The controversial Home Valuation Code of Conduct in effect as of May 1 will change the way consumers and their lenders buy appraisal services. The code bans brokers, who originate a substantial share of new mortgages, from selecting appraisers.

Mortgage brokers will no longer be able to order appraisals for loans that will be sold to Fannie Mae or Freddie Mac. Those institutions will require that all conforming loans come from lenders that order appraisals either directly from appraisers, most of whom are independent contractors, or through appraisal management companies.

Four appraisal organizations, including the Appraisal Institute and the American Society of Appraisers, issued a joint statement alleging that the code will force lenders to shift their valuation assignments to third-party appraisal management companies, abandoning the traditional system of using local appraisers selected by mortgage loan officers. The National Association of Mortgage Brokers filed suit to stop the code from taking effect, then abandoned the effort April 2.

Whether or not the code creates the problems its critics allege, it will certainly change the way many consumers and their lenders select appraisal services. Whether working as independent contractors or through an appraisal management company, appraisers can no longer rely on relationships with mortgage brokers to bring them business.

We’d like to hear your opinion about this. Weigh in here