Housing Bubble
Appraisal Institute warns of RESPA lending bottleneck
March 11, 2003
WASHINGTON, /PRNewswire/ -- The Department of Housing and Urban Development (HUD) should modify its proposed amendments to the regulations implementing the Real Estate Settlement Procedures Act (RESPA), said Appraisal Institute President Alan E. Hummel, SRA, before a House Committee on Small Business today. The hearing, "RESPA Reform and the Economic Effects on Small Business," explored HUD's compliance with the Regulatory Flexibility Act, focusing on the small business economic analysis prepared by HUD.
"By concealing what consumers are getting for their closing cost fees, the HUD packaging proposal is a classic scam or a 'pig in a poke,'" said Hummel. "After a decade of progress under the Uniform Standards of Professional Appraisal Practice enhancing appraisal skills, emphasizing ethical duties, and controlling or reducing costs to consumers, America's appraisers reject a return to insider mortgage dealing."
Contrary to HUD's assumption that appraisals constitute "high price" services, costs have remained constant for ten years, even decreasing in some cases. "We are concerned HUD's guaranteed price of bundled services will drive good appraisers from the residential market. A shortage of qualified appraisers, particularly beyond metropolitan areas, could become a disastrous bottleneck in the mortgage industry," noted Hummel.
HUD's proposal for a 10 percent tolerance on fees would be stifling for appraisers remaining in mortgage work. "For some transactions, a simple 'valuation' by a computer may be adequate, but a physical inspection is often essential to a valid appraisal. The 'one-size-fits-all' structure does not reflect the diversity of appraisal demands," said Hummel.
Mr. Hummel offered these recommendations to address the concerns voiced by the organization. These included retaining the contract appraisal fee under the Good Faith Estimate; creating an exemption from the 10 percent tolerance requirement for loans secured by high-value or otherwise atypical properties; and including language in the RESPA proposal prohibiting inappropriate client pressure, making such policies accessible to appraisers, and requiring lenders to pay for all third-party services regardless of loan status.
"As small business people committed to our communities, we urge HUD to amend its rule and 'open the poke,' so consumers can see what they get for their money," Hummel concluded.
Mr. Hummel's complete testimony can be found online online
Source: Appraisal Institute
