Fannie Mae – Code Of Conduct FAQs
Home Valuation Code of Conduct Frequently Asked Questions (FAQs) – Updated March 2010
To help enhance the integrity of the home appraisal process in the mortgage finance industry, in March 2008, Fannie Mae entered into an agreement with our regulator – the Federal Housing Finance Agency (FHFA) (then the Office of Federal Housing Enterprise Oversight) – and the New York Attorney General’s office to adopt certain policies relating to appraisals for loans delivered to us. Following a public comment period, the Home Valuation Code of Conduct (Code) was modified and became effective for single-family mortgage loans (except government-insured loans) originated on or after May 1, 2009, and delivered to Fannie Mae.
The following FAQs provide additional clarification on implementation of the Code. Fannie Mae’s and Freddie Mac’s FAQs may differ to some extent in style or structure, but present no substantive differences in interpretation or implementation of the Code, nor do they impose any different operational requirements.
What loans are affected by the new Home Valuation Code of Conduct?
Fannie Mae agreed to adopt the Home Valuation Code of Conduct (“the Code”) for all conventional, single-family loans originated on or after May 1, 2009, that are delivered to Fannie Mae. For purposes of the Code, origination date means the date of the application. The Code will not apply to multifamily loans, or to loans insured or guaranteed by a federal agency; the Code only applies to 1- to 4-unit single-family loans sold to Fannie Mae. The Code does not apply to loans sold to Fannie Mae on or after May 1, 2009, that were originated prior to May 1, 2009.
What are the professional requirements for an appraiser under the Code?
The Code requires that an appraiser must be licensed or certified by the state in which the property to be appraised is located.
Does the Code allow an appraiser to update an appraisal for another lender?
Yes. The Code does not prevent an appraiser from performing an update of an appraisal for another lender.
Does the Code apply outside of New York State?
Yes. There is no geographic limitation.
Who besides Fannie Mae has agreed to adopt the Code? Are the Federal Home Loan Banks participating? The FHA?
As of this date, only Fannie Mae and Freddie Mac have agreed to adopt the Code.
Does the Code apply to a loan that is insured or guaranteed by a federal agency and ultimately sold to Fannie Mae (i.e., FHA or VA loan)?
The Code does not apply to loans that are insured or guaranteed by a federal agency, such as FHA and VA loans.
After May 1, 2009, is it permissible for Fannie Mae to purchase private label securities backed by mortgage loans that do not meet the requirement of the Code?
Yes. The Code applies only to 1- to 4-unit single-family loans sold to Fannie Mae by mortgage originators. It does not extend to Fannie Mae’s investments in mortgage-related securities.
Does the Code require lenders to obtain appraisals where they were under no such requirement pursuant to the Fannie Mae Selling Guide?
No, nothing in the Code requires a lender to obtain a property valuation, or to use any particular method for property valuation. Nor does the Code affect the acceptable scope of work for an appraiser in connection with a particular assignment.
Does Section I.B.(9) specifically prohibit a lender from ordering a second appraisal?
No. Section I.B.(9) only prohibits a lender from ordering a second appraisal when they are attempting to influence the outcome of the first appraisal and are now “value-shopping.” As a risk control measure for certain loan products, it may be common for a lender to order more than one appraisal, and this subsection does not prohibit that practice.
Does the Code specifically prohibit communication with an appraiser by a real estate agent?
No.
Does the Code apply to the Desktop Underwriter® Property Inspection Report (Form 2075)?
No, Form 2075 is an inspection report. It is not an appraisal, and therefore the Code does not apply.
Does the Code apply to appraisals performed for loss mitigation?
The Code applies to loans originated and sold to either Fannie Mae or Freddie Mac. It does not apply to appraisals performed for loss mitigation purposes.
How does Fannie Mae audit compliance with the Code?
Compliance with the Code will be part of the lenders’ operational review.
Section IV.E. of the Code allows an exception to Section IV if the Seller meets the definition of a “small bank” and Fannie Mae determines the Seller would suffer a hardship due to the provisions of Section IV of the Code. What are the requirements for this provision?
An institution falls under the provisions of Section IV.E. of the Code if it is a seller/servicer of Fannie Mae, a regulated financial institution with asset values as specified in 12 U.S.C. §2908, and meets the requirements, if any, of the institution’s regulatory agency regarding the Interagency Appraisal and Evaluation Guidelines (SR Letter 94-55 and revisions). As with the entire Code, this provision is subject to Fannie Mae’s representations and warranties. Sellers falling under Section IV.E. are still required to comply with the remainder of the Code, including Section III, which duplicates many of the requirements of Section IV.
Is a Seller required to submit documentation to Fannie Mae to take a Section IV.E. exemption?
Fannie Mae does not require a Seller to submit documentation to become exempt pursuant to Section IV.E of the Code. A Seller claiming this exemption, however, represents and warrants that it meets the criteria of Section IV.E.
Does the Code apply to other valuation methods (i.e., automated valuation models AVMs, broker price opinions BPOs, tax assessments, etc.)?
No, the Code applies only to appraisals.
Is the definition of application date the actual date of the application or the date of receipt of the application by the lender?
The application date is defined as the date the borrower(s) signed the application certifying that the information is correct.
This question clarifies Section II of the Code. Lenders may have had different interpretations prior to the issuance of this question. May lenders submit to Fannie Mae their pipeline loans that were originated in good faith compliance with their, possibly different, interpretation of Section II of the Code?
Yes; however, Fannie Mae expects that processes to comply with the clarification of Section II as referenced above should have been implemented no later than September 1, 2009.
Does the Code require or prohibit the use of foreclosure data by appraisers?
The Code does not speak to foreclosure data. It is up to the appraiser to determine if the data is applicable and appropriate or not.
