VaCAP letter to AG Cuccinelli RE Violation of Virginia Code
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The mandates override the Virginia Code
Re: Impending Violation of Virginia Statute 18 VAC 130-20-160.
Dear Attorney General Cuccinelli,
There is an extremely urgent and important matter that the Virginia Coalition of Appraiser Professionals (VaCAP) wishes to bring to your attention. The Government Sponsored Enterprises (GSEs), which are The Federal National Mortgage Association (FNMA) and The Federal Home Loan Mortgage Corporation (FHLMC), have mandated Real Estate Appraisal reporting requirements that will severely compromise the integrity of information provided in appraisal reports and potentially eliminate the private appraisal profession. This new, comprehensive format will cause unnecessary risk and expense to the citizens of The Commonwealth of Virginia.
A Uniform Appraisal Data (UAD) format is to be effective 9/1/2011. The proposed formatting requires an appraiser to provide a proprietary code unique only to the FNMA and FHLMC developers, rather than a true description of the property. This UAD code will result in incomplete and/or misleading information that must be “corrected” or supplemented in the often unread or overlooked narrative body of an appraisal report. In addition, the format is designed for the analysis of properties in major metropolitan or large suburban communities. This causes additional discrepancies in the rural Virginia market areas, which compose the geographically predominant portion of the Commonwealth. The GSEs claim the UAD codes, originally announced 12/2010, were developed “at the direction of the Federal Housing Finance Agency (FHFA)”, however the concept for a proprietary standardized data set is not revealed in any FHFA documents researched.
The GSEs have previously and currently suggest appraisal report underwriting guidelines. However, absent any relevant legislation, or executive order, are now setting Federal mandates to appraisers. The mandates override the Virginia Code, which for appraisal procedures is the Uniform Standards of Professional Appraisal Practice (USPAP). This is another case of a quasi-Federal agency usurping Virginia law/code, and it will force Virginia appraisers to opt either for UAD or Virginia law compliance. UAD compliance will be the necessary choice in most instances because of the GSE domination of the market. This will cause a series of omissions, resulting in a misleading appraisal report and placing appraisers at risk for license suspension or revocation.
The GSEs are not the primary named client and only one of several lesser “intended users”. As an intended user, the GSEs do not retain ownership of an appraisal report, yet they intend to extract and utilize the data for purposes other than those stated in the appraisal report. The GSE’s stated purpose of the appraisal report is “… to provide the lender/client with an accurate, and adequately supported, opinion of the market value of the subject property.”(emphasis added). The UAD mandate does not support this stated purpose of the appraisal and is tantamount to government-sponsored theft of the appraiser’s personal research and data that will be used to further reduce the reliance on appraisal services.
The stated purpose for the UAD standardization is for review and to capture “consistency”. This has been highly influenced by private entities, outside the Commonwealth, in order to utilize the extracted data to develop
Automated Valuation Models (AVMs). AVMs are computer-driven valuation tools, for use in lieu of independent appraisers, which politically outsource income taxes from Virginia residents. AVMs have long been proven to be unreliable and dangerously inaccurate at estimating market value, especially in rural areas. Facilitating the shift away from professional appraisal analysis and geographic expertise toward computer-generated value estimates will be disastrous for the housing market and eventually the entire financial system. The Commonwealth of Virginia should not continue to pay the price for bad Federal policies that usurp the rights of states.
The precedent set by demanding that deceptive information be inserted into appraisal reports will potentially allow any client to require an appraiser to enter fabricated data, rendering the value conclusions unreliable. This is not a prudent objective for the state of the housing market or economic recovery. Not only does the mandate do nothing to enhance the usefulness or accuracy of an appraisal report, it is an obvious obstruction of appraiser independence that federal and State legislation purports to protect. This is especially egregious considering Fannie Mae and Freddie Mac’s track record of inefficiency and their major contribution to the housing bubble and eventual collapse. Taxpayers have already contributed $130 billion to bail out the GSEs, and the UAD will lead to further decline in the housing market, more failed loans, and greater cost to the taxpayer. Additionally, it will drive the already battered appraisal profession to virtual extinction.
Attached are copies of correspondence from the Appraisal Standards Board of the Appraisal Foundation, as well as the Association of Appraisal Regulatory Officials (AARO). Both object to the implementation of the UAD. We beg you to consider the ramifications of the UAD mandate and take whatever action is legally appropriate toward resolution of this matter. Virginia appraisers comprehend the necessity for in-depth research on the part of the Attorney General’s office, but implementation of the UAD is nearly upon us. Therefore a temporary stay order would be of substantial benefit until the Commonwealth is able to take a more substantive position.
Direct correspondence and website postings reveal that GSE officials intend to implement the notice as scheduled on 9/1/2011 devoid of any meaningful clarifications or vetting, since the introduction in 12/2010. In the interest of brevity, those additional details and documentation will be provided as your office deems appropriate.
There are associated issues regarding noncompliance with Virginia statutes, which would best be discussed in person should you elect to grant our organization’s representatives audience at your earliest opportunity. Thank you for the priority given to this matter. We look forward to your response.
On Behalf of the Board of Directors
Virginia Coalition of Appraiser Professionals