U.S. House Committee on Financial Services - Hearing, July 13, 2011 - UPDATED

UPDATED - VIDEO LINK ADDED

Tomorrow, July 13, 2011, the U.S. House Committee on Financial Services, Subcommittee on Insurance, Housing and Community Opportunity, will hold a hearing at 2:00 PM in 2128 Rayburn House Office Building.

The get together, entitled “Mortgage Origination: The Impact of Recent Changes on Homeowners and Businesses” has two panels of "witnesses" representing a wide array of government agencies and interest groups. These include the Federal Reserve, HUD, the Appraisal Subcommittee on the side of the government.

Interest groups to be represented include appraisers, mortgage bankers, mortgage brokers, Realtors, appraisal management companies and Hispanics. As is the custom, most of the witnesses have submitted written testimony in advance of the hearing. Some of it is interesting, some thoughtful. Portions are pandering, and some will infuriate. Most likely, you don't have time to read it all, but here are a couple of interesting excerpts:

Sara W. Stephens, MAI, CRE, representing the Appraisal Institute, includes these thoughts about Reasonable and Customary Fees:

Unfortunately, the Federal Reserve Board issued a rule that fails to implement the plain language and public policy intent of defining reasonable and customary fees as those not involving appraisal management companies – a retail fee, if you will. In our view, the reason Congress included this provision in the Dodd-Frank Act is to help ensure that appraisers receive adequate compensation for the education, experience, and time necessary to prepare credible appraisal reports. While the price of any service will always be a factor, quality and competency and transparency to the consumer should come first. Business models that helped fuel the fundamentally unsound run-up of the past decade placed far too much emphasis on pricing and bundling of services and focused scant attention on appraisal quality. Congress got it right; unfortunately, the Federal Reserve got it wrong.

National Association of Realtors representative, Steve Brown, has this to say about appraisals:

REALTORS® support and encourage credible, independent appraisals and valuations of real property, which are critical to the health of the overall real estate industry. A trustworthy valuation of real property 1) ensures the real property value is sufficient to collateralize the mortgage, 2) protects the homebuyer, 3) allows secondary markets to have confidence in the mortgage products and mortgage backed securities, and 4) builds public trust in the real estate profession. Professionally developed valuations provide an independent, objective analysis of real property. Valuations that are not credible or not independent harm communities and result in unintended consequences. The purchase of a home is the largest investment most people make. A valuation that does not properly reflect the owner’s equity and may require the owner to pay increased fees or inject unneeded additional liquidity into a collateralized loan to meet higher lending requirements. Valuations of real property that are too high give a false sense of security to homeowners seeking access to the equity in their homes and to lenders making a determination as to the security of their loan. Valuations that are too low may create a downward cycle of economic deterioration for neighborhoods and communities and cause increased cash requirements on lenders.

 and, Don Kelly, speaking for both the Real Estate Valuation Advocacy Association (REVAA), on behalf of REVAA and the Coalition to Facilitate Appraisal Integrity Reform provides some views of the landscape from the perspective of AMCs: 

Fair is a coalition of five of the nation's largest AMCs, which operate networks of individual appraisers and appraisal firms for the completion of appraisal reports (These five AMCs include: 1. LSI, a division of Lender Processing Services, Inc; 2. ServiceLink Valuation Solutions, LLC, a Fidelity Natioinal Financial, Inc. company; 3. Valuation Information Technology, LLC d/b/a Rels Valuation; 4. CoreLogic, Inc.; and 5. PCV/Murcor. Rels Valuation is an affiliate of CoreLogic, Inc. and Wells Fargo Bank).

There are significant benefits for both an appraiser and a lender when they work with an AMC......

That's as much as I can take on that one. You'll have to follow the LINK to read the rest of Don's comments.

If there ever was a time to contact your member of Congress, this is it.

