FIRREA Under Attack!

FIRREA Under Attack - Protecting Homeowners from Appraisal Loopholes

…the federal agencies charged with implementing Title XI of FIRREA have taken steps to limit the number of transactions for which an appraisal is required…

Congresswoman Maxine Waters and Congressman William Lacy Clay request a formal study/investigation into Title XI (FIRREA) and the recent dilution of its intent by the Federal Agencies. The letter to  Gene Dodaro, Comptroller General, Government Accountability Office, addresses threshold increases, regulatory exemptions, appraisal waivers, the North Dakota appraiser certification waiver and evaluations in lieu of an appraisal. It is clear the Chairwoman of the House Financial Services Committee and Subcommittee Chairman on Housing, Community Development and Insurance see the issues surrounding the recent events.

This is a direct result from VaCAP and other coalitions being present at meetings and communication with our representatives. This is an excellent example of how we are making a difference! Getting them to listen is the first step.

Join VaCAP here.

See the News Release here.

Sticking with the theme of change. HousingWire published an article on the benefits of firing a difficult client. Although the article specifically talks to Realtor agents, the principle easily transfers to AMCs/ lenders and others who order appraisals. There are some really good points and the benefits far outweigh keeping that difficult client. See the article here.

Waters and Clay Request GAO Study to Protect Homeowners from Appraisal Loopholes:

We write to request that you undertake a comprehensive study of the implementation of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by the relevant federal agencies. We are concerned about dilution of the original Congressional intent of Title XI of FIRREA through various exemptions from the requirement to obtain an appraisal. We are also concerned that the current rules implementing the appraisal requirement may be insufficient to protect homeowners from the risks associated with an inaccurate home valuation. We respectfully request a Government Accountability Office (GAO) study regarding these issues, including recommendations for how to ensure that the safety and soundness of our financial system is preserved and that homeowners are protected from mortgages with inaccurate valuations.

Title XI was enacted by Congress in response to the numerous valuation related issues that came to light as a result of investigations and hearings into the causes of the savings and loan crisis of the mid-1980s. These appraisal regulatory provisions were enacted to help ensure the future stability of the deposit insurance fund. While Congress envisioned that most real estate related transactions would be covered by Title XI, that is no longer the case. The Appraisal Subcommittee (ASC), the entity created and charged under Title XI to monitor the appraisal related actions of the Federal financial institutions regulatory agencies (Agencies), estimated in its 2018 report to Congress that “at least 90 percent of residential mortgage loan originations are not subject to the Title XI appraisal regulations.”

Over the past few decades, however, the federal agencies charged with implementing Title XI of FIRREA have taken steps to limit the number of transactions for which an appraisal is required.

Threshold Increases: The de minimis threshold, the amount of the transaction below which an appraisal is not required, has been increased numerous times. The agencies quickly raised the amount from $50,000 to $100,000 and then again to $250,000. Earlier this year the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (FRB) all increased the threshold to $400,000. The National Credit Union Administration (NCUA) has also recently proposed the same increase. According to the National Association of Realtors (NAR) the average sales price of an existing home in October of this year was $270,900.

Regulatory Exemptions: The Federal financial regulatory agencies have adopted thirteen regulatory “carve-outs” to reduce the number of transactions that are classified as federally regulated transactions and thereby covered by the provisions of Title XI. One major exemption is

a residential real estate transaction in which the appraisal conforms to the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation appraisal standards applicable to that category of real estate.

Even though such transactions remain in the lending institution’s portfolio and are covered by the deposit insurance fund, under this exemption they are not considered federally related transactions subject to the protections of Title XI.

Appraisal Waivers: Title XI contains a provision for the ASC to grant temporary waivers if it is determined that there is a scarcity of appraisers. That waiver language was intended for initial transition purposes only, not for use thirty years after the implementation. Additionally, the waiver for the state of
North Dakota granted this year by the ASC, the majority of its members appointed by the Agencies, was approved despite the absence of data indicating that a scarcity of appraisers existed.

Evaluations as a substitute for appraisals: The current regulations allow the use of “evaluations” instead of appraisals for transactions below a specified threshold.‘ The agencies’ guidance for conducting evaluations contains no requirements and no standardized methodology; and there is no education requirement for the person conducting the evaluation. Because the agencies’ provisions for evaluations have been issued as guidance, it is not even clear to what extent they are mandatory. It is likely that evaluations will rely heavily on automated valuation models (AVMS). But the agencies have not yet promulgated regulations mandated by the Dodd-Frank Act to implement quality control standards for AVMs.

We request that you conduct a review of the impact of these changes, including the potential risks that they pose to homeowners and the safety and soundness of our financial system. If you have any questions about this letter, please contact Darrell “Rico” Doss in Congressman Clay’s office at, or 202.225.2406.

