Unintended Consequences of the Dodd-Frank Law and Potential Remedies

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Unintended Consequences & Regulatory Issues Facing the Real Estate Appraisal Profession

For well over a year, the Columbia Society of Real Estate Appraisers and five other nonprofit appraiser groups have been working on an industry paper entitled Regulatory Issues Affecting the Real Estate Appraisal Profession (subtitled: Unintended Consequences of the Dodd-Frank Law and Potential Remedies).

The paper is aimed at informing lawmakers of some of the unintended consequences of the Dodd-Frank law as it relates to appraisers and consumers.  We hope that lawmakers will address and correct some of the issues brought to light in this paper.

The Letter

Over the past year, a select group of professional appraisal organizations have met to discuss what are jointly viewed as major problems facing our appraisal profession. The results of these discussions are outlined below and in the accompanying document entitled Regulatory Issues Affecting the Real Estate Appraisal Profession.

Real estate appraisers are currently experiencing significant pressures that threaten the structure and integrity of the appraisal profession while posing financial risks to consumers. We believe that the declining attractiveness of the appraisal profession to new entrants is a major problem, leading to a dwindling qualified appraiser population, lack of transparency in the appraisal process as underwriters off-load risk, and consumers being offered fewer and lower quality professional tools related to one of their most significant financial investments for which they are required to arrive at a fully informed, intelligent decision.

We, the undersigned professional appraisal organizations, seek the following actions to help stabilize the market for practitioners and consumers (taxpayers) alike:

  1. Create a more effective training structure to support Appraiser Trainees in order to support and promote growth in the appraisal profession.
  2. Improve transparency in the valuation process by:
    1. Enforcing consistency in state licensing requirements.
    2. Supporting mandatory licensing rules that require the use of licensed or certified appraisers for any services for which an opinion of value for real property is developed.
    3. Requiring complete disclosure and breakdown of the components covered by the appraisal fees.
  3. Lower the de minimis threshold from $250,000 TO $25,000, providing consumers, at all levels, the opportunity to benefit in their decision making process by providing a professional, unbiased opinion of value.
  4. Enforce payment of “customary and reasonable” fees to appraisers to protect the profession against declining fees and the assumed related decline in appraisal quality.
  5. Encourage heightened appraisal scrutiny of all loan types including Qualified Mortgages and government-sponsored entities (GSE) by amending regulations to ensure that lenders are held to the same standards as that required of higher-risk mortgages.
  6. Relax the three-day requirement for appraisal fee estimates by lenders to allow them sufficient time to estimate these fees given the potential complexities of appraisals versus other required criteria, such as routine credit reports, flood certifications, and tax services.
  7. Support additional consumer access to educational products relating to the appraisal process.

The attached summary describes each of the actions listed above along with suggested solutions. In addition, a more detailed analysis including the historical development of the issues is available at http://columbiasociety.org.

We are very interested in discussing this issue with you or representatives from your office. Please contact us at 800-827-2720 to discuss and/or arrange for a date to meet so that we may discuss in person.

Respectfully,
American Society of Appraisers
Massachusetts Board of Real Estate Appraisers
Columbia Society of Real Estate Appraisers
National Association of Independent Fee Appraisers
Instituto de Valuadores de Puerto Rico
North Carolina Professional Appraisers Coalition

You can review the documents related to the paper by visiting the CSA website.

Bill Smolen, CSA-G, SRA, New York State Appraiser

Image credit flickr - Klesta
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4 Responses

  1. Retired Appraiser Retired Appraiser says:

    I’ve always found the words “unintended consequences” to be laughable with regard to what took place.  HVCC succeeded beyond their wildest dreams in accomplishing what they INTENDED it to do.  It has poured tens of millions of dollars into the pockets of banks each year, for SIX LONG YEARS via their AMCs.  You guys will be discussing remedies 20 years from now; long after the retirement of the last HVCC rape victim.

    Disrespectfully

    Retired Appraiser

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  2. Tom D says:

    A 1 page paper by me.  Pay the appraiser more money.  All  the years of listening to how we should improve the holiness of our profession.  That concept worked really well.

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  3. Not exactly a widespread consensus of appraisers.

    I don’t want to shoot anyone’s efforts down, and these are far better than nothing, but they still leave all the loopholes for lenders and AMCs in place. They are still laudable goals overall.

    Delete the meaningless word “customary” from ALL state and federal regulations. Replace it instead with only the work “reasonable” and then DEFINE that word and accompany failure to pay reasonable fees with fines of not less than ten times what the fee should have been!

    My suggestion is ‘reasonable fees would follow the federal civil service pay scales for grades GS7 through GS 15  (with 14s and 15s being almost purely managerial appraisers) based on license levels and years of experience. Civil service has ALREADY DEFINED REASONABLE salaries for appraisers at all levels. Add in the state location premiums and factor in home office overhead, vacations, insurance and retirement and divide those by the number of appraisals an appraiser can do 100% USPAP compliant in a 40 hour work week and you have your “reasonable” fee minimums.

     

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    • bubba jay bubba jay says:

      well said Mike. there might be a lot of good appraisers out there, but anyone who is doing appraisals for $300 or less and are not complaining about the fees being inappropriate, is lousy at running a BUSINESS. until appraisers figure that out . . . . .

      the bleeding continues . . . . .

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