Appraisal Subcommittee for Development of Regulations

The Appraisal Subcommittee Advisory Committee for the Development of Regulations will hold its next meeting on July 22-23, 2014 at the Embassy Suites Hotel, 1900 Diagonal Road, Alexandria, VA 22314.  

The Meeting will start at 9:00 a.m. and end at 5:00 p.m. on both days. The Meeting Notice will be published in the Federal Register at least 15 days prior to the Meeting.  The first Meeting was held on April 16-17, 2014 in Washington, DC.  The October Meeting will be held on October 15-16, 2014 in Washington, DC (location to be determined) and the January 2015 Meeting dates and location are to be determined. 

Here is the Agenda for the meeting.

Minutes of the April 16 - 17, 2014 meeting are here.

The meetings are open to the public. With a new laptop and a twitter account, I'll make an attempt to provide some updated.

See You in Washington, D.C. - April 16 - 17, 2014

Tucked into page 816 of the Dodd-Frank Act is a little noticed amendment to the Financial Institutions Reform Recovery and Enforcement Act of 1989.

(d) REGULATIONS.—Section 1106 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3335)
is amended—
(1) by inserting ‘‘prescribe regulations in accordance with
chapter 5 of title 5, United States Code (commonly referred
to as the Administrative Procedures Act) after notice and opportunity
for comment,’’ after ‘‘hold hearings’’; and
(2) at the end by inserting ‘‘Any regulations prescribed
by the Appraisal Subcommittee shall (unless otherwise provided
in this title) be limited to the following functions: temporary
practice, national registry, information sharing, and enforcement.
For purposes of prescribing regulations, the Appraisal
Subcommittee shall establish an advisory committee of industry
participants, including appraisers, lenders, consumer advocates,
real estate agents, and government agencies, and hold meetings
as necessary to support the development of regulations.’’.

Just short of four years after the Dodd-Frank Act became law, the Appraisal Subcommittee has created the Appraisal Subcommittee for Development of Regulations. Members have been appointed by the ASC Chairman, Arthur Lindo. Imagine my surprise to find the letter below in my email. We have our first meeting April 16 - 17, 2014 in Washington, D.C. Details at this LINK.

Francois Gregoire - Appointment Letter by Frank Gregoire

Trying to Catch Up

It's been over a month since posting. Please do not take that as an indication nothing is going on; things are hopping! Over the past 30+ days, I've attended the meetings of the National Association of REALTORS® and NAR Appraisal Committee in New Orleans, finished up a big appraisal review assignment for a potential class action lawsuit, completed a few single family and condominium appraisals, and put a dent into examining 52 cases for the Florida Real Estate Appraisal Board's Probable Cause Panel.

The picture with this post shows what 52 cases looks like.

Every day, I wake up hoping to have some time to make a few comments here, and post some information. The time flys by. Although I'm still up to my eyeballs in files and have two appraisals due tomorrow before noon, I did some updating to the site by adding a few links to section on the left of this page.

Over there you will find a link to the Interagency Appraisal and Evaluation Guidelines released by the
Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (FRB); Federal Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, Treasury (OTS); and National Credit Union Administration (NCUA). I also added a link to Fannie and Freddie's Appraiser Independence Guidelines, and the "redlined" version of TITLE XI as amended by the Dodd - Frank Act.

For your reading pleasure, the ASC produced "red lined" version of Title XI is reproduced after the jump.

As soon as the FREAB Probable Cause Panel meeting is over, I hope to provide an update of some of the goings on during the NAR Appraisal Committee meeting and NAR Board of Directors. Some good things for appraiser members of NAR are coming up.

CLICK to Read More

H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act

My world was much different in the late 1980’s. Although I had been in the real estate and appraisal profession for a decade, political activity did not interest me. Here at Gregoire & Gregoire, we had been using a networked mini-computer for appraisal reporting since 1983, but I did not have an email account or address. I did not surf the web. Our clients were savings and loan associations, FHA lenders, loan discount companies (purchasers of privately originated first and second mortgages), real estate brokers, and several lawyers. All our research was completed through examination of paper and microfiche records. We went through Polaroid SX-70 film packs by the case and always kept a spare camera or two in the back seat or trunk of the car. Life was good. A career in the appraisal profession, at least here in the Sunshine State, was one coveted by many.

In-person networking with other appraisers was a regular activity, and usually accomplished at the monthly meetings of the local chapter of the Society of Real Estate Appraisers. My memory may be a little foggy, but I do remember sitting down with a few appraiser friends after a Society meeting to discuss the pending implementation of Title XI of the Financial Institutions Reform Recovery and Enforcement Act (FIRREA). Unlike most of my peers, I was not enthused or optimistic about the new law. It was difficult to see any upside for me or the profession by involving the federal government in appraisal regulation. I lost the argument with my friends, shouted down with comments about “professionalism” and “national standards”.

