Appraisal Scoop

Agencies Issue Proposed Rule to Exempt Subset of Higher-Priced Mortgage Loans from Appraisal Requirements

WASHINGTON— Six federal financial regulatory agencies today issued a proposed rule that would create exemptions from certain appraisal requirements for a subset of higher-priced mortgage loans. The proposed exemptions are intended to save borrowers time and money and to promote the safety and soundness of creditors. The appraisal requirements for higher-priced mortgages were imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

Under the Dodd-Frank Act, mortgage loans are considered to be higher-priced if they are secured by a consumer's home and have interest rates above a certain threshold.

The proposed rule would provide that the following three types of higher-priced mortgage loans would be exempt from the Dodd-Frank Act appraisal requirements:

• loans of $25,000 or less; 
• certain "streamlined" refinancings; and 
• certain loans secured by manufactured housing.

In January 2013, a final rule implementing the new Dodd-Frank Act appraisal requirements was issued by the Federal Reserve Board, 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. Compliance with the final rule will become mandatory on January 18, 2014. These same agencies are jointly issuing the proposed rule on additional exemptions in response to public comments previously received.

The Federal Register notice is attached. The agencies are seeking comments from the public on all aspects of the proposal. The public will have until September 9, 2013, 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.

Attachment: Proposed Rule on Higher-Priced Mortgages - PDF (PDF Help)

 

Survey Finds: Dodd-Frank Appraisal Requirements Putting Strain on LO Annual Income

"The 2012 Loan Originator Survey has been released by Mortgage Daily, providing insight into issues impacting mortgage loan officers. The survey was sponsored by StreetLinks Lender Solutions and co-sponsored by Champions School of Real Estate."

"According to survey finsings, nearly 60 percent of the originators who participated in the survey indicated they earn at least $100,000 annually. Many said that they would have earned more if it weren't for the Dodd-Frank Act—though a small share has actually profited from the law. Appraisal requirements appear to be putting an even bigger dent in income." 

 Click here for the complete article on National Mortgage Professional.

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.”

 

Consumer Financial Protection Bureau adopts rule to improve consumer access to appraisal reports

Rule gives consumers additional rights to information on how a home value is determined

WASHINGTON, D.C. — Today (1/18/2013) the Consumer Financial Protection Bureau (CFPB) adopted a new rule that requires mortgage lenders to provide applicants with free copies of all appraisals and other home-value estimates. The rule will ensure that consumers can receive information prior to closing about how the property’s value was determined.

“This rule will guarantee consumers can receive important information on how a lender determines the value of the home,” said CFPB Director Richard Cordray. “Having this information available promptly makes it easier for loan applicants to make informed decisions.”

Appraisals and other estimates of a home’s value are generally used by mortgage lenders to inform their decisions. Consumers are typically charged for the costs related to conducting an appraisal; however, currently the law does not require that consumers receive a copy of the appraisal unless they request it and does not require that consumers receive a copy of any other estimates of the home’s value.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that lenders give consumers a copy of each appraisal or other estimate free of charge although a lender generally may still charge the consumer a reasonable fee for the cost  of  conducting the appraisal or other estimate. The Bureau’s new rule implements these requirements.

Today’s rule also requires that creditors inform consumers within three days of receiving an application for a loan of their right to receive copy of all appraisals.  Creditors will then be required to provide the copies of appraisal reports and other written home-value estimates to consumers promptly, or three days before closing, whichever is earlier.  The new rule will go into effect in January 2014 and will apply to first-lien mortgages.

The final rule is available at: http://www.consumerfinance.gov/regulations/disclosure-and-delivery-requirements-for-copies-of-appraisals-and-other-written-valuations-under-the-equal-credit-opportunity-act-regulation-b/

A summary of the CFPB’s rule is available at: http://files.consumerfinance.gov/f/201301_cfpb_ecoa-appraisals-rule_summary.pdf

Today, in partnership with several other federal regulatory agencies, the Bureau is also adopting a new rule that establishes special requirements concerning appraisals for higher-priced mortgage loans. The new rule creates an additional level of due diligence by requiring that creditors use a licensed or certified appraiser to prepare the written appraisal report based on a physical inspection of the property. The rule also requires creditors to disclose to applicants information about the purpose of the appraisal and provide consumers with a free copy of any appraisal report.

