The Role of Technology in Staying HVCC-Compliant

By Vladimir Bien-Aime, CEO, Global DMS

With the Home Valuation Code of Conduct (HVCC) now in effect, it’s surprising how many lenders are still skimming the line of noncompliance. But what’s even more disturbing is how many have skated well over the line — landing smack dab into the danger zone of compliance violation — when a solution is so easily accessible. The truth is, achieving HVCC compliance doesn’t have to be difficult. In fact, technology can put compliance at your fingertips, and for less than you may think.

Many of today’s technology-based appraisal management solutions are available with little or no upfront costs, and cost as little as $10 per loan, a fee which can be passed onto the vendor. But how, exactly do these solutions help lenders to stay HVCC-compliant? In order to demystify technology’s role in HVCC compliance, let’s take a look at the six key aspects to the appraisal ordering and management process.

Vendor Management

Keeping track of appraisers and appraisal management companies can be a job in and of itself — especially if you want to do it right. With all of the relevant information lenders need to verify before initiating the appraisal process, it’s not unheard of for 30 to 40 minutes to pass before an appraisal is even ordered. But time’s not the only issue at stake here. When an appraisal is ordered, even if it’s done in an objective HVCC-compliant manner, lenders could still be risking violation. If the lender hasn’t checked the ASC.gov database or another reputable source to determine that the appraisal vendor’s license hasn’t been suspended, it could be violating a basic HVCC guideline.

How can technology help? It’s simple. Technology-based appraisal management solutions manage all aspects of the database automatically, and that includes basic issues like tracking which vendors are working in which areas, as well as verifying that a vendors’ license is up-to-the-minute valid and in good standing.

Appraisal Ordering

In the past, loan originators and processors were responsible for placing appraisal orders. Now, unless they’re willing to risk HVCC violation, they’re going to have to let someone else take care of the process. Appraisals must be ordered with the utmost objectivity. A lot of lenders are under the misconception that if they use an appraisal management company (AMC), they’re in the clear for HVCC compliance. Not true. Using an AMC does not guarantee HVCC compliance.

Technology has obvious benefits in this area. After all, how much more objective can you get than random, computer-generated selections? Users of ASP-based appraisal management solutions simply log in to their accounts from any internet-accessible computer, request the appraisal and the system takes care of the rest. Restricted parties never need to have direct contact with the appraiser. Plus, most appraisal management systems log all communications, offering lenders an electronic “paper trail” that is both auditable and traceable.

Tracking and Communication

Once an appraisal has been ordered, any number of wrinkles can enter the picture and jeopardize the deal, not the least of which are HVCC violations in communications. Communication with appraisers can lead to any number of violations, and lenders need to be careful. It’s one thing to have to track and manage delays, milestones and any unexpected holdups, but now lenders also need to ensure that their interactions with the appraiser fall within HVCC guidelines.

By using a third-party technology-based appraisal management solution, lenders can manage the process without ever having to communicate with the appraiser directly, which in turn eliminates the possibility of anyone exerting pressure to secure a certain outcome. After all, if there’s no direct communication, there’s no opportunity to influence the transaction. What’s more, these communications are tracked and auditable as well, so companies can demonstrate their compliance should the need ever arise.

Appraisal Delivery

Most companies rely on email to deliver appraisals, which not only puts confidential information at risk, but also opens the possibility of the message getting waylaid by anti-spam software or being bounced because of size restrictions. What’s perhaps even more potentially detrimental is that, according to HVCC guidelines, each borrower is required to receive a copy of that appraisal, which is the Achilles Heel that often puts lenders at risk.

Technology can automate delivery of the appraisal to all appropriate parties, including the borrower. But rather than e-mailing a copy of the appraisal directly to the borrower, the borrower is provided with an embedded link that provides secure access to the appraisal, all through a secure server. Likewise, all appraisals are delivered to the originating company through that same secure server as well.

Appraisal Review

There’s a 10% review requirement for all Fannie Mae and Freddie Mac loans. In short, that means one out of 10 loans must be internally audited to make sure that the appraisal is a valid representation of current market value of the home.

When reviewing on a manual basis, there’s no other option than to simply select that 10% at random. By using a technology-based solution, however, companies can target loans according to issues they suspect as problematic, such as those with comparables that fall outside a certain mileage limit or those where the square footage of the comparables exceeds the subject property’s square footage by a certain percentage.

An Effective Safeguard Against Compliance Violations

It’s pretty clear that technology brings objectivity, speed and ease to the appraisal ordering and management process. But what lenders need to realize is that the benefit reaches far beyond mere convenience. By implementing technology into the appraisal ordering and management process, lenders can safeguard themselves against the full range of HVCC compliance violations, whether those oversights are skimming the line of noncompliance or well into the danger zone.

Vladimir Bien-Aime is president and CEO of Global Data Management System LLC. Throughout the past 10 years, thousands of appraisal firms, appraisal management companies and lenders have employed the company’s Web-based software solutions for appraisal management and workflow automation. Global DMS solutions include the OASISOne Management Platform, eTrac WebForms and the MISMO Accessible Receive Station (MARS) PDF to XML data extractor.

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