By JESSICA HOLZER

The mortgage-broker and real-estate industries are pushing to have a measure that would kill new home-appraisal rules inserted into pending legislation to overhaul financial-sector regulation.

The Home Valuation Code of Conduct, adopted in May 2009 to ensure appraiser independence, bars mortgage brokers and bank loan officers from selecting appraisers. Mortgage brokers and realtors complain that the rules have produced low-ball appraisals that have blown up deals, while appraisers argue the change has harmed appraisal quality.

Mortgage lenders, on the other hand, are trying to fend off the measure. Several big lenders own or have a stake in companies that have seen a surge in business as a result of the new rules. "We're going to try all we can to keep it out," said John A. Courson, the Mortgage Bankers Association's president and chief executive officer. Inflated appraisals were widely blamed for helping to fuel the sharp run-up in home prices during the past decade. Before adoption of the new standards, appraisals were typically ordered directly by loan officers or mortgage brokers who worked regularly with the same appraisers. Lenders contend that the new standards have ensured that appraisers aren't pressured by loan officers to make the appraisal match the contract price, increasing chances of getting the mortgage loan approved.

The Code of Conduct was adopted last spring by Fannie Mae and Freddie Mac, the government controlled mortgage giants, in settling a New York state attorney general's probe of their appraisal standards.

Realtors and mortgage brokers succeeded in inserting language in the House-passed financial-regulation bill to end the new protocols. The measure would direct federal regulators to come up with an improved set of rules.

The language, however, didn't make it into the most recent draft being used as a basis for House and Senate negotiations. Lawmakers are expected to turn their attention to the appraisal rules and other mortgage provisions next week.

The new system has been a boon to vendors that specialize in farming out appraisal requests to a network of in-house and independent appraisers. Critics say these middlemen companies have pushed appraisers to do more work in less time, forcing a cram-down in fees across the whole industry that is hurting appraisal quality.

Appraisers have seen their fees slashed by 60%, according to Bill Garber, chief federal lobbyist for the Appraisal Institute, the industry's main trade group. Mr. Garber contends that a new mortgage broker licensing law and a myriad of state laws passed in the wake of the housing bust are sufficient to discourage collusion between brokers and appraisers.

"There's now a layer of oversight that didn't exist prior to the Home Valuation Code of Conduct that I think we can build from," he said.

National Association of Mortgage Brokers CEO Roy DeLoach contends that out-of-town appraisers hired by vendors are eating away at homeowner equity through home valuations that aren't credible: "It's basically hollowing out the equity in communities whether you intend to sell or not."

Mr. DeLoach said he believes the measure to scrap the Code of Conduct was left out of the latest draft of the legislation unintentionally.

Many of the largest U.S. mortgage lenders, including J.P. Morgan & Co. and Citigroup, own or have stakes in the middleman companies, known as appraisal-management companies.

Steve O'Connor, senior vice president of government affairs at the Mortgage Bankers Association, argued that it was sound policy to have a fire wall between the appraiser and the loan underwriter. His group supports federal oversight of appraisal-management companies, but is pushing to cap any fees charged to the companies to fund the regulator at $5,000 annually. Mortgage lenders are also fighting language in the financial-overhaul bill that would require disclosure to home buyers of the share of the appraisal cost going to the appraisal-management company.

Write to Jessica Holzer at jessica.holzer@dowjones.com