The interagency higher-priced appraisals rule for higher-priced mortgage loans is available at: http://www.consumerfinance.gov/pressreleases/agencies-issue-final-rule-on-appraisals-for-higher-priced-mortgage-loans/

A summary of the interagency rule is available at: http://files.consumerfinance.gov/f/201301_cfpb_tila-appraisals-rule_summary.pdf

Consumer Financial Protection Bureau proposes rule to improve consumer access to appraisal reports

Rule would give consumers additional rights to information on how a home value is determined

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) released a proposed rule that would require mortgage lenders to provide home loan applicants with copies of written appraisals and other home value estimates developed in connection with the application. The rule would ensure that consumers receive information prior to closing about how the property’s value was determined.

“When looking to buy a home or refinance a mortgage, consumers need the best available facts and data,” said CFPB Director Richard Cordray. “This rule would guarantee consumers receive important disclosures on how a lender determines the value of the home, making it easier for loan applicants to make informed decisions.”

In response to the mortgage crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that creditors provide mortgage applicants with a copy of written appraisals and home value estimates developed in connection with the application.  Today’s proposed rule would require that creditors inform consumers within three days of applying for a loan of their right to receive a free copy of appraisal reports and home value estimates. Creditors would then be required to provide the reports to consumers as promptly as possible, but in no case later than three days before closing, regardless of whether credit is extended, denied, incomplete or withdrawn.

Appraisals and other home value estimates are used by creditors to inform lending decisions for most home sales. Consumers are typically charged for the costs related to conducting an appraisal; however, currently consumers must request appraisal reports from creditors and may be charged a fee to obtain the report.  Under the proposed rule, creditors could still charge reasonable fees associated with conducting appraisals and home value estimates; however, the rule would prohibit creditors from charging consumers fees for obtaining the reports.

The proposed rule would amend the Equal Credit Opportunity Act (ECOA)’s Regulation B, which require certain disclosures and prohibits lenders from discriminating on the basis of race, national origin, sex, or other protected bases. Under the Dodd-Frank Act, the Bureau is authorized to issue regulations implementing ECOA and supervise compliance with ECOA and Regulation B for certain lenders.

The CFPB welcomes comments on the proposed rule. The public will have 60 days, or until October 15, 2012 to review and provide comments on the proposed rule. The CFPB will review and analyze the comments before issuing a final rule in January 2013.

The CFPB’s proposed rule is available at: http://files.consumerfinance.gov/f/201208_cfpb_ECOA_proposed_rule.pdf

A summary of the CFPB’s proposed rule is available at: http:://files.consumerfinance.gov/f/201208_cfpb_ECOA_plain_language_summary.pdf

The proposed rule can be found here: http://files.consumerfinance.gov/f/201208_cfpb_ECOA_proposed_rule.pdf

This is one of several rulemakings governing mortgage practices currently underway at the Bureau in order to implement requirements of the Dodd-Frank Act. Today, in partnership with several other federal regulatory agencies, the Bureau is also issuing a proposed rule to establish special requirements concerning appraisals for higher-risk mortgage loans, which would require creditors to use a licensed or certified appraiser to prepare the written appraisal report based on a physical inspection of the property.

The interagency proposed rule is available at: http://files.consumerfinance.gov/f/201208_cfpb_HRM_proposed_rule.pdf

A summary of the interagency proposed rule is available at: http://files.consumerfinance.gov/f/201208_cfpb_HRM_plain_language_summary.pdf

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

GAO Report Scrutinizes Appraisal Processes - Appraisal Institute

Fed Report Scrutinizes Appraisal Processes

 

Source: Appraisal Institutue

The Government Accountability Office released a report June 28 that scrutinized real estate valuations in the wake of the recent mortgage crisis. The report, Residential Appraisals Regulators Should Take Actions to Strengthen Appraisal Oversight, was produced using data from Fannie Mae, Freddie Mac and five of the biggest mortgage lenders.

The report revealed that valuations received through broker price opinions and automated valuation models take less time and are less costly than traditional appraisal reports, but traditional appraisal reports are still mandated for almost all first-lien residential loan originations due to their greater reliability

Almost all appraisal reports utilize the sales comparison approach, which bases the property value on recent sales of similar properties. Fannie, Freddie and the Federal Housing Administration all require the use of comparable properties in appraisals.  

The report noted that appraisal management companies are becoming more prominent because of regulations that prevent conflicts of interest in the appraiser selection process. However, the expanded use of AMCs has caused doubt about their oversight and impact on appraisal quality — namely that they give higher priority to low cost and speed than quality and competence.

