Tuesday, July 12, 2011

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


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.


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.