UPDATE - VIDEO LINK ADDED

It's a long hearing, almost 3 hours. To save time, check Marc Savitt at 1:35, Sarah Stephens at 1:40 and her discussion of appraisal fees at 1:42. Don Kelly talks at 1:46 and tries to justify the AMC support of unreasonable fees at 2:46.

The Appraisal Foundation Comments on AI Resignation

In the interest of equal time, HERE is a link to a communication from The Appraisal Foundation explaining what happened between them and the Appraisal Institute.

Below is a brief series of Q&A designed to reflect The Appraisal Foundation’s position with respect to the September 7, 2010 decision by the Appraisal Institute to withdraw as a Sponsor of The Appraisal Foundation.

Question: Why did the Appraisal Institute choose to withdraw as a Sponsoring Organization of The Appraisal Foundation?

Answer: Obviously, only the Appraisal Institute can provide their full reasoning for this decision. However, the simple response to this question is the Appraisal Institute was unwilling to accept sanctions imposed by The Appraisal Foundation as a result of their conduct as a Sponsoring Organization.

Question: What did the Appraisal Institute do or not do that The Appraisal Foundation objected to?

Answer: In simplest terms, The Appraisal Foundation expects its Sponsoring Organizations to communicate with it first regarding any matters that have a direct or indirect impact on our organization. The Appraisal Institute failed to comply with this expectation.

Read it all HERE

My only comment: Do you find the format of communications from the Appraisal Foundation as annoying as I?

It's ON!! - Appraisal Institute Withdraws Sponsorship from TAF

The letter speaks for itself. Although Appraiser Active has not had much to say on the kerfuffle between the Appraisal Institute and The Appraisal Foundation, that does not mean I do not have any opinions on the matter. My belief that The Appraisal Foundation has morphed into a behemoth far beyond what had been envisioned by the original Appraisal Sponsoring Organizations is well known.

This action by the Appraisal Institute will have far reaching and lasting consequences. I applaud their testicular fortitude.

The Foundation, not so much. IMNSHO, their actions are typical of the bullying tactics usually reserved for comments to state appraiser regulatory boards.


AI Withdraws Sponsorship from TAF

HB 303-Regulation of Appraisal Management Companies, Passes Florida Legislature

Mark this date: April 27, 2010. On this date, the Florida Legislature passed HB 303 - Regulation of Appraisal Management Companies. The Florida House passed the bill on Monday, the 26th. The bill was sent to the Florida Senate and referred to three committees. The Senate decided to lay their bill, S 2210, on the table, and vote on the House bill. The vote was 35 Yeas / 0 Nays.

In addition to requiring the registration and regulation of Appraisal Management Companies, if signed by the Governor, the bill will require the Florida Real Estate Appraisal Board to adopt rules to specify the means by which an appraiser's signature may be affixed to an appraisal  report and include requirements for protecting the security of an appraiser's signature.

If signed by the Governor, the effective date of the legislation is July 1, 2011.

Thanks to Rep. Matt Hudson, the sponsor of the bill, and all the cosponsors. We should also acknowledge Sen. Lee Constantine and Sen. Mike Fasano, sponsors of the bills on the Senate side of the legislature. The Florida REALTORS® demonstrated determination and perseverance in getting this bill introduced, through all the committees and on the floor for consideration. A special thanks to Trey Goldman, Legislative Counsel for the Florida REALTORS®. Region X of the Appraisal Institute, and their lobbyist, Bob Hartnett were actively involved in this effort as well. Well done!

Appraisal Institute, Others, Suggest AMC Statement of Principles

From Appraiser News Online:

The nation’s largest professional organizations of real estate appraisers have set forth a list of business-related principles that they say appraisal management companies should adopt and advocate. The exposure draft of “Appraiser and Management Company Statement of Principles,” released March 11, is open for comment and discussion from all stakeholders through May 1.


“Adherence to these principles will help ensure that quality appraisals are prepared by competent appraisers for financial institutions and other clients in a timely manner,” Appraisal Institute President Leslie Sellers, MAI, SRA, said.

