WASHINGTON, Nov. 7, 2011 /PRNewswire-USNewswire/ -- The American Guild of Appraisers (AGA), a national organization of real estate appraisers that is an affiliate of the AFL-CIO's Office and Professional Employees International Union (OPEIU), announced today it has retained a law firm as part of a broad-reaching effort to overturn recent federal regulations that dramatically cut the fees that appraisers are paid to perform appraisals, and threaten the viability of professional appraisal practice and the reliability of appraisals used in real estate transactions.
In the aftermath of the national financial collapse brought on in part by badly underwritten subprime loans, Congress found that inadequate appraisals resulting from undue pressure on the appraisal process was a contributing factor. To address the problem, Congress enacted a series of appraisal reforms in the Dodd Frank law to ensure appraiser independence and accountability. A key component of the legislation is a requirement that appraisers be paid Reasonable and Customary fees for their work. Under the legislation, Reasonable and Customary fees are defined to ensure that appraisers are not undercompensated relative to the market and the nature of the assignment. Responding to evidence that Appraisal Management Companies (AMC's) have been dominating the market and pressuring appraisers to accept assignments with unreasonable requirements and unreasonably low fees, the law specifically prohibits basing fees on the current practices of Appraisal Management Companies.
Earlier this year, however, the Federal Reserve Board adopted implementing rules that have been interpreted by the banking industry and AMC's as permitting paying appraisers a fraction of Reasonable and Customary fees. Appraisal industry experts also point out that in addition to controlling virtually all of the business, AMCs also dictate the turn-times for assignments that, in many cases, have been unreasonably set at 24 hours while at the same time increasing the details and requirements for documentation in the appraisal report.
According to AGA President, Peter Vidi Jr. this is a big problem for appraisers, consumers and taxpayers. "To understand this problem and its impact, first you have to follow the money," said Vidi. "A borrower is required by the lender to pay an appraisal fee that represents whatever is Reasonable and Customary in that market. What the borrower doesn't know is that perhaps less than half of the fee that they are required to pay is actually going to the appraiser who performs the appraisal. The rest, often more than half of the fee, goes to the appraisal management company. AMC's are often owned or controlled by lenders and make big profits without the borrower's knowledge that his fee is an additional profit center for the lender or the subsidiary management company at the expense of the borrower. Additionally, since the implementation of recent, well intended but poorly implemented federal legislation, the vast majority of appraisals for mortgages have been ordered through Appraisal Management companies that drive the fees down to professional appraisers while requiring the consumer to pay market rates.
"Why should anyone care? If an appraiser is not paid a Reasonable and Customary fee and forced to comply with unrealistic turn-times for an appraisal assignment then the quality of the work product suffers," Vidi continued. "Fees that are a fraction of Reasonable and Customary, along with the unrealistic and 'creeping' appraisal requirements are driving many good appraisers out of the profession. We are seeing unprecedented numbers of seasoned appraisers leaving the market. Those that remain are forced to cram more appraisals into the workweek in order to earn a living. The result inevitably will be less reliable appraisals and another round of poorly underwritten loans that could help to destabilize a fragile economy. The American Guild of Appraisers feels that it is time to take a stand for the professional real estate appraiser."
"From a legal standpoint, it's quite clear that Congress intended that appraisers be paid Reasonable and Customary fees and that most appraisal management companies are simply violating the law," said Matt Schneider with Garvey Schubert Barer, the law firm retained to represent the AGA. "Unfortunately, the Federal Reserve has adopted regulations that AMC's are interpreting as permitting and validating their practice of paying appraisers a fraction of what is a Reasonable and Customary fee. Regrettably, so far the Fed has been unwilling to take any action to ensure that both its regulations and the behavior of AMC's comply with the law."
Schneider said that his firm is reviewing all of the facts and the law and will be advising the AGA as to what options are available for legal action that may include a lawsuit against the Federal Reserve Board.
"Taking legal action against the Federal Reserve is not something that the appraisal industry would do lightly, but there may be no other option," said Vidi. "This is far too important an issue to appraisers and consumers to simply walk away. We are fighting for our livelihood and for the integrity of the work that we do."
OPEIU President Michael Goodwin said that OPEIU and the AFL-CIO and their millions of members stand firmly behind the AGA. "We support concerted action by the American Guild of Appraisers to protect the integrity of professional appraisal practice and the profession by ensuring that the federal agencies carry out the intent of the law."
ABOUT THE AMERICAN GUILD OF APPRAISERS/OPEIU GUILD 44
The American Guild of Appraisers/OPEIU Guild 44 seeks to represent the interests of appraisers, developing a strong presence before the U.S. Congress and each of the state legislatures. By working closely and exchanging dialog with other like-minded organizations, the AGA works to educate consumers about the appraisers' non bias, independent role in the value process, while ensuring the accountability of both the appraisal profession and the financial institutions with which the appraiser provides services.
The Office and Professional Employees International Union represents more than 110,000 members (representing 125,000 employees) in the United States, Puerto Rico and Canada. OPEIU represents employees and independent contractors in banking and credit unions, insurance, higher education, shipping, hospitals, medical clinics, utilities, transportation, hotels, administrative offices and more.
Professional organizations and Guilds affiliated with OPEIU are a diverse group that includes physicians, pharmacists, chiropractors, appraisers, podiatrists, clinical social workers, hypnotists, teachers and helicopter pilots.
SOURCE Office and Professional Employees International Union, AFL-CIO (OPEIU)
Article Source: WASHINGTON, Nov. 7, 2011 /PRNewswire-USNewswire/