Ken Harney Weighs in on the FRB Interim Final Rule (TILA Section of Dodd-Frank)

If there is one national columnist with his ear close to the ground and regularly checking the pulse of the real estate and real estate appraisal professions, it's Ken Harney, of the Washington Post. In his latest column, Ken examines the Interim Final Rule released by the Board of Governors of the Federal Reserve System. The rule provides the implementation language for Appraiser Independence standards and Customary and Reasonable Fee requirements included in the Dodd-Frank Act amendments to the Truth in Lending Act (TILA).

Ken interviews a few appraisers, including Pat Turner (VA), Leslie Sellers (President of the Appraisal Institute) and yours truly. Although none of us talked with each other prior to the interview, it looks like we share the same concerns. Consumers, borrowers, and real estate agents should be concerned as well.

So what sort of changes are you likely to see? Experienced appraisers say probably not enough, at least in the proposal's current form.

"It's just a rehash of the [code]," says Pat Turner, a Richmond area appraiser and critic of the Fannie-Freddie rules.

Leslie Sellers, president of the 26,000-member Appraisal Institute, a professional group based in Chicago, says the Fed's proposals include important core principles of freedom from coercion and outside influence on valuations but don't lessen the current system's tilt toward cut-rate fees and short turnaround times over appraisal quality.

Frank Gregoire, past chairman of the Florida Real Estate Appraisal Board and incoming chairman of the National Association of Realtors' appraisal committee, says that "until the federal banking agencies decide to enforce some of the words they're putting on paper, the public can expect business as usual."

There's more, so please CLICK HERE and read the whole thing.

I've got more to say, but it's Friday night, and my wife, Fran, and I are headed out for some seafood ;-)

Federal Reserve Releases Final Interim Rule For Comment - Customary and Reasonable Appraisal Fees

It's HOT off the press! Here is the Interim Final Rule and Request for Public Comment from the Board of Governors of the Federal Reserve System to amend Regulation Z, Truth in Lending.


For immediate release:

The Federal Reserve Board on Monday announced an interim final rule to ensure that real estate appraisers are free to use their independent professional judgment in assigning home values without influence or pressure from those with interests in the transactions. The rule also seeks to ensure that appraisers receive customary and reasonable payments for their services.

The interim final rule includes several provisions that protect the integrity of the appraisal process when a consumer's home is securing the loan. The interim final rule:

• Prohibits coercion and other similar actions designed to cause appraisers to base the appraised value of properties on factors other than their independent judgment;
• Prohibits appraisers and appraisal management companies hired by lenders from having financial or other interests in the properties or the credit transactions;
• Prohibits creditors from extending credit based on appraisals if they know beforehand of violations involving appraiser coercion or conflicts of interest, unless the creditors determine that the values of the properties are not materially misstated;
• Requires that creditors or settlement service providers that have information about appraiser misconduct file reports with the appropriate state licensing authorities; and
• Requires the payment of reasonable and customary compensation to appraisers who are not employees of the creditors or of the appraisal management companies hired by the creditors.

The interim final rule is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Compliance will be mandatory on April 1, 2011. Public comments are due 60 days after the interim final rule is published in the Federal Register, which is expected soon.

The Board is publishing for public comment an interim final rule amending Regulation Z (Truth in Lending). The interim rule implements Section 129E of the Truth in Lending Act (TILA), which was enacted on July 21, 2010, as Section 1472 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. TILA Section 129E establishes new requirements for appraisal independence for consumer credit transactions secured by the consumer’s principal dwelling. The amendments are designed to ensure that real estate appraisals used to support creditors’ underwriting decisions are based on the appraiser’s independent professional judgment, free of any influence or pressure that may be exerted by parties that have an interest in the transaction. The amendments also seek to ensure that creditors and their agents pay customary and reasonable fees to appraisers. The Board seeks comment on all aspects of the interim final rule.

HERE is a link to a pdf of the rule. I have also posted a copy of the pdf on SCRIBD. That is available after the jump.

