By Holden Lewis • Bankrate.com

Mortgages crept up this week, but just a little. They have been pretty steady for the past month.

The benchmark 30-year, fixed-rate mortgage rose 4 basis points, to 5.27 percent, according to the Bankrate.com's national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.38 discount and origination points. One year ago, the mortgage index was 6.13 percent; four weeks ago, it was 5.2 percent.

The benchmark 15-year, fixed-rate mortgage rose 5 basis points to 4.78 percent. The benchmark 5/1 adjustable-rate mortgage rose 2 basis points, to 5.07 percent.

Bankrate's weekly rate survey is a snapshot of what's happening with mortgage rates every Wednesday. That means it misses the ups and downs that can occur on the other days of the week. But judging by day-to-day mortgage bond prices, it looks like mortgage rates have been calm for about a month.

Home Valuation Code of Conduct
Borrowers haven't been so calm. They're frustrated about a lot of the changes that have occurred lately in the world of mortgages. The most recent change is the imposition of something called the Home Valuation Code of Conduct, or HVCC. It's a set of rules governing appraisals for loans that can be sold to Freddie Mac or Fannie Mae, and it went into effect May 1.

There's something old-fashioned about the Home Valuation Code of Conduct. If you've ever watched "The Dick Van Dyke Show" from the early 1960s, you noticed that the married main characters, Rob and Laura Petrie, slept in separate beds. The network apparently believed that a realistic bedroom arrangement would have scandalized baby boomers and their fecund parents. Similarly, the HVCC was conceived in the belief that mortgage lenders and appraisers should never get in bed together. Heck, they shouldn't even flirt.

The new code of conduct forbids mortgage brokers from hiring appraisers or even talking to them. Mortgage lenders may hire independent appraisers directly or through middlemen called appraisal management companies, which take a cut of appraisers' fees. Major appraisal management companies are owned by big banks. Critics of the HVCC charge that banks' ownership of appraisal management companies creates a conflict of interest that could raise prices paid by consumers.

More demand for appraisals
In e-mails to Bankrate, consumers complain about having to pay upfront for expensive appraisals. "Now they are telling me I have to pay $475 for an appraisal!" one reader writes indignantly. And if the appraised value is too low to qualify the borrower for a loan, there will be no refund.

"Paying for appraisals upfront has become a lot more standard," says Dan Green, loan officer for Mobium Mortgage in Cincinnati.

The HVCC aims to prevent brokers and lenders from pressuring appraisers to "hit a number" -- to appraise a house at a certain value that will allow the loan to be approved. But it also forbids more innocent conversations between appraisers and loan originators.

Previously, brokers and loan officers could call appraisers informally and describe a prospective deal and ask, "Is this going to work out or not?" says Brian Koss, managing partner for Mortgage Network, a mortgage bank based in Danvers, Mass. "That's how we saved a lot of time" by weeding out unsupportable loans from the get-go.

Now that call can't be made. As a result, Koss says, "we're going to do a lot of work on loans that aren't going to close."

When a lender calls an appraiser to ask if a certain property will be valued high enough to qualify a loan deal, it might seem like a benign conversation to the lender, but a threatening one to the appraiser. If an appraiser answers "no" too often, that appraiser's business could dry up. The HVCC's goal is to decrease the pressure on appraisers to "hit a number" just to remain in business.

Green isn't sure that the HVCC is necessary. Lenders already have beefed up their fraud-prevention departments, and inflated appraisals have little chance of getting through. Besides, Green says, "a good loan officer works with a good appraiser because the appraiser is open and honest and provides quick service."

source: Bank Rate