NAR Releases Statement on Appraiser Independence

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NAR Releases Statement on Appraiser IndependenceThe National Association of Realtors (NAR) released a statement supporting the independence of appraisers and the appraisal process on their website while expressing their concerns about interference in the appraisal process. The NAR Appraisal Committee will meet this Wednesday, May 11, 2011 at 8:00 A.M at the Marriott Wardman Park Hotel, 2660 Woodley Road, NW, Washington, DC. One item sure to be a topic of discussion is the recently released Statement on Appraiser Independence.

NAR Statement on Appraiser Independence

“The role of the appraiser is to provide an independent and impartial analysis of real property. This analysis is a critical component of the mortgage transaction and, in recent months, has become the subject of unnecessary pressure. Over the last 18 months, new laws, rules, and regulations have been implemented in an effort to protect the independence of the appraiser with limited success.

The National Association of Realtors® strongly supports the independence of appraisers and the appraisal process. Compromising this independence will impact the quality of appraisal reports adding risk for both consumers and lenders.

In recent months interference in the appraisal process has unnecessarily put at risk a sustainable housing recovery. Our member appraisers are dealing with changes in the real estate market due to economic conditions in the country, their long time business relationships with market participants have been destroyed and their business models have been shattered. The latest blow is their enduring the consequences of the implementation of aspects of the Dodd-Frank Act.

Appraisers are being asked to include distressed transactions as comparable sales, to complete the appraisal in an unreasonable and unrealistic short time span, and to comply with a scope of work not justified by the fee being offered. In some situations appraisers are required to provide as many as eight comparable sales and/or listings. NAR believes this is interference in appraiser independence, causing harm to the real estate recovery, and harmful to consumers.

This month, compliance with the Federal Reserve’s interim final rule amending Regulation Z (Truth in Lending) became mandatory. Early reports indicate that some appraisal management companies may be misinterpreting the reasonable and customary fee requirements of the statute and the interim rule. Although NAR has not commented on the customary and reasonable fee language of the statute or the interim rule, we are concerned that unfair treatment of our member appraisers will further erode their businesses and impact the quality of appraisal reports, adding risk for consumers and lenders.

NAR 2010 President Ron Phipps said “asking for up to 10 comps, reducing turnaround times, and expanding the scope of the assignment without appropriately adjusting the fee is adding unnecessary risk to an already fragile mortgage market system. We must maintain an environment where our independent appraisers are treated fairly as they are the lynchpin of the mortgage transaction.” NAR has long advocated for an independent appraisal process and enhanced education requirements to promote public trust in the appraisal profession. NAR wants to ensure the consumer is provided the service bargained for along with a well-supported, credible opinion of value.”

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3 Responses

    • Jeremy W Hall Appraisals - Colorado Jeremy W Hall Appraisals - Colorado says:

      To whom it may concern:

      Any revision to, or replacement of the follow criteria stated clearly in Dodd-Frank, a federal law, would require Congressional Amendment – not arbitrary gross misinterpretation of the actual LAW: Dodd-Frank ‘‘(i) CUSTOMARY AND REASONABLE FEE ‘‘ Fee studies shall EXCLUDE assignments ordered by known appraisal management companies.” Kindly advise when the fictional “Option 1” now in the published Interim Final Rule will be removed. Thank you!

      Predatory lending practices and subsequent preferential appraiser selection choices is an ongoing event which the implementation of HVCC, and related policies have not successfully managed. AMCs have walked right over the appropriate intention of their business position to quell predatory lending, & real estate valuation flipping & flopping, the same way they have walked right over C&R appraiser fee laws. Lack of round robin rotating fee panels allows for a multitude of advocacy related problems in real estate appraisal distribution.

      What works is the tried and true traditional approach, similar to the VA panel, as well as many existing in house distribution rotating panel credit union methods. Having a biased middle man who seeks to appease the wishes of lending client commission based brokers is not much different than an appraiser being pressured directly by a biased lenders agent who utilized preferential assignment practices at the expense of fair consumer protection to maximize their profits. In fact, they are markedly similar.

      The AMC will preferentially choose appraisers that show advocacy in favor of the lenders more often than not. Lack of rotating panels means one single appraiser can cause a systemic problem with valuation security and that can go on indefinitely because the AMC will not risk losing their lender clients any more than that one bad appraiser will risk losing his preferentially assigned appraisal work. Independent valuation opinions essentially cannot coexist within a climate of preferential appraisal assignment.

      These are advocacy related issues which drive the entire structure of appraisal ethics. An appraiser must not be an advocate. However, feeding consumer appraisal charges back to the lender, their subsidiary AMCs, or even making deals work so an appraiser can keep up their automated AMC grading to receive more work, are points in fact which are at odds with proper ethical appraiser rules.

      Is it too late for someone who knows how this works to examine this? The current implementation and interpretation of these rules is clearly erroneous. “The fox guarding the hen house” rings so true. The appraiser is many times the only person on the front end of loan to be a truly unbiased party, they are supposed to be uniquely qualified to assure the collateral worth is adequate. Preferential assignment practices have and will continue to cause these basic checks and balances involving appraisers, salesman, and brokers to be meaningless.

      Thank you – Jeremy

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      • Retired Appraiser Retired Appraiser says:

        To sum it up in a nutshell: “It’s legal if banks say it’s legal”.

        Banks say it’s legal.

        How does that rub ya? LOL

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