Sincere regards,

Wm. Lacy Clay, Chairman HCDI Subcommittee
Maxine Waters, Chairwoman Financial Services Committee


VaCAP Board
Image credit flickr - mush m.
VaCAP Board

VaCAP Board

Coalition of individual appraisers working together to unite, promote and protect the collective interests of all appraisal professionals in Virginia; to promote needed changes in laws, rules, regulations, policies and standards affecting all appraisers in Virginia; to observe and report the actions of regulatory, legislative, oversight, and standards-setting entities of the Commonwealth.

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25 Responses

  1. Avatar Bill Johnson says:

    Rome is burning and continues to burn. Time to go read a fluff piece on the coach’s site “You want to become an appraiser”

    Seek the truth.

    • Avatar Steve says:

      Bill, Your comments about Dustin are getting old. Maybe you should find some thing else to worry about.

      Seek out homie!

      • Avatar Bill Johnson says:

        Steve, if just one in a thousand want to be business owner appraisers reads this blog post here first (reality of the business), and makes an educated decision accordingly on their professional future, versus reading Dustin’s fluff piece “You want to become an appraiser”, and jumping in before checking the water, then I call that a success. As redundant and tiring as it might be, the truth doesn’t take a day off as someone new everyday needs to be informed.

        Did you spend 30 minutes today talking / listening to an agent about the underbelly of our industry, I did? Perhaps her next buyer will qualify for an appraisal waiver, but just maybe she will remember our conversation and educate them to the importance of independence. Hell, perhaps your next assignment will be because of a seed I planted 10 years ago (HVCC), or 10 days ago.

        Your welcome.

        If only those newbie appraisers had someone to sell them a dream and the brochure literature.

        Seek the truth.

      • Avatar JohnnyQ says:

        Bill, sounds like you’ve got all your eggs in the lender work basket. Maybe you should consider diversifying.

        • Avatar Bill Johnson says:

          Been there done that Johnny Q and reinvented myself many times to fit the need of the market. Currently, between the VA, and 3 credit unions I have all the work I need to make anyone unhappy (ha ha). I’m blessed to have mine, but understand for a variety of reasons that many don’t (locally / nationally), thus my point of view is often not of my world, but rather the world of others.

          As it relates to diversifying to say civil use work, one very important factor I take into consideration is what I call the education of. Meaning, why not take the time and energy to serve / educate a few local clients (weekly, monthly meetings), versus having to always inform and educate new ones.

          Seek the truth.

          • Avatar Larry Fuller says:

            This is where we as professional appraiser have failed (educating). “As it relates to diversifying to say civil use work, one very important factor I take into consideration is what I call the education of. Meaning, why not take the time and energy to serve / educate a few local clients (weekly, monthly meetings), versus having to always inform and educate new ones”

            Educating instead of explaining on the back end. This educating /consulting effort must be a part of a successful appraiser’s tool kit. Lately, it’s a big part of what is necessary on my end after delivery of a report for clients to fully grasp what an appraisal or a valuation entails.

            • Avatar Bill Johnson says:

              Yes Larry, the education of over time has meant many things to me. Education of, meaning I was a trainee for 4 years before I ever signed a report solo. Education of, as the trainee became the trainer. Education of, meaning I was the business owner and no longer the employee / independent contractor. Education of, civil use, tax assessment appeal, residential lending. Education of my current residential clients. Education of, every agent, buyer, homeowner I come in contact with.

              Seeking the truth and attempting to educate since the 1990’s.

              • Avatar Tom says:

                You are so special. Must have way too much time on your hands. You haven’t done anything different than any other long standing, prudent appraiser. Must be trying to impress the newbies.

                Your grind is old…seek a life…

                • Avatar IMJSAYN says:

                  Bill is special and so are all appraisers refusing AMC work! If that’s you Tom, then you’re special too 😉

                • Avatar Bill Johnson says:

                  Embrace the grind Tom and stand up to those are are trying to knock us down and profit off of the misery of many.

                  Yes Tom, everyday I try and be special.

                  Seeking the truth and welcoming the grind.

                  • Avatar Tom Diedrichs says:

                    FYI Bill, I haven’t done any work for an AMC in ten years. Every time I read a post from blog, it reminds exactly of why not!

                    I know the truth…

                    • Avatar Bill Johnson says:

                      In knowing the truth Tom, spread the truth. Tell that credit union borrower about your 25 years in the industry. Tell that veteran that you’ve completed 10,000 assignments while the typical realtor sales 3.75 homes a year. Go speak with your local area assemblywoman where in my case it’s Lorena Gonzales sponsor of the disastrous California AB5 (yes I yelled for her to seek the truth).

                      Tom, if there are 50,000 true practicing appraisers in the nation (1,000 per state), then you and all of us are special.

                      Seek the truth.

  2. Avatar Koma says:

    We all know this mess will not change until the next housing market fiasco. It seems to never happen before then. Keep on spinning though.

