Appraisal Scoop

U.S. Senate Candidate FINALLY Pays 2005 Residential Appraisal Fee

Mass. GOP Senate candidate pays 2005 appraisal fee by Steve LeBlanc Associated Press / May 16, 2013

BOSTON (AP) — Republican U.S. Senate candidate Gabriel Gomez said he has paid an eight-year-old, $1,000 bill for an appraisal on his Cohasset home, even as he again called on Democratic challenger Edward Markey to release his tax returns.

Gomez paid the fee Thursday, after The Boston Globe reported that the appraiser had filed a claim against Gomez in small claims court.

‘‘I'm surprised to hear this $1,000 bill after eight years,’’ Gomez told reporters during a campaign stop in Quincy on Thursday. ‘‘Quite frankly, I don’t even recall the bill.’’

The appraiser said Gomez hired him in 2005 to help determine how much he could deduct from his federal tax return in exchange for agreeing not to make alterations on the facade of the historic home.

Gomez reportedly declined to pay the fee after receiving a more generous evaluation from another appraiser. Democrats have criticized the $281,000 tax break, saying local bylaws already prevented Gomez from changing the facade of the house. 

Read the complete story - click here

A Comprehensive Blueprint for Residential Appraisal Reform - And the Winner Is?

 

GUEST AUTHOR:  Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at [email protected]  Look for the Outside The Boxes category for a collection of Patrick's articles on Appraisal Scoop!

 

For years, Joan Trice via her Collateral Risk Network has promoted the concept of improving the appraisal process. Recently, Joan participated in a whitepaper with the National Association of Homebuilders (NAHB) entitled “A Comprehensive Blueprint for Residential Appraisal Reform”.

Among the findings and recommendations were:

• Streamlining the process (including USPAP) and ensuring effective oversight and enforcement
• Creation of a national real estate data superhighway accessible to all
• Better education and credentialing for appraisers
• Establishing consistent rules, guidelines and standards for appraisers
• Developing procedures to address faulty appraisals

The other day in the Appraisal Buzz, Joan invited appraisers to participate in “improving the appraisal process”. She wants our thoughts, ideas and anything we feel will make a difference and improve the appraisal process.  Regardless of whether or not you agree, or disagree with her direction, you have to respect her effort.

Leading means doing what needs to be done and Joan is leading. She took time and made the effort to assemble movers and shakers along with “inside the beltway folks” that are in a position to reshape the appraisal process. She also has the attention of the NAHB, and the “Collateral Risk Network”, a 300 person “members only” group of chief appraisers, regulators and industry experts, who (according to the article) “are focused on resolving the many challenges facing our profession”.

To that end, I wanted to make some observations and give Joan some thoughts on the appraisal process and ways I think we could make it more effective for appraisers and those that rely on appraisal services. I hope that each of you will do the same.

Definition of the Problem

In my opinion, the form and the process could be improved.  However, I do not believe it is the form or the process that stands as an impediment to a healthy housing market. When you examine what is wrong with housing and the system, changing the appraisal form is not going to fix the problem.

While USPAP has been adopted by the users of appraisal services, its underlying tenets and fundamentals have not been intergraded into the lending system that appraisals support or into the mindsets of those that use or rely on appraisal services. Therein is the problem. 

We are required to develop opinions “objectively” within USPAP compliance. At the same time, those wanting to “make a deal”, often want us to view the value opinion from outside USPAP or lending guidelines. When we do not, we are the problem and we are the ones impeding “housing’s recovery”.
despite the obvious.

Lenders and users of the appraisal have different motivations from those providing appraisal services.  The appraiser does not stand to benefit from the deal. Often the client (lender) or the client’s client (builder, agent, buyer, etc.) does. Appraisers are not incented to come in high or low. We are paid the
same, regardless of the value opinion. We have every incentive to make the deal and avoid the consequences.

On the other hand, builder’s, lenders and other market participants, have skin in the game. They do not earn a commission or a profit if the deal does not close. When the deal is at risk of not closing, due to the value not being there, the debate ensues.

