Declaration of Appraisal Independence
Real Estate Appraisers of America: Declare appraiser independence by prohibiting lenders from having any ownership or stake in the real estate appraisal process.
This declaration of the real estate appraisal workers of the United States of America and those who stand together with the appraisal industry is made subject to the understanding that commercial and financial events guide growth and development of society, and that financial products and services are integral to the necessary and successful health of our citizens. It is further understood and recognized that the fair and independent valuation of underlying assets backing financial products are critical to investors, borrowers and all others who rely upon the safety and soundness of these financial products.
United we hold truths and beliefs, that all men and woman in their pursuit of life, liberty and happiness, must preserve their unalienable rights to buy a home, borrow money, invest in financial instruments, and plan for retirement without fear that their life savings are being exposed to unnecessary and preventable risk.
To secure these rights, it is necessary to ensure the fruits of our labor are not eroded or confiscated through actions of others. When it becomes apparent over the course of history that there are those who create financial products for merely their own self interest and have no regard for the harm they are bringing to mankind, and are furthermore allowed to continue to grow larger without the necessary checks and balances that are required in a functioning democratic society – the time has come to act.
Mortgages provide a significant portion of the balance sheet assets of many of the world’s largest financial institutions, including banks, insurance companies and pension funds. Mortgages are used to secure derivative products that are sold by Wall Street to the workers of the world through their company or public retirement funds.
Families and individuals must be able to depend upon credible, fair and nonbiased valuations of the underlying real estate assets that secure their retirement and savings. Congress recognized the importance of real estate appraisals to a successfully functioning financial economy in the last two major market corrections. The Financial Reform, Recovery and Enforcement Act of 1989 established licensing laws for appraisers in mortgage transactions and provided a state regulated framework for supervision. The Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 outlined strict appraiser independence rules.
While a regulatory framework exists for an independent appraisal industry, complete separation between those that create and sell financial products and those that value said transactions – does not exist. Lenders are exempted from many of the rules established by Dodd-Frank and continue to be allowed to own and control the production of appraisals.
Recently proposed rules promulgated by the federal banking regulators are attempting to further erode appraisal independence by allowing entities, including correspondent lenders, to bring the appraisal function in-house and avoid many of the laws passed by Congress to protect the independent valuation of real estate assets.
An inherent conflict exists when those that originate or securitize mortgages are allowed to own or control the selection of the appraiser. Division of responsibilities within an organization cannot mitigate this conflict. It is common knowledge in the industry that mortgage banking organizations continue to select appraisers based on the preferences of commissioned loan officers. While this practice is illegal, the industry has to this point only made unsuccessful attempts to cure the root ailment. This scenario cannot be allowed to continue if the appraisal profession, which is so vital to a healthy economy, is to remain credible and viable.
Beyond these conflicts
of interest, many lenders are using their ever-growing size and strength as a weapon to intimidate appraisers with enormous requirement creep, unnecessary blacklisting, exclusive panels, downward fee pressure, and value pressure. Lenders relentlessly work towards further consolidating their power, and by doing so increase their leveraging strength over appraisers. Correcting this serious market structure problem as it relates to the appraisal function is also requisite to the long-term health of appraisers and the valuations that citizens depend on them to provide.
To solve these problems, we declare that any organization originating loans that might be sold into the secondary market must be strictly prohibited from having any form of ownership or other conflict of interest in the appraisal function. Origination of these loans must be supported by at least one truly independent appraisal that is subject to review by borrowers and investors. Since lenders should not be allowed to own or control an appraiser, the loan officer should be tasked with routing the appraisal order to an approved and vetted third party to manage the appraisal process, instead of being forced to route the appraisal order to the lender’s internal appraisal pipeline where various abuses are currently taking place. The third party must be totally independent and able to demonstrate absolutely zero conflict of interest. Using loan officers to select among approved, vetted, independent and now heavily regulated third parties, gives power back to the people in the communities where the service is performed and will force these third parties to compete for appraisal orders by way of best practices, thereby benefiting all parties involved. Furthermore, once valuations are truly independent, they should be easily portable between lenders, no longer forcing borrowers to incur unneeded, redundant and expensive second valuations.
