Appraisal Scoop

ASA, NAIFA Send Letter to Appraisal Subcommittee Urging Delay in Rollout of National Appraisal Complaint Hotline

Also Meet With Representatives of ASC; Urge Delay of March 29th Go-Live Date

On February 6 ASA, along with the National Association of Independent Fee Appraisers (NAIFA), sent a letter to the Appraisal Subcommittee (ASC) urging them to delay the planned March 29th implementation of the national appraisal complaint hotline, as required by the Dodd-Frank Act.

In pushing for the delay, ASA and NAIFA pointed to several issues regarding the hotline’s formation:

• That the hotline was created in a closed process, without adequate stakeholder exposure or input;
• The hotline, as proposed, violates Congress’s intent and the clear language of Dodd-Frank;
• The hotline has morphed from a tool for appraisers to report instances of undue influence into a “catch-all” tool where anyone can file a complaint against an appraiser for any alleged violation of USPAP, regardless of whether it is legitimate; and,
• The open-ended cipher design of the hotline will greatly increase the volume of complaints against appraisers, impose undue, excessive burdens on them and on state appraiser licensing agencies, and possibly gum up the mortgage loan processing system. Ironically, the open-ended hotline is likely to increase pressure on appraisers to come up with market values that will make a mortgage transaction appear to be safely collateralized.

On February 7, government relations representatives for ASA and NAIFA met with Jim Park, Executive Director of ASC, along with senior staff, to further discuss the letter’s contents and to request an opportunity for the two organizations to be heard by the full ASC board.

You can read the full letter sent to the ASC by clicking here. 

Scott A. Austin, IFA sent along these excerpts: 

The bottom line: 

“What is almost certain to happen – if the hotline website and system permit complaints involving alleged violations of any and all USPAP provisions – is an influx of large numbers of complaints that are spurious or fundamentally mistaken – complaints which will, nevertheless, raise questions about the professionalism of the appraiser complained against, occupy his or her time and attention and force state or federal agencies to review them. These are likely, but very unwelcome, outcomes that
the ASC should want to avoid..."

“While our organizations strongly support the hotline system for the purpose intended by Congress, we do not support a complaint system that permits individuals to trigger an investigative process that is unrelated to appraiser independence matters. We also do not support a process which excludes stakeholders from having a say in the implementation of a unique federal program, like the hotline program, which impacts our members in vital ways.  Congress unambiguously intended the hotline to concern itself solely with appraiser independence issues; and the complaint system designed by the agencies should clearly reflect that fact.”

 

The Appraisal Foundation has released two new pamphlets benefitting consumers and lenders.

The Appraisal Foundation has released two new pamphlets benefitting consumers and lenders.

"A Guide to Understanding a Residential Appraisal" was developed specifically for consumers.   This pamphlet provides consumers an overview of the residential appraisal and how it relates to the home buying process.  

LINK:  https://appraisalfoundation.sharefile.com/d/scfe7be1162c4358b

 "Appraisers, Appraisals & You: A Lender’s Guide to USPAP" was developed for lenders working in the loan underwriting process. This pamphlet provides insight to lenders in working with appraisers as well as an overview of the entire appraisal process. 

LINK:  https://appraisalfoundation.sharefile.com/d/s5d634c9fee34c6da

For more information please contact Paula Douglas Seidel ([email protected]).

Agencies Issue Proposed Rule on Appraisals for Higher-Risk Mortgages

WASHINGTON— Six federal financial regulatory agencies today issued a proposed rule to establish new appraisal requirements for “higher-risk mortgage loans.”  The proposed rule would implement amendments to the Truth in Lending Act enacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Under the Dodd-Frank Act, mortgage loans are higher-risk if they are secured by a consumer’s home and have interest rates above a certain threshold.

Download HRM_Joint_Proposed_Rule-Signed

For higher-risk mortgage loans, the proposed rule would require creditors to use a licensed or certified appraiser who prepares a written report based on a physical inspection of the interior of the property. The proposed rule also would require creditors to disclose to applicants information about the purpose of the appraisal and provide consumers with a free copy of any appraisal report.