Is it a fair debate, with all parties trying to find the right value for the subject or is it a little one-sided, with some of the participants promoting a value opinion via “their comparables” that, “believe it or not”, supports the deal and a commission earned or profit realized?

Personally, I think USPAP, market value and a long list of appraisal related issues (including the forms), better training, accountability, etc., should be addressed. However, none of this will matter unless we change the system. As long as market participants have a financial incentive to close the deal, any impediment to closing the deal, will be considered counter-productive and will come under attack.

We have changed the form and the appraisal process many times over my 40+/- years in the business. Tell me, what has changed when it comes to users of appraisal services and those that rely on the appraisal, when the appraisal does not close the deal?

Do lenders, agents and builders pat us on the back, saying wow, were glad you came in a little low and saved us from making a high-risk deal? Are they quick to say to their clients, “You should be happy Mr. and Mrs. Smith, that appraiser just saved you from paying too much for the property that I sold you?”

Over the past five plus years, lenders, homebuilders, agents and secondary market investors went out of business and homebuyers lost their homes, when loans did not perform and the effects rippled through our economy. Ask a few simple questions to these same individuals and businesses.

“If you could go back in time, knowing what we now do, would you be willing to pay the appraiser twice as much to hear the truth? Would you give him or her more time complete the assignment, without pressure, and develop a more reliable value opinion? Would you listen to the appraiser and adjust your loan to avoid housing’s collapse? If you could erase the massive loans losses, by merely listening to an objective voice, as opposed to those with skin in the game, would you?”

The appraisal process is not perfect and nor are the appraisers. I have taught nationwide and met 1,000’s of appraisers. Generally, they are good people who do not know what they do not know. This we can fix with better training. On the other hand, you cannot fix an “incentive based” housing market with a new appraisal form.

Real Estate is “Imperfect” ... stop shooting the messenger

Defining the appraisal problem and fixing nit is really quite simple. Real estate is imperfect, as are its participants. There are many sides to “housing”. However, only one side or two sides have adopted a
definition of market value and a set of standards and criteria that must be followed to determine what market value is, the appraisal profession under lending guidelines.

I agree with homebuilders, real estate agents, loan officers, lenders, secondary market participants, investors, property owners, etc., that the appraisal process should be more transparent. However, I
disagree that “changing the appraisal process or forms” will solve the problem or that it is “one step” towards a possible solution.

This country depends on housing. Housing and its related industries are a considerable contribution to the GDP of the US. Over the past decade, we witnessed firsthand, the importance of housing and the financial systems and related industries that support it and our economy.

Everyone was made acutely aware of what happens to the economy when you disregard the measures in place to prevent pressure and unfair advantages. Market participants want a better “appraisal process” and one that is transparent. I for one agree that it should be and they should have it.

To that end, we do not need to change the appraisal process or the forms. We simply need to have the participants adopt the same rules we have. We need all of “housings participants” to play by the same rules, to be governed by the same principles and subject to the same consequences.

We can start by having the National Association of Home Builders, the National Association of Realtors, and others adopt a modified version of USPAP or Dodd Frank that incorporates many value related principles and the same definitions (including value and how it is determined), that we have.

When builders and agents set the price, those prices should be supportable as market value, using the same criteria we have to. Those involved with the sale (that depends on financing), refuse to recognize the rules adopted (USPAP and Appraisal Guidelines) by those that control that same financing.  

We can edit USPAP to make it easier to comprehend and Congress can adopt it as “Federal Law”, (just like the speed limit), that applies to all housing market participants. This way, it is the law of the land and
anyone violating its principles and provisions are now subject to the same consequences.

We can also adopt a “national market value definition” and “criteria” that will be transparent and that all market participants must follow. If we all know the rules, and those same rules and consequences apply
to us equally, there would no longer be an “appraisal problem”.

Closing thoughts

Housing is multi-sided, complex and vital to the economy. Housing depends and financing and financing depends on a transparent and verifiable appraisal process. At the same time, we cannot have one part of housing subject to rules and consequences the other participants are not.