The time has come for the total separation of valuation from loan production. The importance of a healthy profession capable of delivering truly independent, accurate and fair valuations of assets is too critical.
Submit your signature by visiting APC’s Declaration of Appraisal Independence Signature Page
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I completely DISAGREE with the form and conclusion of this so called ‘declaration’. It is noting more than a self serving promo for AMCs as near as I can tell.
I’m a big boy now. I learned how to say “NO” to lenders, and brokers a long time ago.
I would prefer that lenders take back the appraisal functions “in house” and hire professional appraisal staff to order and service them. The so called independent third parties have only proven themselves to be so incompetent and uninformed about the whole process, as to render it nearly meaningless.
When independence is a virtual guarantee of incompetence, we need to take another look at the so called ‘independents’ administering it.
“The Appraiser Prosperity Coalition was formed by anonymous real estate appraisal industry insiders who must protect their identity in order to maintain their livelihood.” / If the cause is just, the people backing it don’t need to be anonymous. We need separation of appraisal fees, so that middle management is forced to stop applying downward appraisal fee pressure for variable opportunistic profit. Cost savings need to be returned to consumers, not held as financial incentive to drive down the appraisers earnings power. Simple solutions that could be implemented right now include separation of the appraisers fee, and also, implementing rotational panels for order distribution. That would provide some immediate relief from results based distribution activity. This Appraisal Coalition has great ideas, but I’m not going to back an anonymous organization. I don’t even know if an American wrote that message…
The Declaration of Appraisal Independence, has indeed been delivered by the Appraiser Prosperity Coalition. The APC is a real estate appraiser grass-roots effort that is being managed by Federal Advocates, Inc.. Their problem analysis and powerful, simple proposed solutions are detailed on their website at http://www.AppraiserProsperity.com. Many, many appraisers have collaborated together to create this project. It is not controlled by any one person or an AMC outside of Federal Advocates Inc.. FA’s staff is listed on their website at [www.FederalAdvocates.com].
While some appraisers can say “NO” to value pressure… many cannot and did not due to intense financial pressure. As a result, loan officers will never again be permitted to have a direct relationship with real estate appraisers. Ironically, lenders controlling the process internally suffer from the same illness that loan officers were suffering from. They drive up profits by closing loans that depend on values. The natural conflict of interest is totally unsolvable and value pressures have and will continue under those lenders who are controlling their appraisal process.
Some third parties have proven themselves to be incompetent… however; incompetence exists within companies at every industry position. This is why we believe that when loan officers are once again tasked with ordering appraisals from the licensed and regulated 3rd party of their liking… they will choose the company that offers the most competency and best practices. This will force 3rd parties to increasingly raise the quality of their services in order to compete for businesses that will make them earn it day in and day out.
The cause was just for the underground railroad… so to say that people who believe in and fight for a just cause should always expose their identities is simply untrue. Appraisers who have families to provide for and must rely on the income that is currently available can’t totally destroy their remaining income in order to promote their just cause. We believe this is the reason that no other group with the needed solutions have surfaced in the middle of this giant mess. And… it is a giant mess. Read all of the comments posted below the Declaration of Appraisal Independence on the petition site from the link above. Yes, it is a mess.
Another reason the oppressive state of the industry remains is because any time an effort is put together to bring some change… many appraisers attack it because they think it is not a perfect solution. Appraisers must unite behind simple solutions to turn the tide back in their favor. Absent of that, the wasteland will continue to waste away. The time for appraisers to fight back is now. Solutions that will truly bring positive changes are on the table. Federal Advocates, Inc. is on the warpath to fight for the Appraiser Prosperity Coalition… positive change is coming. The more people join with them, the faster it will come. Don’t sit on the sideline, get involved and make a difference!
Independence was declared in 2008. You can’t declare it twice. Independence must be evolved and not stay stagnate by foolishness.