The following are Mr. David Berenbaum's, Chief Program Officer, National Community Reinvestment Coalition - Top Ten Appraisal Reform Recommendations!
In conclusion, I reiterate that the time has come for members of Congress, the prudential regulators, the Appraisal Subcommittee and the Consumer Financial Protection Bureau to work collectively to ensure that consumers and all the industry stakeholders involved in the home buying and refinance process will benefit from a system of regulation that helps ensure the independence and integrity of the appraisal process while promoting equal access to responsible and sustainable credit and a robust mortgage marketplace that meets our nations immediate housing finance needs.
To accomplish this end, it is crucial to consider the following recommendations:
1. Review and define a more modern, robust appraisal reporting process and not accept the Uniform Residential Appraisal Report form by the GSEs but rather to call on the industry to define more robust and standardized reporting that can be tailored to the lending situation. The recent changes by FHFA regarding the Uniform Appraisal Dataset have only added further confusion to the already inadequate mandated appraisal form.
2. Require professional appraisals by licensed appraisal professionals for all residential mortgages above $50,000 regardless if they are originated or insured by the private sector or Fannie Mae, Freddie Mac, or Federal Housing Agency.
3. The role and impact of Appraisal Management Companies (AMC) must be critically reviewed by the ASC to ensure that they are not negatively affecting appraisal quality and further Congress should immediately investigate the emerging practice of mortgage originators assigning or requiring that Appraisal Management Companies and/or appraisal professionals they engage for business assume the buy-back risk from the secondary market or insurer claims relating to loan origination.
4. Appraisal professionals enhance safety and soundness and protect the interests of all the parties to a mortgage transaction—including consumers—and they must be appropriately compensated under any usual & customary fee standard that is developed
5. The banking regulators, Fannie Mae, Freddie Mac and the FHA should not escape Appraisal Subcommittee valuation safety and soundness review and enforcement. National Community Reinvestment Coalition 29
6. While Automated Valuation Models (AVM’s) serve as a useful and cost competitive compliance tool and an effective check against fraud, they should never replace the use of an appraisal by a licensed appraiser for all mortgages that exceed $50,000.
7. There is a need for more effective Consumer Protection, Transparency & Education.
8. Responsible Appraisal Practices Ensure and Expand Housing Opportunities in an Open Society.
9. Inappropriate appraisal undervaluation is equally damaging to homeowners, communities, the tax base, investors & insurers.
10. States must suspend redirecting funds intended for appraisal compliance, professional development and licensing, to their general funds.