Federal regulators and Fannie and Freddie claim that they hold lenders responsible for ensuring that AMCs’ policies and practices meet their requirements; however, lenders typically don’t directly review the operations of the AMCs they use.

The Dodd-Frank Act requires state appraisal licensing boards to supervise AMCs. The law also mandates that federal banking regulators, the Federal Housing Finance Agency and the Consumer Financial Protection Bureau create minimum standards for states to apply in registering AMCs. However, the GAO indicated that federal regulators had yet to finish rulemaking to establish state standards.

Dodd-Frank broadened the role of the Appraisal Subcommittee, which oversees state appraiser regulatory programs, monitors requirements relating to appraisal standards for federal financial institutions, maintains a National Registry of state-certified and licensed appraisers and monitors and reviews operations of the Appraisal Foundation.

However, the ASC has been restricted in meeting its responsibilities under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the report noted.

“For example, ASC has not clearly defined the criteria it uses to assess states’ overall compliance with Title XI,” the report stated. “In addition, Title XI charges ASC with monitoring the appraisal requirements of the federal banking 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.”

SOURCE: Appraisal Institute

20 Benefits of the Full-Fee Appraisal Management Company (AMC) Model

AUTHOR: Jeff Schurman is the executive director of Leading Causes LLC ( www.leadingcauses.com ), a leadership and business development advisory firm that helps mortgage lenders and third-party service providers to assess strategic, operations, reputation, reporting, and compliance risks that accompany sourcing of real estate mortgage settlement services. He is the editor of the Mortgage Third Party Risk Blog (www.mortgagethirdpartyriskblog.com ), and the former executive director of the Title Appraisal Vendor Management Association.

From Jeff Schurman's white paper:  Download The AMC Full-Fee Hypothesis - Jeff Schurman

"In this section, we propose that there are at least 20 self-serving benefits to the AMC industry by paying appraisers their full-retail fees. We rely extensively on research we and others have conducted, our extensive combined interactions with appraisers and AMC industry leaders, and basic economic principles, chief among them supply and demand. Most of our observations are grounded in free market behaviors among buyers and sellers of settlement services. Significantly, much of the rationale is grounded in the discipline generally known as systems thinking."

Paying appraisers their full (or retail) fees…

1. Removes the single-largest barrier to acceptance of AMC as legitimate business partners.

2. Increases the supply of appraisers willing to work with AMCs.

3. Encourages new appraisers to enter the appraisal profession.

4. Leads to better control of appraisal quality.

5. Lowers costs for recruiting, quality control, and rework.

6. Enables AMCs to gain market share.

7. Provides AMCs rationale to charge lenders for the actual value the AMC brings to the transaction.

8. Enables AMCs to provide clients quantifiable means with which to compare AMC alternatives.

9. Reduces third-party risks described in numerous FFIEC Financial Institution Letters and agency guidelines.

10. Promotes less contentious treatment of AMCs.

11. Takes the subjective “customary and reasonable” fee requirement in the Dodd-Frank bill off the table.

12. Paves the way for nationalizing AMC regulation.

13. Provides clients better overall service quality.

14. Preempts external efforts of factions to force AMCs to pay up.

15. Is the most ethical thing to do in a fair and equitable society.

16. Allows for significantly improved vendor relations between the AMC and the appraiser.

17. Reduces the risk that disgruntled appraisers will draw the attention of federal regulators.

18. Provides joint marketing opportunities because appraisers will see the AMC as worth promoting.

19. Opens the door to a better borrower experience because the appraiser doesn’t enter the home angry.

20. Opens the door for joint publicity efforts because appraisers will feel like partners.

 

 Download The AMC Full-Fee Hypothesis - Jeff Schurman

Appraisal and AMC Fees Separated on Revised Settlement Forms

The Consumer Financial Protection Bureau released the second proposed version of a new Consumer Disclosure Form Feb. 1 that includes clear disclosure of any fee paid to a “Local Appraisal Company” and to an “Appraisal Management Company.” 

The Appraisal Institute reported last month that the CFPB is in the midst of developing a new form that would replace the existing HUD-1 settlement statement. In December 2011, Appraisal Institute representatives met with CFPB officials about the new form.

The CFPB has indicated that several versions of the proposed form will be developed and tested with consumers by focus groups, with a proposed rule to be released this summer.

Click Here to read the complete article at the Appraisal Institute's Opinions of Value site.

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