Creditors would have to obtain an additional appraisal at no cost to the consumer for a home-purchase higher-risk mortgage loan if the seller acquired the property for a lower price during the past six months. This requirement would address fraudulent property flipping by seeking to ensure that the value of the property being used as collateral for the loan legitimately increased.

The proposed rule is being issued by the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency.

The Federal Register notice is attached. The agencies are seeking comments from the public on all aspects of the proposal. The public will have 60 days, or until October 15, 2012, to review and comment on most of the proposal. However, comments related to the proposed Paperwork Reduction Act analysis will be due 60 days after the rule is published in the Federal Register. Publication of the proposal in the Federal Register is expected shortly. 

Download HRM_Joint_Proposed_Rule-Signed

Could Appraiser Shortage Mean Rising Costs to Borrowers?

Re-blogged with permission from Elizabeth Ecker Published in News, Reverse Mortgage

One component of the reverse mortgage—and general mortgage—business seems to be shrinking fast, in spite of rising demand: Appraisers.

Once a booming business, many appraisers left the industry upon the housing crash, never to reenter the market. More generally, though, changes including new regulations have led to a decline in qualified appraisers at a time when borrowers are starting to need their services increasingly once again.

“A lot of appraisers left when business volume tanked and many were frustrated with AMCs that offered very low fees,” says Erik Richard, CEO of Landmark Network. “Appraisers are an aging population and then couple that with the difficulty there is now in becoming an appraiser, and the number of appraisers are way down.”

 Today’s regulations require appraisers in training to partner with a working, certified appraiser in a sort of apprenticeship role. Historically, that process allowed a new appraiser to get the right education while logging a set number of hours before applying for a full license.

Under the arrangement, trainees were able to complete appraisals with the certified appraiser, essentially co-signing the report. But today, there are fewer certified appraisers and more importantly, very few will bring on trainees. Exacerbating the problem, few financial institutions will accept work done by a trainee.

“It really is the perfect storm when you add the rise of loan applications and the stabilization of home values in many markets,” Richard says.

Further, the industry is having a hard time recruiting new people.

“The appraisal industry is in a dire situation,” says Brian Coester, CEO of Coester VMS. “New appraisers are not coming in and old appraisers are getting out.”

“The problem is exacerbated by the inability to attract the next generation of appraisers to the profession,” wrote Michael Kleber-Diggs of Vesta Valuation in a January article in online publication Appraisal Buzz.

 

   

Source: The Appraisal Institute

With the market for appraisals beginning to show an uptick through homeowners refinancing under The Home Affordable Refinance Program (HARP) II, as well as values beginning to drive sales again in a few select areas of the country, the shortage is actually leading to longer turn times for getting an appraisal.

“A lot of appraisers that are strapped and are busy,” says Davide Stroop of Mortgage Information Services. “They’re pushing their turnaround times out a bit. Normally, we’d find another appraiser to take care of the overflow, but that’s where we’re seeing the reduction. There are not as many who are able to take that work on today. Turnaround times haven’t been impacted that greatly, but where’s the next wave of appraisers coming from? Where are they?”

Looking ahead, the lack of supply and growing demand could also lead to rising costs to borrowers. In some markets this is already the case, AMCs say.

“Appraisals will cost a lot more,” Coester says, as a result of the supply and demand. “Borrowers have a big enough problem paying for appraisals now in the reverse mortgage space.”