Our tax dollars support Fannie Mae, Freddie Mac, HUD, VA, etc. If we are taking the risks of funding housing, we need to minimize the opportunity for housing to derail, a result of, “unintended consequences”.

If tax dollars support housing, there should be transparency for the process, the data that supports the process and the rules. Remove the privacy laws and give appraisers access to the data in places where they do not have it.  Share knowledge and common goals and all ships rise with the tide.

My suggestion, invite the homebuilders and agents (and anyone else with skin in the game) to be a part of changing the appraisal process. Give them a say and have them take the pledge to promote and support whatever comes out of this process and to force Congress to modify Dodd Frank and make it the law of the land, applicable to all of housing’s “market participants”, equally.

Your opinion matters

Housing’s health is vital to the US economy. Each of us, have a stake in seeing a vibrant housing market. To that end, there are no acceptable reasons for any market participant to have an advantage or any other one to be disadvantaged, as appraisers have been for many years.

Homebuilders and other participants make valid observations. Appraisals often are not consistent and at times, this will cost the builder or consumer. At the same time, it is easy to point a finger from the stands and tell others what must be done, when you do not have to follow the same rules and you are not subject to the same consequences.

Several years ago, in response to the HVCC, Dave Biggers and Alamode collected more than 30,000 signatures in support of sensible changes (as opposed to what was on the table at the time) and forwarded them to Fannie Mae, Freddie Mac, HUD and others. This effort had an impact and the “powers that be” listened. We need to repeat this effort, this time with Joan Trice.

Tell Joan and the CRN the problems you see and share your thoughts as to how they could be and should be addressed, with new regulations, or modifications to existing ones, better forms, systems and accountability for all.

Joan is leading and like or not, industry participants are looking to her for answers.  Let her know
how you feel and give her and the CRN the chance to hear what you have to say. If the NHAB really has a “blueprint for change”, let us make sure to include them and all the others in the plan.

 

GUEST AUTHOR:  Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at [email protected]  Look for the new Outside The Boxes category for a collection of Patrick's articles on Appraisal Scoop!

NCRC Statement on CFPB Appraisal Rules - "Research shows that 90% of appraisals during the height of the period of irresponsible, toxic lending were improperly and illegally influenced by lenders."

Washington, DC – Today, in reaction to the Consumer Financial Protection Bureau’s (CFPB) release of new appraisal rules, NCRC President and CEO John Taylor made the following statement:

“The CFPB’s new appraisal rules promote transparency and fairness for consumers. In a step that NCRC has long called for, all consumers will now receive copies of appraisals and automated valuation model (AVM) reports and will be able to check them for errors. Further, consumers and industry alike will benefit from the use of responsible valuation professionals in high cost loan origination. We are very pleased that the CFPB has taken our recommendations in this area.”

“One of the most overlooked elements of the housing and economic crisis is the role that inflated appraisals played. Research shows that 90% of appraisals during the height of the period of irresponsible, toxic lending were improperly and illegally influenced by lenders. Conversely, since the onset of the crisis home values have been overly deflated. The new disclosure requirements help immensely with both of these problems.”

“In addition to the steps they have taken thus far, the CFPB and the other regulators should undertake additional rulemaking to better regulate the activities of Appraisal Management Companies (AMCs), and to create a true arms length between originators and appraisers, which is already required by law but largely ignored.”

In June of 2012, NCRC Chief Program Officer David Berenbaum testified on appraisal oversight before the United States House of Representatives Committee on Financial Services.

About NCRC

The National Community Reinvestment Coalition is an association of more than 600 community-based organizations that promote access to basic banking services, including credit and savings, to create and sustain affordable housing, job development and vibrant communities for America's working families. To find out more, visit http://www.ncrc.org

Senators Reintroduce Bill to Expand HARP to Homeowners with Equity - Eliminate appraisal costs for all borrowers

Two U.S. Senators have reintroduced a bill which aimed at giving Freddie Mac and Fannie Mae (the GSEs) financed homeowners with equity the some opportunity to refinance as currently enjoyed by homeowners who are underwater.  The Responsible Homeowner Refinancing Act would extend the guidelines and reduced fees available under the Home Affordable Refinance Program (HARP) to homeowners regardless of the loan-to-value (LTV) ratio of their current GSE owned or guaranteed loan.

