Housing Bubble
Appraisal Groups want appraisal oversight and reform added to Agenda
More than 40,000 combined appraisal professionals represented by the American Society of Appraisers, National Association of Realtors and Appraisal Institute called on Senator Richard Shelby (R-Ala.), Chair of the Senate Committee on Banking, Housing and Urban Affairs, today to make appraisal oversight and reform an agenda item in the 108th Congress.
The organizations' request was made in advance of a report due out from the General Accounting Office (GAO) on the effectiveness of the current appraisal regulatory structure. The GAO investigation, which began in April of last year, was undertaken at the request of Senator Paul Sarbanes (D-Md.) and Senator Zell Miller (D-Ga.) after Congressional inquiries into loan flipping and predatory lending brought to light numerous reports of inconsistencies in the appraisal regulatory structure.
"Consumers and all the parties involved in the home buying process will benefit from a system of regulation that helps ensure the independence and integrity of the appraisal process," said Appraisal Institute President Alan Hummel, SRA, "and we believe it's important that Senator Shelby be aware of the GAO's investigation because the recommendations for their report are likely to fall under the jurisdiction of the Banking Committee."
The GAO is expected to release a report to Congress in March of this year regarding its investigation, which focused on the effectiveness of the state and federal appraisal systems as set forth in Title XI of Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989.
Title XI of FIRREA was enacted to protect federal financial and public policy interests in real estate related transactions by requiring that real estate appraisals be performed by individuals having demonstrated competency in the profession. However, the regulatory structure that developed as a result of the Act has become overly complex, inconsistent from state to state, and is in need of a thorough review and examination by Congress.
"Since Title XI was enacted, inconsistency among the states regarding licensing requirements and lax federal oversight have left the appraisal professional and the consumer at the mercy of lenders and others with a financial interest in the transaction," Mr. Hummel noted. "Whether it's a lack of resources or a lack of will by those charged with providing oversight, these defects in the system must be addressed."
Within the letter, the organizations pointed out that while a fundamental goal of Title XI was to raise the professionalism of appraisers involved in federally related transactions, the implementation of FIRREA actually failed to create incentives for appraisers to seek additional training, education and experience. The letter states that the public would be better served by a system that would encourage appraisers to excel through appropriate professional development above and beyond the minimal state licensure requirements.
"We hope these and other deficiencies in the regulatory structure are brought to light through the GAO investigation," Mr. Hummel concluded. "We believe the investigation of the appraisal regulatory process is just the first step in addressing the issue of mortgage fraud. The home-buying public must be assured that all of the professionals in real estate mortgage-related transactions are ethical, accountable and subject to proper oversight and review."
Source: Source: Appraisal Institute
