HVCC was well-intentioned. The object was to eliminate a potential conflict of interest by separating appraisers' opinions from the interests of the parties who hired them. It was thought that appraisers routinely released valuations that were unduly influenced by what the refinancing homeowners, real estate agents or mortgage brokers wanted, so as to continue to win their approval and their business.
The idea behind HVCC was to require an unrelated party to order the appraisal. That way, the appraiser's livelihood did not depend on bringing in values that would satisfy those who hired him or her. However, this required putting a middleman between the appraiser and the client. This extra layer was an appraisal management company, and AMCs made a killing off their captive market, pocketing up to 40 percent of the appraisal fee. So, borrowers paid more and appraisers earned less.
Before HVCC, a loan officer could choose an appraiser with the most experience in the type of property being appraised, or with the greatest understanding of the property's location, or the one with the fastest turnaround or most professional service. Now that the AMC was hiring the appraiser, with profit being the only motive, there was no guarantee that the appraisal would be accurate or timely, or that it would be performed by the most qualified practitioner.
This meant that getting an accurate appraised value was a crap-shoot. And if the appraisal came in too low to make refinancing possible? Homeowners had little recourse, unless they wanted to start over with a new mortgage lender and pay for another appraisal.
Was the code needed in the first place?
One can make a good case that AMCs are not needed. Appraisers are licensed; they have to acquire an education, amass work experience, and pass tests. Their work is reviewed by lenders' appraisal review committees, and values thought to be too high are routinely reduced.
Finally, mortgage lenders keep lists of appraisers whose work they feel is not reliable; they are less likely to accept appraisals from them. Adding an additional layer between the property owner and the appraiser has caused refinances to take longer and cost more, with little discernible benefit to the borrower or lender.