About 20 years after that discussion, technology has influenced many of the actions involved in the research, development and reporting of appraisals. Our ability and means to research and communicate has improved exponentially, and personally, my interest in regulation, government, and politics has become an obsession. The nature of some folks within the sphere of real property, loan origination, lending and banking is, unfortunately, just as it was. A mere 25 or so years after the disintegration of the savings and loans that prompted FIRREA, the country finds itself in the midst of an even worse financial mess. In response to crisis, and true to form, Congress has once again sprung into action to save us all. Their solution is H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act.

CLICK to Read More

Conference Committee Agrees to Appraisal Changes - UPDATED AGAIN

Scroll for UPDATE

After an all night session, the House and Senate Conferees declared the Conference Report passed early in the morning of June 25, 2010. Their report will now be filed with the House and Senate for consideration.

The bill is "only" 2315 pages; it will not be posted here. However, Subtitle F, referencing appraisal activities, is only 39 pages, so here it is for your reading pleasure.

HR 4173 Subtitle F Appraisal Activities

Within the document you will find amendments that mandate an "onsite" appraisal for certain high risk mortgages, wording to establish Appraiser Independence Standards, a requirement that appraisal fees conform to customary and reasonable standards, and a sunset of the HVCC.

There is also language to establish minimum requirements for AMCs, require states to register AMCs, exempt bank owned AMCs from state registration and an increase in the ASC Registry Fee.

The Appraisal Foundation, particularlly the Appraiser Qualifications Board, is granted even more power and control.

Mixed bag, in my opinion.

Your Comments?

UPDATE - 6/29/2010 Wall Street Journal: Finance Bill's Fate Uncertain in Senate

2ND UPDATE - 6/29/2010 The Hill:  Wall Street bill back to conference

There's nothing in the Hill story about the appraisal provisions in the bill. It's all about the politics of getting the Conference Bill passed by the Senate.

Exempt Bank Owned AMCs? What are They Thinking?

Although discussion of the Wall Street Reform and Consumer Protection Act of 2009 has faded from the front page of the newspapers, in today's Washington Post, Ken Harney offers a column outlining some possible benefits to consumers and what he believes will go to the President's desk affecting housing and mortgage finance.

Of most interest to Appraiser Active is this:

Real estate appraisal improvements. The House bill would give the new consumer protection agency oversight on home mortgage appraisals and the power to create rules and standards to guarantee "appraiser independence" from pressures by lenders, realty agents and others. It also would require that once the new rules are adopted, the controversial "Home Valuation Code of Conduct" mandated last year by Fannie Mae and Freddie Mac be terminated. The code has been criticized by consumers, realty agents, builders and appraisers for encouraging lowball appraisals and the use of inexperienced appraisers willing to work for low fees. The Senate bill does not have appraisal provisions, but a bipartisan push is under way to convince conferees to adopt the House version.

None of the "appraisal improvements" were included in the Senate amendment to the House Bill, H.R. 4173. Some of the "appraisal improvements" are worthwhile, others not so. Among the most meaningful are amendments to FIRREA that will require states to regulate Appraisal Management Companies. (If you follow the link, start at Sec. 9503 and use the FORWARD button under the THIS DOCUMENT tab at the bottom of the page to read all the text)

Unfortunately, the above amendments also include this provision:

`SEC. 1124. APPRAISAL MANAGEMENT COMPANY MINIMUM QUALIFICATIONS.

`(b) Exception for Federally Regulated Financial Institutions- The requirements of subsection (a) shall not apply to an appraisal management company that is a subsidiary owned and controlled by a financial institution and regulated by a federal financial institution regulatory agency. In such case, the appropriate federal financial institutions regulatory agency shall, at a minimum, develop regulations affecting the operations of the appraisal management company to--

`(1) verify that only licensed or certified appraisers are used for federally related transactions;

`(2) require that appraisals coordinated by an institution or subsidiary providing appraisal management services comply with the Uniform Standards of Professional Appraisal Practice; and

`(3) require that appraisals are conducted independently and free from inappropriate influence and coercion pursuant to the appraisal independence standards established under section 129E of the Truth in Lending Act.

This is preposterous!

Several states have already enacted laws to regulate Appraisal Management Companies. I’m not sure of the exact language for other states, but the bill to regulate Appraisal Management Companies recently signed into law here in Florida does not exempt ANY Appraisal Management Company from registration and regulation.

Based on comments and conversations with appraisers here in Florida and from around the country, the worst Appraisal Management Company offenders for fee abuse, unreasonable turn time demands and interference with appraiser independence are those owned or affiliated with regulated banking or financial institutions. EXAMPLE, EXAMPLE, EXAMPLE, EXAMPLE.