According to the THOMAS Library of Congress website, the bill was originally introduced on May 10, 2012 and referred to the Senate Banking Committee where it apparently died.  The new version is sponsored by Robert Menendez (D-NJ) and Barbara Boxer (D-CA).

According to its sponsors, the bill would be available to borrowers who are current on their existing GSE owned or guaranteed loans.  It would:

• Remove barriers to competition.
  The lender currently servicing a loan has an advantage over a new lender which faces stricter underwriting criteria and greater risks from the GSEs' reps and warranties should the borrower default.  These different standards have hindered competition, resulting in higher prices and less favorable terms for borrowers.  The proposed legislation would direct the GSEs to require equalize the underwriting and associated reps and warranties between new lenders and current servicers. 
• Guarantee equal access to streamlined refinancing for all GSE borrowers. 
  The revised HARP guidelines continued to distinguish between borrowers with LTVs above 80 percent and those below, leaving higher equity borrowers with greater costs and administrative burdens and effectively locking them out of the program.  The bill will allow all lenders to offer a single, streamlined program to all GSE borrowers who have been paying their loans on time.
• Eliminate up-front fees completely on refinances. 
  Under enhancements to HARP earlier this year, some fees for HARP loans were lowered and others were eliminated completely, creating what the sponsors call an economically indefensible situation in which borrowers with significant equity face steeper costs for refinancing than borrowers with no equity and hence presenting considerably greater risk.  These additional fees can be as high as two percent of the loan amount.  The bill prohibits the GSEs from charging up-front fees to refinance any loan they already guarantee, which is also in the best financial interests of the GSE's and taxpayers.
• Eliminate appraisal costs for all borrowers. 
  Borrowers who live in communities without a significant number of recent home sales are often precluded from the Automated Valuation Models widely used by the GSEs and must pay hundreds of dollars for a manual appraisal to refinance.  The proposed bill will require the GSEs to develop additional streamlined alternatives to manual appraisals, eliminating a significant barrier and reducing cost and time for borrowers and lenders alike, especially in rural areas
• Further streamline the refinancing application process.
  Since participation in HARP requires that borrowers be current on their loans and with a demonstrated commitment to timely payments, there is no reason to require proof of employment or income for these loans.  The GSEs already own the risk which will only decrease with lower interest rates and payments.  The bill eliminates employment and income verification requirements, further streamlining the refinancing process and removing unnecessary costs and hassle for lenders and borrowers alike.
• Save taxpayers money. 
  The sponsors cite the Congressional Budget Office which says the bill will pay for itself through reduced default rates of existing GSE loans.

Menendez said, "Passing this bill will get rid of the red tape that leaves millions of borrowers trapped in higher interest loans, puts money back into the pockets of middle class families, and strengthens our economy. I'm asking Republicans to join us in putting families first."

Boxer said, "This bill is a win-win-win: homeowners will have more money in their pockets, Fannie and Freddie will see fewer foreclosures, and the housing market and economy will be strengthened. That's why the Menendez-Boxer bill has such broad support from industry and consumer groups."

The legislation has received support from the Mortgage Bankers Association, National Association of Realtors, National Association of Home Builders and the Center for Responsible Lending.

  View Article: http://www.mortgagenewsdaily.com/09112012_refinancing_harp.asp

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

Video: House Hearings - Housing Appraisal Industry

On June 28, 2012 Witnesses, including both appraisers and appraisal organizations, testified on proposals to improve oversight, regulation, and enforcement of the housing appraisal process. Among the topics addressed were the implementation of new financial service regulations under the Dodd-Frank law, appraisal fraud, the role of state regulators, and oversight of the appraisal process at the local level.

Top Ten Appraisal Reform Recommendations [NCRC]

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.

