Appraisers Disappointed at Federal Agencies
I’ve read a number of posts where appraisers are disappointed at federal banking agencies declining to hold public hearings on the topic of raising the appraisal minimum threshold for residential real estate transactions from $250,000 to $400,000.
The request for a public hearing on the issue was ‘worth a shot’ but was never a realistic expectation.
We knew that when we joined with others in signing the letter. Federal rulemaking agencies already have policies and procedures in place for mandatory public input. It’s unrealistic to expect them to make special exceptions. Especially when existing lobbyists that promoted the short-sighted policy changes in question so strongly oppose having their issues exposed to the light of day.
Far more important was the letter authored by John Russell of ASA that was signed by all the appraiser peer groups and state coalitions (including ASA, AI, AGA, as well as the other initials that respectfully, I can never remember, and at least 30 state coalitions). No slight intended. Every signatory is highly respected.
That eleven-page letter was sent to the appropriate federal banking agencies in a proper format specifically addressing each of the issues for which comments were requested. John did a brilliant job composing that letter. Everyone that helped him research the issues is also to be commended.
The American Guild of Appraisers was also pleased to see that the AFL-CIO representing financial interests of over twelve and a half million union members and their extended families as taxpayers and consumers also wrote an outstanding letter opposing the proposed increase in the de minimis limit.
The AFL-CIO was also signed by the Americans For Financial Reform Lobby which represents many famous national civil rights and diverse social and consumer interests’ groups representing millions more citizens and taxpayers. Look them up and see their letter below.
While we all like to believe it was ‘our’ voice that tips the scales (as collectively it truly is), I’ll be very amazed if regulators and bureaucrats are able to ignore the views of so many union members and American Citizen/taxpayer interests. The numbers involved in just these two groups are enough to sway national elections.
I’ll be watching this one closely.
For information on how to add your voice to that of other appraisers and millions of union members, contact JanBellas@appraisersguild.org
Excerpt from consumer, community and civil rights organizations’ letter
Yet, the banking agencies have proposed replacing professional-quality, federally-regulated appraisals with loosely-defined “evaluations.” The standards for evaluations are weak and vague. They may be conducted by bank employees11 and appear to allow reliance on AVMs so long as the evaluator also visits the property.12 Bank employees do not have the same specialized training as appraisers. AVMs are also unregulated and lack consistent reliability, especially in certain areas.13 The proposal would be a dangerous return to self-policing and would expose thousands more borrowers and investors to shoddy origination practices and increased risk of foreclosure…
According to your proposal, the plan would exempt 72% of regulated transactions from the appraisal requirement… Quality appraisals are too important to become optional. Indeed, several large banks held unsafe loans in their portfolio in the lead-up to the housing crisis.18 The banking agencies should not open the door to the possibility of inflated appraisals re-merging among segments of the market…
It has also been suggested that eliminating appraisals will benefit consumers by reducing the time and cost to close a loan. But neither of these alleged benefits outweighs the tremendous risk of purchasing a home without a proper appraisal. The average number of days to close a mortgage is 43, down from 48 in 2012.19 The banking agencies have provided no data showing that a switch from appraisals to evaluations would significantly reduce that average further. The agencies also lack data on the cost of appraisals, but using the range of appraisal fees currently authorized by the VA, the average appraisal costs $638. That is only 26 basis points of a mortgage under the current threshold of $250,000 and 16 basis points under the proposed threshold of $400,000. Given that borrowers may still be required to pay for an evaluation, they would still pay a portion of that amount to get a mortgage. But even if borrowers paid nothing for a valuation, the savings do not justify the increased risk of an inflated valuation. If regulators are concerned about reducing closing costs, there are far more effective methods of doing so…