A Cry from the Appraisal Trenches: The Fall of GSE Oversight

Picture this: a system built to protect homeowners, backed by taxpayer dollars, now teetering on the edge of betrayal. The regulatory framework governing Government-Sponsored Enterprises (GSEs) was once a fortress of consumer protection, transparency, and fairness. As an appraiser, I’ve watched this fortress crumble. The rules imposed on GSEs and their partners—our trade-off for their congressional charter—have been chipped away through years of cunning maneuvers by trade groups and stakeholder interests. What’s left is a hollow shell, far removed from the original vision that fueled our work. The result? A housing market teetering on the brink, with appraisers like me caught in the crossfire.

Our Struggle in the Appraisal Arena

The appraisal industry, where we pour our expertise into ensuring fair valuations, has been gutted by regulatory sleight-of-hand. The MISMO standards gave birth to the Collateral Underwriter (CU), which plundered our intellectual property without a dime of compensation. Worse, that data was turned against us, hammering small businesses like ours into the ground. Enter the Appraisal Management Companies (AMCs)—the wolves in sheep’s clothing. Licensed only to manage appraisals, AMCs have sprawled into services meant for tightly regulated lenders. This tangled web lets lenders and AMCs dodge accountability, shoving liability onto our shoulders while shielding themselves from consumer lawsuits.

AMCs hit us harder with quasi-legal “junk fees,” as the Appraisal Regulation Compliance Council (ARCC) group has screamed for investigations. The Consumer Financial Protection Bureau’s (CFPB) Regulation Z Customary and Reasonable (C&R) fee interpretation gutted the Dodd-Frank Act’s mandate for market-rate fees—fees we’d earn without AMCs skimming the top. This loophole let AMCs sidestep independent fee surveys or Veterans Affairs (VA) local rates, dodging $10,000 to $20,000 daily fines per appraisal. Add predatory AMC practices and the “separation from loan production” rule, and it’s no wonder so many of us have fled GSE work, abandoning the consumer protections we once championed.

The regulatory rot doesn’t stop there. Rising debt-to-income ratios, loosened loan-to-value (LTV) standards, hybrid appraisals, unlicensed property data collectors, drive-by services, and a flood of substitute valuation products—evaluations, broker price opinions, desktops by out-of-state strangers, and automated valuation models (AVMs)—have sidelined our local expertise. The recent inter-agency AVM final rule only greases the skids, prioritizing these shortcuts over the rigorous valuations we provide.

The Bigger Scam: FNMA’s Loan Shell Game

Zoom out, and the picture gets uglier. The Federal National Mortgage Association (FNMA) wholesale loan program feels like a front to hide bad actors and shoddy work. Defaulted loans are repackaged as “reperforming” with sweetheart terms—40-year loans, 115% LTVs, or deferred payments handed out selectively under Diversity, Equity, and Inclusion (DEI) or other special lending banners. Jeremy Baggott called it a clandestine welfare program, and he’s not wrong. It’s corporate welfare, too, with properties funneled to elite investors at fire-sale prices, never reaching the public through programs like Good Neighbor or open Multiple Listing Services (MLS). These homes are hoarded as investment units, jacking up rents and sale prices, fueling a housing bubble, and strangling supply. And who gets the blame? Us, branded as “racist appraisers” while our voices are silenced under the banner of “appraisal modernization.”

Mic check. One two one two. Is anyone there? Is this thing on?

The CFPB’s Ticking Time Bomb

Here’s where it gets wild. The CFPB’s potential collapse could be a game-changer for us. If it goes down, so does its Regulation Z safe harbor that let AMCs lowball our fees. Without it, AMCs and lenders could face $10,000 to $20,000 fines per appraisal for dodging market-rate pay. A federal injunction has stalled the CFPB’s demise, but if it falls, the AMC model could implode—or lenders might finally have to foot the bill instead of bleeding us dry through fee splits. That could bring our best and brightest back to GSE lending, leveling the playing field with fairer work distribution.

A Battle Plan to Save the System

It’s time for Federal Housing Finance Agency (FHFA) Director William Pulte to step up and fight for us:

• Torch the AVM final rule and its DEI-driven “disparate valuation” algorithms that meddle with our work.
• Slash appraisal waiver thresholds (currently a reckless 98% LTV) and tighten DTI ratios to keep us in the game.
• Ban hybrid appraisals, property data collectors, evals, BPOs, and other flimsy valuation products for high-risk loans.
• End the perverse incentives tying GSE executive pay to sidelining us, falsely painting our work as “biased.”
• Stop the blacklisting, fake performance grades, and shady tiered rankings that lock us out. Replace them with a VA-style round-robin system for fair work distribution.
• Declare the CFPB’s safe harbor on Regulation Z C&R fees dead—or enforce market-rate pay for our work, effective now.

Why We Matter

We appraisers are the GSE system’s backbone, the last line of defense against fraud and predatory schemes. But regulatory decay and AMC greed have reduced our role to a flicker of its former strength. Restoring our place with fair pay and real oversight isn’t just about saving us—it’s about protecting consumers and stabilizing the housing market. So, I’m tapping the mic one more time: Is anyone out there? Is this thing on?