“Agreement with these principles will promote equality and a mutually beneficial relationship between professional appraisers and the AMCs using their services,” said Mike Evans, FASA, president of the American Society of Appraisers. “Most importantly, adherence to these principals will ensure consumers are protected, and safety and soundness fostered, when lenders use AMCs for valuation services.”

The statement is a joint effort of the Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers.

Following the public comment period, the professional appraisal organizations will request that AMCs formally adopt the revised Statement of Principles and agree to comply with them in their interactions with appraisers, their clients and consumers, according to Sellers.

After adoption, the appraisal organizations will continue to work with all stakeholders, including the AMC community, to provide further clarification of each of the principles through such means as guidance documents and responses to frequently asked questions, Sellers said. The Statement of Principles is intended to evolve as the AMC industry continues to mature, and state and federal laws applicable to AMCs continue to be enacted and implemented, he added.

“The organizations look forward to working with AMCs, state boards, local chapters and consumer groups as the business practices of AMCs are refined to comply with the principles. The principles are intended to promote mutually beneficial business relationships between management companies and professional appraisers,” Sellers said.

In 2008, the professional appraisal organizations drafted and released model legislation for the registration and regulation of appraisal management companies. Laws based upon this model legislation have been considered by at least 25 states, with 10 states passing the bills – some of which await enactment – and the rest still under consideration.

CLICK HERE for a pdf copy of the draft Statement of Principles.

Since the TAVMA folks have been free and easy with their advice to the appraisal community, it will be interesting to see their reaction to this proposal.

President of Appraisal Institute to Testify on the Hill

UPDATED- May 15, 2009 (TAVMA Responds - See Link Below)

From the Appraisal Institute:

NOTE: The testimony is TODAY, March 11, 2009

MEMO

To: All Members

From: Frederick H. Grubbe, CEO

Date: March 10, 2009

Subject: Jim Amorin to Testify Tomorrow Before the House Committee on Financial Services' Subcommittee

Jim Amorin, MAI, SRA, President of the Appraisal Institute, will testify tomorrow afternoon before the House Committee on Financial Services' Subcommittee on Financial Institutions and Consumer Credit at the Subcommittee's hearing on mortgage lending reform. The hearing will stream live tomorrow, March 11, at 2:30 p.m. ET via the House Committee on Financial Services' Web site

(www.house.gov/apps/list/hearing/financialsvcs_dem/hr0311092.shtml).

During his testimony, President Amorin will stress the importance of appraiser independence and address what our organization perceives to be weaknesses in the mortgage lending process. Included in the points he will make are the following:

• The need for mortgage reform legislation that addresses the inappropriate pressuring of appraisers and the need for providing greater accountability and enforcement options for federal and state appraiser regulators.


• The recommendation for an immediate review of the new loan modification guidelines (Home Affordable Modification) released by the Treasury Department last week, in order to ensure that consumers and neighborhoods are being protected and that proper valuation is being utilized, including questioning the allowances of Broker Price Opinions being used in lieu of appraisals.


• The need to regulate appraisal management companies and encourage lenders to use the best qualified appraisers available to mitigate financial institutions' risk and protect the investment of both lenders and consumers.

If you are unable to tune into the hearing, a transcript of President Amorin's testimony will be made available in tomorrow's issue of Appraiser News Online.

NOTE: The testimony is available NOW in PDF format right HERE

The Appraisal Institute 550 W. Van Buren St., Suite 1000, Chicago, IL 60607 T 312-335-4140 F 312-335-4258/4222

UPDATE!!

Three panels of speakers, a total of 15, testified before the committee today. At least two should be of interest to appraisers, real estate brokers and borrowers:

Charles McMillan, President of the National Association of Realtors

Mark Savitt, President of the National Association of Mortgage Brokers

Both addressed the HVCC and the need for regulation of AMCs.

UPDATE!! May 15, 2009 - The Title/Appraisal Vendor Management Association (TAVMA) responds by questioning the truthfulness of the Professional Appraisal Associations offering testimony - HERE