WASHINGTON – (RealEstateRama) — The Housing and Insurance Subcommittee held a hearing on Wednesday to discuss necessary changes to the appraisal industry.
“Appraisals are one of the cornerstones of the home-buying process. Issues that impact appraisers also impact nearly every American buying or selling a home, in rural and urban areas; in high- and low-income neighborhoods,” explained Subcommittee Chairman Blaine Luetkemeyer (R-MO). “Yet when it comes to the regulatory regime surrounding appraisals, it seems we’re stuck in 1989.”
“Today’s hearing focused on a topic that isn’t often on television or in the newspapers yet is an important issue that impacts Americans across the country who are buying or selling homes. The last meaningful update of the appraisal structure was in 1989, and while the marketplace has evolved, the regulatory regime remains stuck in the past,” said Subcommittee Chairman Blaine Luetkemeyer (R-MO). “Ultimately, our nation’s appraisal system is unnecessarily complicated and outdated. That complexity impacts homeowners and is, in part, responsible for delayed closings and increased consumer costs. Today’s hearing gave this Subcommittee an opportunity to examine the past and, more importantly, look to the future of appraisal standards in America. We can and will find a better way that increases consumer choice and maintains market confidence.”
Key Takeaways from the Hearing:
- The current appraisal regulatory regime is stuck in a 1980s model and does not reflect the advancements of a 21st century marketplace.
- The appraisal regulatory structure should take advantage of advancements in alternative home valuation methods.
- The Dodd-Frank Act’s impact on the appraisal industry has not enhanced the system for appraisers, consumers or stakeholders.
- The decline in the number of professional appraisers is reflective of burdensome qualifications and a changing marketplace.
Topline Witness Quotes:
“Dodd-Frank benefited consumers by requiring lenders to provide a copy of the appraisal that was utilized in underwriting a loan. The CFPB went a step further and required lenders to provide borrowers with copies of all valuation products that were considered in conjunction with the loan application. Unfortunately, many borrowers were simply confused when receiving this information prior to closing. Some wondered why certain products reflected one opinion of value, while a different product showed another. And how was the appraisal fee the borrower paid actually applied to these various products?” – David S. Bunton, President, The Appraisal Foundation
“Today, all stakeholders suffer from an appraisal regulatory regime that is outmoded. The housing finance crisis shed a bright light on the systemic failures of the appraisal process. The structural flaws of the regulatory scheme reveal a system whereby no one was held accountable. This illustration of the current regulatory structure says it all. It should be no surprise that appraisal industry is being highly scrutinized. It is entirely dysfunctional. It is time for a ‘big and bold’ plan to overhaul the system.” – Joan N. Trice, Chief Executive Officer and Founder, Clearbox
“Today, the number of real property appraisers in the United States is in decline, and concerns are being expressed by banks and real estate professionals alike about a potential shortage of appraisers. What is clear is that all appraisers are being choked by rules and regulations in nearly every facet of their business.” – Bill Garber, Director of Government and External Relations, Appraisal Institute
“In response to criticism that lax appraisals contributed to the financial crisis, more restrictive appraisal policies have been implemented by lenders, federal banking regulators, the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the United States Department of Agriculture (USDA), and Fannie Mae and Freddie Mac (the Enterprises). Oftentimes, this has created a myriad of appraisal guidelines that are complex and inconsistent, causing confusion and frustration. Appraisal standards are not clear, best practices have not been well communicated, and enforcement is not occurring in a consistent manner. For all sectors that interact with appraisers – consumers, home builders, realtors, lenders, the Enterprises, mortgage insurers – appraisal quality and appraiser competence remain tremendous challenges.” – Ed Brady, Chairman of the Board, National Association of Home Builders