11 years and we have not received any cost of living increases to keep up with the “COST OF LIVING!” Now we’re supposed to take another pay cut? How are we supposed to do business!?!? And all to correct a problem that doesn’t exist!

    While there are problems with the appraisal industry (as in every industry), THE MAIN problem IS NOT the appraisal industry. It’s the lending industry.

    Does it really take a genius to figure out that when you sell a home to a buyer with questionable credit, nothing to put down, and provide them with 100% financing that you’ve doomed them to failure unless they experience personal financial success? Or that when you give them 100% financing on an ARM that you put a nail in their coffin? You can’t refinance them at $100%, and they can’t sell a home with no equity because of the 6% to 8% realtor commissions. What do you think the home owner will do when their taxes go up? Or when something significant needs repair or replacement (like an air conditioner, furnace, or roof)? Or when they lose work due to any hardship related circumstances? They give the home back to the bank. And now, HERE WE ARE with more foreclosures and vacant homes than ever before in our history. Most of those homes were worth what they sold for when they were appraised. Today they’re not. Not because of fraudulent appraisals, but because the market is flooded with foreclosures and short sales.

    Hmm I know how we’ll fix it. I have the solution! Let’s create an AMC (as another unnecessary level of bureaucracy with an empty pocket to fill) that will steal half of the fees from the appraiser so that lenders can no longer communicate with the appraisers directly. That will fix everything.

    What are we paying the people that come up with this nonsense for?!?!?!?

  • We are all living the nightmare of HVCC. I am not sure who is being protected but it’s NOT the consumer. Since May 1, 2009 I’ve seen several deals completely fail due to HVCC. Orders are taking 30 ++ days to complete instead of turn times promised, leaving locked rates to be extended at the cost of consumer. We can’t even call to get status directly. Appraisals are costing $200.00 more then before in Hawaii where appraisals are already priced higher then most states.
    Its clear the people responsible for HVCC have NO understanding of how the loan process works and how communication between ALL parties is the foundation of the process and is important to protect the consumer as well as lender. The problems we are having with lending in our county is not an appraisal problem. WE have or had a lender program problem.
    CRAZY loan programs that allowed unqualified borrowers to purchase and refinance and pull hundreds of thousands of $$$ out of their properties. These programs have been elimated for the most part and the problems will correct themselves without HVCC.
    Mortgage brokers are not the problem either. We are being pushed out of the industry with lenders no longer willing to do wholesale business with us, instead bumping up their retail or inside sales, which in my opinion are untrained order takers.

  • I agree with all. I as a broker provide an honest service. My job is to help people acquire home financing. Wall Street created some products that in my opionion pushed the limit for common sense but because they were there and my competitors were offering them to Realtors whose job is to sell real estate, I had no choice to make my customers aware of these programs if they fit that mold. Simply put, it was my job to tell an applicant honestly if they qualify for a certain loan program. It IS NOT my job to tell someone whether or not they can afford a home. THAT IS THEIR RESPONSIBILITY!! It is not any other salesperson’s job to determine whether a customer can afford the (pick one, big screen TV, luxury auto, designer shoes, filet mignon, etc.) so why is it mine and why does the government think it can legislate responsibility. The HVCC is another poor attempt by government to do that. Nothing is thought through as to the consequences of the action. Look at the MDIA!! Does anyone consult with the thousand of hard working, honest individuals who actually do the job and understand the process? Apparently not. Speaking to a bank president/attorney/administrator is not the same as speaking to originators in the field. C’mon!

  • I would say that NAR (National Association of Realtors) addressed the issues at hand for Realtors around the nation but could have gone more in depth. NAR has done many possitive things for real estate agents in the challenging market and has done a great job with the many issues coming up.

  • I agree with almost all that was said on this topic. HVCC is absurd and protects no-one. I disagree with Brian though, it IS our responsibilty to see that the buyer can afford the loan. Unfortunately the greed of Wall Street created these loans that people were often talked into by L/O’s. Allowing rediculous margins to fuel the YSP. The States and Federal government would have been better served by chasing down unlicensed and unscrupulous L/O’s and company owners. HVCC is an attempt to shut the stable door long after the horse has bolted, targeting the wrong players in this mess. The amount of money that these AMC’s are taking from appraisers is wrong, it is very poor legislation that hurts everyone in the transaction with the exception of the AMC.

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