The failure of banks to properly throttle their lending practices helped to get us in this mess, and now the proposal is to let them run Appraisal Management Companies without state regulation?

It’s important to convince the Conference Committee to strike that exemption for bank owned and operated Appraisal Management Companies. Otherwise, the public can expect nothing more than the same "close scrutiny", "attention to detail", and "rigorous oversight" the Federal Banking Agencies exhibited prior to the current fiasco.

We cannot trust the regulation of bank owned/controlled Appraisal Management Companies to Federal Agencies.

The Senate has appointed their conferees:

Dodd; Johnson; Reed; Schumer; Shelby; Crapo; Corker; Gregg; Lincoln; Leahy; Harkin; Chambliss.

We're still waiting for the House to name their participants to the conference, but Barney Frank is sure to be there.

It's time to fire up the professional associations and the public to write their Senators, Representatives and the bill conferees to make sure bank owned AMCS are NOT EXEMPT from state regulation.

AARO - Association of Appraiser Regulatory Officials

The ASSOCIATION OF APPRAISER REGULATORY OFFICIALS (AARO) will be meeting October 10 - 13, 2009 in Washington, D.C. for the Annual Conference. This is the second of two meetings AARO has each year.

According to their bylaws, their MISSION is to improve the administration and enforcement of real estate appraisal laws in member jurisdictions. The agenda for the Fall, 2009 program reveals the effort to meet that mission. In addition to regular meetings of their committees on AQB Oversight, ASB Oversight, Investigator Training and Education, several panel discussions and guest speakers are scheduled. These include:

Consistent Enforcement - Enforcing USPAP

• Joe Traynor - Chair, The Appraisal Foundation Consistent Enforcement Task Force
• Jenny Tidwell - Appraisal Policy Manager, Appraisal Subcommittee

Updates

• Jim Park - Executive Director, Appraisal Subcommittee
• David Bunton - President, The Appraisal Foundation
• Sandy Guilfoil - Chair, Appraisal Standards Board
• Gary Taylor - Chair, Appraiser Qualifications Board

The Changing Face of the Appraisal Profession

• Joan Trice - Appraisal Buzz
• Jim Amorin - President, Appraisal Institute (AI)
• Richard Edmunds -President-Elect, American Society of Farm Managers and Rural Appraisers (ASFMRA)
• John Marazzo - President, National Association of Independent Fee Appraisers (NAIFA)

HVCC - Appraisal Management Companies and Broker Price Opinion Issues

• Jeff Dickstein - National Association of Broker Price Opinion Professionals (NABPOP)
• Frank Gregoire - National Association of Realtors® NOTE: I am appearing as a representative of the National Association of Realtors® Appraisal Committee
• David Feldman - Real Estate Valuation Advocacy Association (REVAA) and Title/Appraiser Vendor Management Association (TAVMA)

Lender Policy Updates and Issues

• Peter Gillispie - Federal Housing Administration / Department of Housing and Urban Development
• Robert Murphy - Fannie Mae
• Jacqueline Doty - Freddie Mac
• Gerry Keifer - Veterans Administration

From 2000 through 2008, when I was a member and Chairman of the Florida Real Estate Appraisal Board, I attended nearly every meeting of AARO. Each provided great opportunities to meet with other state regulators as well as individuals involved in appraisal policy development, appraisal standards development and enforcement and refinement of appraiser qualifications.

Although I won't be able to attend the entire meeting, each of the above discussions is on my calendar. I'll try to live blog a bit from the AARO meetings next weekend and provide a full update after returning to the Sunshine State.

FWIW, you can catch my article about the HVCC on page 4 of the latest AARO Newsletter.

WSJ - Unintended Consequences of HVCC

The Wall Street Journal has another article about the real estate market, appraisers and the Home Valuation Code of Conduct (HVCC). It's an interesting take with more tales of woe with a couple of interesting observations.

Reappraising Home Appraisers

After being blamed for helping to inflate home values during the housing boom, the appraisal business is again coming under fire. Squeezed by a drop in fees, some appraisers are compensating by driving long distances to handle more assignments.

Their wanderings are raising questions about whether they know enough about the neighborhoods to accurately assess the value of homes—which has implications for both home buyers and owners.

Bob Blake, a flight-test engineer who lives in Palm Beach Gardens, Fla., was shocked when an appraiser who traveled 44 miles from Port St. Lucie, Fla., valued his home at $228,000 in late May. Mr. Blake's mortgage broker, Skip McDonough, protested to the appraisal-management company, Nations Valuation Services Inc., that the appraiser had failed to look at comparable homes. Eventually, Nations sent another appraiser, who valued the home at $295,000. The dispute delayed Mr. Blake's refinancing by more than six weeks.