Written by Elizabeth Ecker - Click here to see the original article

Viability of the Appraisal Profession - Guest Post by David Towne

GUEST AUTHOR: Dave Towne, Certified Real Estate Appraiser - Towne Appraisals. 16422 Britt Rd., Mount Vernon, WA Phone: 360.708.1196 eMail: [email protected] Web: http://www.TowneAppraisals.com

Appraisers……

Those of you who desire to ‘read the minds’ of those players with direct bearing on appraisers will want to read the latest TAVMA newsletter. TAVMA is the Title/Appraisal Vendor Management Association – a trade organization now with diminished membership (only 27 + 5 affiliates) from its heyday in the mid-2000’s.

http://www.tavma.org/Articles_NEW/TAV_NL_Spring12.pdf

The lead article is written by Jeff Schurman who use to be the Executive Director of TAVMA. While in that position, he often wrote articles not very complimentary to appraisers or to the plight we have in being paid fairly. At the time, he advocated the AMC ‘wholesale price’ model in paying appraisers, and lobbied against AMC regulation at the state level.

Now, he’s beginning to question that model and the viability of the appraisal profession.

Mr. Schurman has his own consulting business (associated with TAVMA), and has a Blog in which he writes about mortgage lending issues. http://www.mortgagethirdpartyriskblog.com/

In an entry on April 10, 2012 he states this:

“The current environment is not conducive to attracting large numbers of young professionals into the appraisal business. I doubt anyone would seriously dispute this claim. So if the appraiser population continues to decline it will one day dip below the relevancy quotient.”

That brings me to the AQB. While many appraisers were sleeping, or sitting on their thumbs, the AQB instituted new ‘requirements’ for a person to qualify to become a Certified Real Estate Appraiser – either Residential or General (Commercial). Existing state certified (licensed) appraisers will be grandfathered, but effective Jan. 2015, an applicant for Certification will have to have a 4 year college degree.

In practical application, due to time-in-grade requirements as a trainee, an applicant will have to have a 4 year degree by December 2013, otherwise will not qualify to become a certified appraiser.

The ‘licensed’ category does not have such stringent requirements, but FHA and many lenders WILL NOT USE a ‘licensed’ appraiser. Some states are moving away from, or have eliminated, the ‘licensed’ category.

Are there those among you who really believe a 4 year college degree is absolutely necessary to appraise a residential property? The fallacy of that argument is that somehow a sheepskin equates to quality work. That’s absolutely wrong. Quality work comes from within the person in terms of their own attitude, ethics and willingness to learn, and has nothing to do with a 4 year degree.

The result of the AQB action, and the AMC model paying lower than ‘real’ fees parallels the concern Mr. Schurman expresses.

These are the real threats to the appraisal profession viability long term, not the UAD process instituted by Fannie/Freddie or report data acquisition that I see so often expressed.

 

GUEST AUTHOR: Dave Towne, Certified Real Estate Appraiser - Towne Appraisals. 16422 Britt Rd., Mount Vernon, WA Phone: 360.708.1196 eMail: [email protected] Web: http://www.TowneAppraisals.com

PR: American Guild of Appraisers Petitions Federal Reserve Board and Consumer Financial Protection Bureau to Overturn Regulation that Threatens Viability of Professional Appraisal Practice

WASHINGTON, Feb. 23, 2012 /PRNewswire via COMTEX/ -- 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), has petitioned the Federal Reserve Board ("Fed") and the Consumer Financial Protection Bureau to overturn a regulation adopted by the Fed that is contrary to the Dodd Frank Financial Reform law, threatens the viability of professional appraisal practice and undermines the legitimacy of real estate appraisals relied on by lenders in making residential mortgage loans.

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 appraisers 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. Responding to evidence that appraisal management companies 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.

Last year the Fed adopted a rule that allows appraisal management companies that control up to 80 percent of residential appraisals to pay appraisers a fraction of what a customary and reasonable fee would be as defined in the law, sometimes as much as 50 percent or more below the prevailing rates. As a result, industry experts report, the problems that Congress sought to address have been exacerbated. And the reliability of residential real estate appraisals is once again subject to question.

Peter Vidi, President of the American Guild of Appraisers explained, "Under the regulation we are seeking to overturn, the borrower doesn't save a penny but the appraiser gets a fee that is as much as 50 percent less than prevailing rates. 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 goes to the appraisal management company. AMC's are often owned or controlled by lenders that 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."

