Life After Dodd-Frank

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IDFPR Board

Illinois Appraisal Newsletters at IDFPR
Provided as a service to licensed and registered Illinois appraisal professionals as well as Illinois course providers and users of appraisals. Illinois Appraiser Newsletters promote a greater understanding of USPAP, the Act, and the Administrative Rules of the State of Illinois.promote a greater understanding of USPAP, the Act, and the Administrative Rules of the State of Illinois.
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Appraisal Regulations - Life After Dodd-Frank

Do the agencies’ appraisal regulations apply to FHA, VA…

Republican control of Washington DC will mean one of two things:

  • A scaling back of Dodd-Frank, or
  • The elimination of Dodd-Frank

Like it or not, one of these two scenarios will play itself out in 2017 or 2018.

What about AMCs?

The AMC Final Rule was deemed that…the registration and supervision of AMCs is voluntary, and that a State may elect not to establish such a program for any reason, including if its resources do not support such a program.

Will the states walk away from AMC regulation? Perhaps not all, but definitely some states will either bypass the registration and licensing of AMCs or may repeal their existing regulations.

The question becomes, what happens to AMCs who are no longer regulated?

Nothing. AMCs will continue to operate whether there are regulations or not. If AMCs are not regulated in a state, won’t that affect their ability to process federally related transactions? About 4% of all residential transactions fall into this category and yet, no one is quite clear which transactions those are.

Appraisers treat every assignment as if it was a federally related transaction even though 96% do not fall into this category. Remember, AO-30 in USPAP discusses what is and what is not an FRT:

What is a “federally related transaction”? The term is defined in Title XI of FIRREA as “any real estate-related financial transaction which —
(A) a federal financial institutions regulatory agency or the Resolution Trust Corporation engages in, contracts for, or regulates; and
(B) requires the services of an appraiser.”

The agencies’ appraisal regulations define when the services of an appraiser are required. The agencies’ appraisal regulations also list specific categories of transactions that do not require the services of an appraiser.

Do the agencies’ appraisal regulations apply to FHA, VA, Fannie Mae, Freddie Mac, Farmer Mac, or Sallie Mae?
FHA, VA, Fannie Mae, Freddie Mac, Farmer Mac and Sallie Mae are not under the supervision of the federal financial institutions regulatory agencies and therefore are not subject to their appraisal regulations.

That’s pretty much everything residential appraisers do, isn’t it? Do you think that it makes sense to continue to regulate a profession that consists of 4% of the entire market for services?

The Resolution Trust Corporation was shut down in December of 1995.

By Brian Weaver, Coordinator Editor of IllinoisAppraiser, Appraisal Management Company Coordinator for the Illinois Department of Financial and Professional Regulation (IDFPR)Illinois Appraiser Newsletters – Volume 10, Issue 1 – January 2017

IDFPR Board

IDFPR Board

Provided as a service to licensed and registered Illinois appraisal professionals as well as Illinois course providers and users of appraisals. Illinois Appraiser Newsletters promote a greater understanding of USPAP, the Act, and the Administrative Rules of the State of Illinois. promote a greater understanding of USPAP, the Act, and the Administrative Rules of the State of Illinois.

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5 Responses

  1. Christopher D Yaecker says:

    It was obvious a few years ago with all of the republican opposition to Dodd Frank that the pendulum would eventually swing back to deregulation of the mortgage market, and the great real estate collapse would be forgotten.  Now that Trump has filled his cabinet with Wall Street and banking executives, and republicans control Congress we will soon be back to those pre-2008 days when a bum on the street could quality for a $500,000 loan with a 125% LTV.  My appraisal business was brisk before the financial meltdown and I had more REO appraisals from 2009 through 2011 than I could shake a tape measure at.

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  2. Baggins - Financial education is in order. Baggins - Financial education is in order. says:

    Yes, gearing up for default servicing is always a wise move after periods of excess mortgage demand.  For regulations, no amount of regulation is effective, not more and not less.

    If only consumers were financially educated themselves, there would be no need for regulation.

    The only way to have a secure mortgage is to not have a mortgage in the first place, that’s the plain truth about debt and housing.  You don’t own that home and cannot call yourself a legitimate home owner, until the final payment is made and the title is in your personal safe.

    “We’re from the government and we’re here to help.”  Famous last words;  Yes government, please save me from myself.

    America rates as one of the lowest educators for financial literacy in the world.  A pigmie on a dung pile with a clay coin knows more about the value of money than many silver spoon Americans.  If we want to protect people from aggressive lending institutions, we might consider educating the youth rather than asking the aggressive lenders to police themselves.  Just saying, since revolving door regulation acts as a tool for monopolistic positioning of major corporations first and foremost, with protective regulatory structure of citizens obviously coming in second place or much further down the list of priorities.  Our monstrously oversized mortgage market and need for such robust regulation is a direct consequence of Americans not understanding how dangerous debt really is, along with government backing of private loans in the first place.  No amount of regulation will be effective at educating citizens on the dangers of debt, that has to happen in the school systems.

    Bring cash or go home, people look really sad whipping out the credit card every time and rolling debt along multiple instruments.  People who’s life plan is to stay in debt may actually be retarded and simply have never been properly diagnosed.  People who think the government exists to protect us from ourselves do not know what the purpose of representative democracy is all about.  If lenders lent their own money, they’d put much more value in the appraisers services.

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  3. WOW!
    I’ve never seen so much misinformation compiled within such a short article before!

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  4. Christopher, let’s not lose sight of the fact that it was not deregulation itself that caused the financial collapse, but rather efforts to shore it up after the repeal of Glass-Stegall 1934. The method of accounting itself was modified which in turn seriously affected the reserve holding requirements of banking institutions relative to their assets.

    Personally I’d like to see a return to Glass Stegall in which investment banking is completely segregated from consumer banking. Instead of interjecting clear partisan bias into the discussion, why not stick with the facts?

    “Dodd-Frank” was itself named after the two biggest villains in the financial crisis; Barney Frank AND Christopher Dodd. To think that any legislation drafted and promoted by these two self serving political hacks served to provide ANY meaningful regulation is simply naïve. You need look no further than the intentionally vague and feckless provisions for reasonable and customary fees enforcement.

    MOST of the burdens imposed by Dodd Frank have little to do with mortgage securities protections. Whether it should be replaced with something meaningful or not is open for discussion; but to pretend it provides any level of protection against the next meltdown is doing all a disservice.

    MOST of the “history repeating itself” mortgage abuses have in fact taken place in the past eight years. Whether they will continue is anybody’s guess…

    but NOTHING Trump has said or done suggests that he would weaken our banking system. Appointing people that actually know what the hell they are doing does not equate to selling out to Wall Street.

    If it did, then every President (republican or democrat) that has hired a Treasury Secretary out of the ex Goldman Sachs executives pool could be argued to have sold out too.

    Maybe THEY did.

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  5. Michael Edward says:

    To go back to the way it was before Dodd Frank would be a disaster for the appraisal industry.  I never want to deal with lenders again.  Having insulation from them was the best thing that ever happened to our industry.

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