With Congress due back on Capitol Hill after Labor Day, the legislative fight over Fannie Mae's and Freddie Mac's controversial appraisal rules is heating up.

Bipartisan legislation that would put the “Home Valuation Code of Conduct” (or HVCC) on hold for 18 months has steadily gathered support in the past month, and now has 54 co-sponsors.

Meanwhile, the National Association of Realtors continued its grass-roots lobbying push for the HVCC moratorium bill in key congressmen's home districts during the August recess. The association has been an outspoken critic of the HVCC rules, arguing that they produce deal-killing lowball appraisals, encourge the use of low-paid appraisers unfamiliar with local conditions, and have raised the cost of valuations for consumers.

Home builders, appraiser and mortgage brokers also have opposed the rules, which took effect May 1.

In late August, new FHA commissioner David H. Stevens weighed in on the issue with the first public comment from HUD. Stevens said FHA, which now accounts for about one-third of mortgage market volume, does not plan to adopt the HVCC. FHA has its own detailed, long-standing guidelines and standards covering appraisals and appraisers.

But in a statement provided to Realty Times last week, Stevens said FHA believes that some of the core principles of Fannie's and Freddie's guidelines are good.

“We do like the HVCC's separation of influence in ordering the appraisal from those who financially benefit from the outcome,” he said. Though FHA won't use the HVCC language in its rules, the agency is “considering changes” that “may incorporate some” of the HVCC's principles.

FHA's goal “is to get (these) changes into the marketplace in the near future,” Stevens said in his statement. That suggests that FHA will soon be coming out with new guidelines on home valuations that will affect lenders, realty agents, appraisers and consumers.

No details on what changes FHA is contemplating were available last week.

Complicating the issue for anyone hoping to avoid HVCC problems by opting for FHA loans is the fact that many of the largest FHA originators now follow HVCC procedures for all new loans, including FHA.

That, in turn, will put more pressure on supporters of the moratorium bill co-authored by Mississippi Democratic Congressman Travers Childers and California Republican Gary Miller.

Time is running short for getting that legislation through the House and Senate this Fall -- even with 54 Republicans and Democrats signed on in support of the bill - because Congress's schedule is jam-packed with bigger, more prominent issues such as health care and energy.

Published: August 31, 2009

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.