Vidi and many other leaders in the appraisal profession believe that the practices of appraisal management companies are threatening the reliability of appraisals to the detriment of borrowers and taxpayers. Vidi noted, "In addition to paying low fees, appraisal management firms are pressuring appraisers to meet unreasonable deadlines and often condition work on an appraiser's willingness to cooperate in ways that compromise the integrity of the appraisal process."

Vidi continued, "Most licensed and certified appraisers are hard working, competent and honest, and under the current circumstances, many are choosing to leave the profession. Those who remain are having to take on too many assignments just to earn a living and are dependent on the appraisal management companies that control the business."

The petition was filed on behalf of the American Guild of Appraisers by lawyers, Matt Schneider and Ben Lambiotte of the law firm, Garvey Schubert Barer. Schneider commented, "We believe that the Guild has a strong legal case that the Fed has violated the Dodd Frank law. We are hopeful that the Fed and the new Consumer Financial Protection Bureau, which is specifically charged with protecting the interests of consumers in financial transactions will reexamine this rule and make the changes necessary to carry out the intent of the law."

The petition also asserts that the Fed failed to comply with the law by not providing an opportunity for public comment on the proposed rule. In fact, after the rule was adopted, more than 1,400 comments were received by the Fed in response to the rule. Schneider claims that the Fed was obligated under the Administrative Procedure Act, to provide notice and opportunity for comment prior to adoption of the rule and that the Fed was further required to consider and address comments submitted as part of the rulemaking process.

Vidi noted that he has no illusions that getting this problem fixed will be easy. Vidi said, "For the appraisal management companies and their owners there is well over $100 million annually at stake. For the taxpayer who is left holding the bag when bad lending leads to defaults and for the borrower who often overpays for a home, this is a serious matter. For real estate appraisers, this one of several related issues that will determine the future of the appraisal profession."

While expressing hope that the petition will be successful, Vidi acknowledged that if the Fed and the CFPB don't do the right thing, litigation may be the only alternative. Vidi said, "Suing the Federal Reserve is not something that the appraisal industry would do lightly, but there may be no other option. 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. We ask all appraisers to join with us in this effort."

OPEIU International President Michael Goodwin said that OPEIU and 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."

ABOUT THE AMERICAN GUILD OF APPRAISERS/OPEIU GUILD 44The 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.

ABOUT OPEIUThe Office and Professional Employees International Union represents more than 108,000 members 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)

Copyright (C) 2012 PR Newswire. All rights reserved

Pennsylvania Gov. Tom Corbett signs AMC legislation

Originally posted by Kim Shindle On February 3, 2012 @ 6:00 am In Association News,Government Affairs- http://www.PARJustListed.com

Appraisal management companies will now be regulated in Pennsylvania, thanks to legislation signed by Gov. Tom Corbett on Thursday.

House Bill 398 [1] (Stevenson) requires appraisal management companies to be registered with the State Board of Certified Real Estate Appraisers. Pennsylvania is the 30th state to pass such legislation.

More appraisal management companies appeared throughout the country, as a result of the Home Valuation Code of Conduct [2] (HVCC). The Home Valuation Code of Conduct originated from a settlement among New York Attorney General Andrew Cuomo, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac. While the HVCC was sunset, the issue of unregulated appraisal management companies remained.

“We believe this legislation is important to protect homebuyers in the Commonwealth,” said PAR President Frank Jacovini. “Research initially showed after the Home Valuation Code of Conduct was enacted, consumers were paying higher fees for appraisals that were frequently inaccurate and misrepresented the value of the property. We also saw closings being delayed as a result.”

The new law will create a level playing field for AMCs and appraisers. Appraisal management companies will now be required to work within the nationally sanctioned Uniform Standards of Professional Appraisal Practice (USPAP) [3] .