A spokesman for Nations Valuation declined to discuss the details of the appraisals but said, "We feel we handled it properly."

NOTE: Nations Valuation Service has posted their "commitment" to the HVCC. However, Appraiser Active does not find a "self-certification" or seal. Dang!

The WSJ goes on to give their interpretation of why appraisals are completed for a mortgage finance transaction:

Appraisals are supposed to shield home buyers from paying too much and lenders from overestimating the value of collateral. If appraisals come in too high, buyers may overpay, making defaults more likely. If they are too low, it becomes hard to sell or refinance homes. Many real-estate agents and builders say that the pendulum has swung too far toward caution, and that lowball appraisals threaten to snuff out any recovery in the housing market.

It's a nice interpretation, but a common misconception. The regulatory scheme for real estate appraisers adopted by the United States Congress in 1989 was in response to the collapse of the Savings and Loan industry. The purpose of the federal legislation is to protect federally regulated financial institutions, not individual home purchasers or borrowers.

Appraisals are completed for the benefit of the client and intended users. Rarely, in the case of an appraisal completed for a real estate purchase or refinance transaction, is the borrower named as an intended user.

The debate over appraisals is inflamed by a natural tension: Real-estate agents and mortgage brokers, who need to complete transactions to collect their fees, are unhappy when an appraiser nixes the sale price. But it also suggests that there may be unintended consequences to an attempt by New York Attorney General Andrew Cuomo to reform the appraisal business.
....
"Many appraisers are struggling to survive on the fees paid by the AMCs," says Bill Garber, a spokesman for the Appraisal Institute, a trade group based in Chicago. Appraisers are being asked to work faster even as their fees are cut, and that conflicts with the goal of getting reliable appraisals, he says.

Appraisal-management companies deny they are squeezing appraisers too hard. A spokesman for banking giant Wells Fargo & Co., which owns an AMC, says it "has invested substantial time and resources in the quality control of the valuation process to, among other things, ensure that individual appraisers have relevant knowledge of the markets and properties they review." A spokeswoman for Mr. Cuomo says the new code is working well and helping protect appraisers from pressure to inflate estimates.

The pile of appraisals generated by AMC Independent Contractor appraisers accumulating on the floor by my desk proves otherwise. The complaints about non-geographic competent appraisers pouring in to regulatory agencies provides even more evidence that the non-regulated, Big Bank Owned AMCs and Andrew Cuomo are blowing smoke.

In fact, within my collection is an "appraisal" generated by an individual contracted by RELS, the Wells Fargo affiliated AMC. Along with the "appraisal", the borrower provided a copy of the Automated Valuation Model (AVM) generated value estimate produced by RELS. The AVM was crap, and the "appraisal" mysteriously provided an opinion of value that mirrored the AVM estimate. The Wells Fargo claim that "that individual appraisers have relevant knowledge of the markets and properties they review."? The property was in Pinellas County, Florida. The "appraiser" is based in Ft. Myers, Florida. That's 120 miles away!

Here's more:

Sometimes appraisers are called on to express opinions on the values of faraway homes without even seeing them. LandSafe, an appraisal unit of Bank of America Corp., in May assigned Jane Price, an appraiser in Dallas, to review another appraiser's estimate of a home in Cathedral City, Calif. Ms. Price didn't visit the neighborhood in question, but her review cited nearby homes she used to determine comparable value.

I'll bet Ms. Price has no idea where in tarnation Cathedral City, California is, and that she does not have a license or certification to appraise in California. How does this protect the federally regulated financial institutions, never mind Fannie Mae and Feddie Mac. Is it any wonder the GSEs are in their current mess?

Go ahead and read the whole thing. By the way, it's 1320 miles from Dallas to Cathedral City.

Appraisal Subcommittee Hires an Executive Director

For Immediate Release

March 31, 2009

The Appraisal Subcommittee Hires an Executive Director

The Appraisal Subcommittee (ASC) today announced the hiring of Jim Park as its Executive Director. Mr. Park has over 23 years of appraisal and mortgage banking experience. During his extensive career, he has held executive management and leadership roles at several financial institutions. He also served for four years as the Director of Research and Technical Issues at The Appraisal Foundation. Mr. Park holds a B.A. in organizational communications from the University of Colorado and a certified general appraiser credential in the Commonwealth of Virginia.

The Executive Director is the senior staff position of the ASC with responsibility for the supervision of the day-to-day ASC operations and ASC staff. Under direction of the ASC, the Executive Director is responsible for implementing ASC policies, overseeing its programs, and developing recommendations to the ASC members. The Executive Director also represents the ASC before state appraisal regulatory officials and various appraisal industry groups. He may be contacted via email at Jim@asc.gov

Congratulations on the new position Jim!