SOURCE: http://financialservices.house.gov/UploadedFiles/HHRG-112-BA04-WState-DBerenbaum-20120628.pdf

(June 28th) “Appraisal Oversight: The Regulatory Impact on Consumers and Businesses” Testimony Transcripts

There's a hearing going on right now that may impact how appraisers do business in the future.  The following links include transcripts of the testimony that willl be given.   

 

“Appraisal Oversight: The Regulatory Impact on Consumers and Businesses”
Thursday, June 28, 2012 10:00 AM in 2128 Rayburn HOB
Insurance, Housing and Community Opportunity

WITNESS LIST

Panel I

• Mr. William B. Shear, Director, Financial Markets and Community Investment,
  Government Accountability Office
• Mr. Don Rodgers, President, Association of Appraiser Regulatory Officials
• Mr. James R. Park, Executive Director, Appraisal Subcommittee, Federal Financial Institutions Examination Council

Panel II

• Mr. David Berenbaum, Chief Program Officer, National Community Reinvestment
  Coalition
• Mr. David Bunton, President, Appraisal Foundation
• Mr. Francois K. Gregoire, 2011 Chair, National Association of Realtors, Appraisal Committee
• Mr. Don Kelly, Executive Director, Real Estate Valuation Advocacy Association (REVAA), on behalf of REVAA and the Coalition to Facilitate Appraisal Integrity Reform
• Ms. Karen J. Mann, President, Mann & Associates Appraisers, on behalf of the American Society of Appraisers
• Ms. Sara Stephens, President, Appraisal Institute 

 

Call To Action: Congressional Subcommittee REFUSES Small Business Brokers and Appraisers a Seat at the Table

Congressional Subcommittee REFUSES Small Business Brokers and Appraisers a Seat at the Table

For the second time in a week, the Subcommittee on Insurance, Housing and Community Opportunity, Chaired by Rep. Judy Biggert (R-Illinois), refused small business housing professionals the right to be represented during Congressional testimony.

On June 20th, the Subcommittee held a hearing entitled: “Mortgage Disclosures: How Do We Cut Red Tape for Consumers and Small Businesses?” Although, Banks were represented three times on the panel, Brokers were intentionally excluded. NAIHP argued to represent the industry, but was refused because the panel was full.

On June 28th, this same Subcommittee will hold another hearing entitled:“Appraisal Oversight: The Regulatory Impact on Consumers and Businesses” Although, NAIHP has been and continues to be the persistent force for change in current Appraiser Independence regulations, we are being denied the opportunity to testify. NAIHP has been nationally recognized for exposing the plea bargain agreement between Cuomo and the GSEs, which created HVCC.

NAIHP also filed a complaint against the FHFA, due to their failure to release 40 thousand public comment letters. The Appraisal Institute, who openly admits to supporting HVCC, is being allowed to testify.

We still may be able to testify on your behalf, but we need your help!

Here’s what we need you to do-TODAY!

Because the hearing is scheduled for this Thursday (June 28th), all small business housing professionals (appraisers, brokers, originators, etc.) need to act NOW!

• Call Chairwoman Biggert’s office NOW, using the bullet points below- strongly request that NAIHP be allowed to testify on behalf of small business residential appraisers. (Please be professional and respectful)

Allow NAIHP to testify on Thursday, regarding appraisal regulations. By not allowing NAIHP to testify (again), Rep. Biggert appears to be anti-small business. The Appraisal Institute does NOT represent residential, Main Street Appraisers. We’re small business and we VOTE.

Mrs. Biggert’s WASHINGTON OFFICE: Phone: 202-225-3515

Illinois Members: Call both Washington & District Offices

DISTRICT OFFICE 6262 S. Route 83, Suite 305 | Willowbrook, IL 60527 Phone: 630-655-2052 If you are local, please call AND stop by her district office.

 

SOURCE: This Call to Action is a joint effort between the National Association of Independent Housing Professionals (NAIHP) and their affiliate- the Illinois Association of Mortgage Professionals (IAMP)

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!