“Thanks to a collaborative group of all stakeholders providing input into this bill, this new legislation provides protection for consumers and industry participants alike,” according to Michelle Bradley, chair of PAR’s Appraisal Management Company Task Force. “Those who own or operate AMCs will be accountable to industry standards and state regulation.”

The new legislation also:

• Implements a registration and renewal fee of $1,000
• Implements a $20,000 bond or letter of credit to secure the faithful performance
• Requires all appraisal reviews to be conducted by a certified or licensed appraiser
• Requires AMCs to adopt Uniform Standards of Professional Appraisal Practice (USPAP) recordkeeping rules.

About Kim Shindle: Kim Shindle is the Manager of Media Relations at the Pennsylvania Association of Realtors®.

SPECIAL THANKS to Paul Faeder of Keystone Realty and Appraisal Service Inc. of Bushkill, PA for sending this to Appraisal Scoop!

American Guild of Appraisers Files Request with Federal Reserve Board Seeking Documents Related to Regulations on Customary and Reasonable Compensation of Fee Appraisers

WASHINGTON, Jan. 23, 2012 /PRNewswire-USNewswire/ -- On behalf of the American Guild of Appraisers, today the law firm Garvey Schubert Barer filed a request with the Federal Reserve Board under the Freedom of Information Act seeking a wide variety of documents related to the regulations on customary and reasonable compensation of fee appraisers that were issued by the Board in October 2011. 

In announcing this action, Guild President Peter Vidi said, "It is clear that appraisal management companies have interpreted rules issued by the Fed as permitting practices that result in real estate appraisers being compensated at levels that are far below 'reasonable and customary fees' as required in the Dodd Frank Law.  We want to learn whether the Fed intended this result and if so why."

Vidi continued, "we hope that these documents will shed light on why the Board chose to create two conflicting 'safe harbors' for compliance with these regulations, one of which permits Appraisal Management Companies to rely upon the considerably lower rates that they themselves pay appraisers in determining what compensation is considered 'customary and reasonable' in direct violation of the Dodd Frank law.  To this end, we have asked for all internal and external correspondence related to their development of these regulations, as well as documents such as meeting records, studies, reports and other information considered by the Board in the development of the regulations."

The formal request under the Freedom of Information Act seeks all documents that chronicle any consideration given by the Board, after having issued the regulations, to the public comments submitted to them, many of which pointed out the problems created by the safe harbor provisions, as well as to any follow-up actions that might be taken to correct these problems.   "We are hopeful that these documents will allow us to better understand the seriousness with which these issues have been considered and the potential for future corrective action," Vidi noted.

The Guild previously announced that it had retained a law firm to explore all avenues including possible litigation to correct a regulation that is in violation of the Dodd Frank law.  The FOIA request is a next step in determining the best means to get the problem resolved.  

This reduction in fees to appraisers of up to 50 percent and amounting to more than $100 million according to industry experts, does not result in any savings for homebuyers because the appraisal management firms have not reduced fees charged to lenders and passed on to borrowers.  Instead, according to Vidi, the quality and reliability of appraisals is being degraded and many competent appraisers are leaving the profession.  "The appraisal fee provisions in Dodd Frank were intended to ensure the independence of appraisers and the integrity of the appraisal process.  Simply put, this is not what is happening," Vidi said. 

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.

ABOUT OPEIU
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)

Read more: http://www.digitaljournal.com/pr/558017#ixzz1lLjkamwj

GAO Recommendation: Appraisal Subcommittee Needs to Improve Monitoring Procedures

Why GAO Did This Study

Real estate appraisals have come under increased scrutiny in the wake of the recent mortgage crisis. Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 created an oversight structure for appraisals and appraisers that involves state, federal, and private entities. This structure includes ASC, a federal agency responsible for monitoring these entities’ Title XI-related activities. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) expanded ASC’s Title XI role and required GAO to examine ASC’s activities and exemptions to federal appraisal requirements. This report discusses (1) how ASC is carrying out its original Title XI responsibilities, (2) ASC’s actions and plans to implement Dodd-Frank Act provisions, and (3) regulatory dollar thresholds for determining when an appraisal is required. To do this work, GAO reviewed ASC records and reports, surveyed state appraiser regulatory agencies, analyzed government mortgage data, and interviewed industry stakeholders.