  3. Avatar Pat Turner says:

    Sooner rather than later

    • Baggins Baggins says:

      Great article Milton. It’s the first receivers of money argument. He tip toed around calling it QE. It’s QE, plain and simple, again.

      The repo’s bail out is the tip of the iceberg. The fed built up these companies, funded them, they were first receivers of money, enjoyed negative lending rates in a climate of non accountability. Then they needed even more because since the beginning, the growth was not sustainable under normal free market principals. Lessons in the invisible hand and poisonous protectionism.

      Language change, I’ll have to stop using the line that ‘because it’s an frt’… Corrective actions might include revisiting regulatory proposals. There were proposals to furnish consumers each and every eval created to include clear disclosure of methodology, the true spirit of the C&R rule 10k/20k, better disclosure, and of course; intended prohibitions on risky trading, actually creating better transparency and accountability throughout the financial sectors.

      Gotta love the Tylers! Dude’s on the radio are talking about how it’s all 10x the size of what it was 2008 time frame. Revisiting firrea, regrettably, is only a band aid and will not stop the inevitable pending consequences of the federal reserves biased and secretive activity. Per your article, the senate’s banking committee’s first and final mistake, comes from recognizing the FED as a legal entity worthy of any trust in the first place. Raising deminis and similar activity throughout every sector is inevitable because the debasement of the currency continues at a rapid pace. Let’s tie every recognized government table to the comparative actual value of cash in this fiat system. The effective demin would again be somewhere in the 10k range. People have not had ‘appreciation’ of their homes, they certainly have seen a hell of a lot of more cash floating around. We’re only now seeing the inflationary effects of QE from several rounds ago. Now they can’t print it fast enough to keep up with even themselves. The American consumer always loses. In that regard, don’t worry about it because until a radical restructuring happens, the inevitable is the inevitable. Protect yourself.

      • Avatar Realrose says:

        So mr baggins, why not call a spade a spade? Libertarians like you have taken over our government with the help of the tea party and republicans who covered up for trump’s crimes; he will take our country down and bankrupt everyone in it because he wants all the money, but has no qualifications for the office he holds; he does more damage each day, so I know he and his greedy friends are rigging the mortgage market, the stock market and pretty soon there won’t be any food in the grocery market when he gets done with the farmers. wake up baggins and stop your libertarian (selfish greedy bastards) speak. you are part of the problem, not the solution.

        • Avatar Mark says:

          What does anything in your statement have to do with appraising real estate

        • Realrose, we have asked you several times to be respectful of the opinions of others and not to attack someone for having an opinion that differs from your own; to treat other commenters and the articles’ subjects and authors the way you’d like to be treated. Be respectful — not profane, offensive or inflammatory. Your comments are not constructive and certainly not helpful. This is your last warning. You are one step away from being banned from AppraisersBlogs! We count on your cooperation and appreciate your support!

  4. Avatar Mark says:

    I don’t see what the problem is.

    Bill Johnson, sad you had to wait 4 years to sign your first report.

    Signed my first report, apartment complex, 2 months out of college.

    • Avatar Bill Johnson says:

      Mark, I did not say one HAD to wait 4 years to sign a first report solo, but rather for a variety of reasons that is the path and opportunity I was blessed with. Are you aware Mark that at one time the state of CA required NO LESS than 2.5 years of experience FROM RECEIPT of one’s trainee license to become a certified appraiser? What happens if you obtain 1.5 years of experience pre-license, have a supervisor signing out of trust for some time, and ultimately work the requirements for 2.5 years post license to become certified? Ask a friend, but 1.5 + 2.5 equals 4 (years).

      Thanks for asking Mark, but are you aware of the past difficulties and timeline (current unknown) to become VA approved in the state of California? One must apply every year for possible approval, but within my circle the average wait time for approval is 7 years. Don’t even get me started on a past client (New American Funding), who required 10 years of experience just to apply.

      Mark, if in fact you signed your 1st appraisal solo just 2 months out of college, be sure and thank all of your AMC clients for their efforts in lowering the bar for entry.

      As my good friend would say, “Go make up a value”.

      Seek the truth.

  5. Avatar Mark says:

    I signed my first appraisal report. A full Narrative of the bunkhouse Apartments in Anaheim, California in March of 1985 while working for One of the most prestigious appraisal companies in the country. Well before there were any requirements to become an appraiser? Certification came in 1989 with FIRREA. Back then appraisers are trying to figure out what regulation R41b ment. Then R 41C.

    I just started a praising residential last year. For the first time since high school. And no, I don’t know. How long it takes to get on the VA list?

    The client for my first signed appraisal was the FDIC.

    • Avatar Bill Johnson says:

      My point to all of this Mark and tying it together with this blog, is that we have value even though the powers that be generally don’t want to recognize (waivers, etc.), and or choose to ignore for their own profits.

      Keep up the fight.

      Seek the truth.


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FIRREA Under Attack!

by VaCAP Board time to read: 4 min