Most appraisers have been expressing interest and concern about how the Federal Reserve Board of Governors would deal with the section of the law addressing Customary and Reasonable Fees. There's quite a bit to chew on in there. To save time, read pages 57 - 59 for an overview, and pages 124 - 130 for the rule.

What do you think?

CLICK to Read More

Freddie Mac - Appraiser Independence Requirements Announced

On the same day Fannie Mae announced their Appraiser Independence Requirements, Freddie Mac issued a Single Family Seller/Servicer Guide Update letting the world know of their Appraiser Independence Requirements.

In their release, Freddie states :

Effective October 15, 2010 we are adopting appraiser independence requirements that maintain the spirit and intent of the Home Valuation Code of Conduct (HVCC). Freddie Mac has worked with the Federal Housing Finance Agency and Fannie Mae to develop appraisal independence requirements to replace the HVCC, which is expected to sunset this month.

Here's the Freddie Mac Appraiser Independence Requirements:

Freddie Mac Appraiser Independence Requirements 10-15-2010

Fannie Mae - Appraiser Independence Requirements Announced

As expected, Fannie Mae has issued an Announcement, SEL-2010-14, with their new Appraiser Independence Requirments.

After H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law, many folks cheered the sunset of the Home Valuation Code of Conduct (HVCC). Appraiser Active took a more cynical view. It looks like we were right on the money. Here's what Fannie has to say in their release:

The Appraiser Independence Requirements replace the Home Valuation Code of Conduct (HVCC). These updated requirements maintain the spirit and intent of the HVCC and continue to provide important protections for mortgage investors, home buyers, and the housing market.

The HVCC is being replaced by the Appraiser Independence Requirements; however, all conventional, single-family mortgage loans with application dates on or after May 1, 2009, must additionally comply with the HVCC until the earlier of the release of the Interim Final Rules by the Federal Reserve as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or November 1, 2010.

For those with an interest, the Fannie Mae Appraiser Independence Requirements:

Fannie Mae Appraiser Independence Requirements 10-15-2010

Washington, D.C. Events: AARO, NAR - Valuation Summit

There are two major appraisal/valuation related events in Washington, D.C. this week. First, the Association of Appraiser Regulatory Officials (AARO), along with The Appraisal Foundation and the Appraisal Subcommittee, is holding a joint conference October 1 - 5, 2010. Their Agenda is full, and packed with interesting speakers and timely topics. AARO president, Bruce Fitzsimons, has invited me to attend. As a former regulator, and current Honorary Member of AARO, it will be great to see long time friends (and foes) from the appraisal regulator world.

Immediately following the AARO Joint Conference, the National Association of REALTORS® is hosting a Valuation Summit October 5 - 6, 2010. Several folks from the AARO Conference will be making appearances for panel discussions. Once again, it will be great to see long time friends and acquaintances like NAR President Vicki Cox Golder, NAR President-Elect Ron Phipps, Kentucky Real Estate Appraisers Board Executive Director Larry Disney, Steve Fritts from the FDIC, and Jacqueline Doty from Freddie Mac. Having crossed swords with him during the negotiations over the Florida AMC Regulation Bill during the 2010 Legislative session, it will be interesting to hear what former TAVMA President Don Blanchard has to say.

By far, the most entertaining portion of the day will be the last session. I've been asked to moderate the panel discussion among Dave Bunton, Jim Park and Bruce Fitzsimons. It would be great if we could arrange for a webcast!

Here's the agenda.

Valuation Summit Final Agenda

Appraisal Associations Comment on Dodd-Frank Rulemaking

Back in August, shortly after the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law, Appraiser Active commented on the rule making. Quite a few individuals have commented, along with some associations, like TAVMA.

Here is a copy of the comment letter submitted by the appraiser professional associations. It's certainly comprehensive, and provides some ideas for your comments.

Joint Letter to Federal Reserve TILA Appraisal Provisions