Full Report:  GAO-12-147 Click Here

What GAO Found

The Appraisal Subcommittee (ASC) has been performing its monitoring role under Title XI, but several weaknesses have potentially limited its effectiveness. For example, Title XI did not originally provide ASC rulemaking and enforcement tools that could be useful in promoting state compliance. In addition, ASC has not reported or clearly defined the criteria it uses to assess states’ overall compliance levels. Title XI charges ASC with monitoring the appraisal requirements of the federal financial institutions regulators, but ASC has not defined the scope of this function—for example, by developing policies and procedures—and its monitoring activities have been limited. ASC also lacks specific policies for determining whether activities of the Appraisal Foundation (a private nonprofit organization that sets criteria for appraisals and appraisers) that are funded by ASC grants are Title XI-related. Not having appropriate policies and procedures is inconsistent with federal internal control standards designed to promote effectiveness and efficiency and limits the accountability and transparency of ASC’s activities.

ASC faces potential resource and planning challenges in implementing some Dodd-Frank Act provisions. ASC has only 10 staff and is funded by appraiser registration fees that totaled $2.8 million in fiscal year 2010. The Dodd-Frank Act expands ASC’s responsibilities and authorities.

For example, the act requires ASC to establish a national appraiser complaint hotline and provide grants to state appraiser regulatory agencies, and it gives ASC limited rulemaking and enhanced enforcement authorities to help address prior weaknesses.

As of October 2011, ASC had completed several implementation tasks that required no rulemaking or creation of new programs and was in various stages of progress on the others. The potentially resource-intensive nature of some remaining tasks will require careful planning. For example, operating a complaint hotline may require investments in information technology and the creation of screening and follow-up procedures. Also, implementing a grant program will require ASC to set aside funds, develop funding criteria, and oversee grantees. ASC is in the process of developing a strategic plan to help carry out these efforts with available resources.

GAO found that more than 70 percent of residential mortgages made from 2006 through 2009 were $250,000 or less—the regulatory threshold at or below which appraisals are not required for transactions involving federally regulated lenders. In recent years, however, the threshold has had a limited impact on the proportion of mortgages with appraisals because mortgage investors and insurers such as Fannie Mae, Freddie Mac, and the Federal Housing Administration have generally required appraisals for mortgages both above and below the threshold.

While these entities currently dominate the mortgage market, federal plans to scale them back could lead to a more privatized market, and whether this market would impose similar requirements is not known. None of the appraisal industry stakeholders GAO spoke with argued for increasing the threshold. Some stakeholders said the threshold should be lowered or eliminated, citing potential benefits to risk management and consumer protection.

Others noted potential downsides to lowering the threshold, such as requiring more borrowers to pay appraisal fees and requiring appraisals on more transactions for which cheaper and quicker valuation methods may be sufficient.

What GAO Recommends

To help ensure effective implementation of ASC’s original Title XI and additional Dodd-Frank Act responsibilities, ASC should clarify and report the criteria it uses to assess states’ overall compliance with Title XI and develop specific policies and procedures for its other monitoring functions. GAO provided a draft of this report to ASC and seven other agencies. ASC and two other agencies agreed with the report’s recommendations. One agency did not comment on the recommendations, and the others did not provide written comments

SOURCE: GAO-12-147 - January 18, 2012

American Guild of Appraisers Fights to Overturn Federal Regulations that Dramatically Cut Fees and Threaten Profession

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.

ABOUT OPEIU
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)

RELATED LINKS
http://www.opeiu.org

Article Source: WASHINGTON, Nov. 7, 2011 /PRNewswire-USNewswire/