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.
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