Tuesday, October 19, 2010

FYI: FRB Issues Interim Final Rule to Replace HVCC

The Federal Reserve Board issued for public comment an interim final rule to replace HVCC, in order to implement new requirements for appraisal independence for consumer credit transactions secured by the consumer's principal dwelling, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.


The full text of the interim final rule is available at:



The interim final rule is designed to:  (1) ensure that real estate appraisals used to support creditors' underwriting decisions are based on the appraiser's independent professional judgment, free of any influence or pressure that may be exerted by parties that have an interest in the transaction; and  (2) ensure that creditors and their agents pay only customary and reasonable fees to appraisers.


More specifically, the interim final rule:

  • Prohibits coercion and other similar actions designed to cause appraisers to base the appraised value of properties on factors other than their independent judgment;
  • Prohibits appraisers and appraisal management companies hired by lenders from having financial or other interests in the properties or the credit transactions;
  • Prohibits creditors from extending credit based on appraisals if they know beforehand of violations involving appraiser coercion or conflicts of interest, unless the creditors determine that the values of the properties are not materially misstated;
  • Requires that creditors or settlement service providers that have information about appraiser misconduct file reports with the appropriate state licensing authorities; and
  • Requires the payment of reasonable and customary compensation to appraisers who are not employees of the creditors or of the appraisal management companies hired by the creditors.

Compliance is optional until April 1, 2011, at which time compliance will become mandatory.


Public comments are due 60 days after the interim final rule is published in the Federal Register, which is expected shortly.


Let me know if you have any questions.  Thanks.


Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874




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