ARCC Discussion Exposes GSEs Agenda to Reduce Appraisal “Friction”
The recent discussion hosted by the Appraisal Regulation Compliance Council (ARCC) with Mark Calabria, the former Director of the Federal Housing Finance Agency (FHFA), offered a rare and illuminating glimpse into the inner workings and mindset of the nation’s housing finance regulators. During the engaging conversation led by ARCC Chair Josh Tucker, Dr. Calabria shared his expert perspective on FHFA’s controversial decision to significantly increase the use of appraisal waivers, which allow mortgage lenders to bypass the traditional home appraisal process. According to Calabria, this shift represents a concerning trend where the government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac are openly viewing appraisers and the appraisal process as an unnecessary “friction” that impedes their ability to gain greater market share. The former FHFA Director’s candid admission that the GSEs have explicitly stated this sentiment to him was a shocking revelation, essentially confirming what many in the appraisal industry have long suspected – that there are concerted efforts underway to systematically diminish the role of professional, independent real estate appraisers. This marks a troubling development, as appraisals serve as critical safeguards to protect consumers, lenders, and the broader housing market from the risks of inflated property values and predatory lending practices.
Lori Noble of ARCC further emphasized the dangers of this “regulatory capture”, where powerful industry interests are able to influence policymakers to prioritize their own short-term financial gains over the long-term stability and integrity of the housing system. Calabria’s parting words underscored the urgency for appraisers and concerned citizens to make their voices heard with policymakers, as the dismantling of these essential “checks and balances” could have dire consequences for the broader housing market and economy if left unchecked.
The ARCC forum provided a rare opportunity to pull back the curtain on the inner workings of housing finance regulation, laying bare the high-stakes battle over the future role of professional real estate appraisals. Importantly, the ARCC research team has compiled comprehensive data revealing staggering damages and lost consumer purchasing power – totaling $24 billion over the past two years – due to the mismanagement and lack of regulation surrounding third-party services provided for lenders and banks. While the underlying issues of appraisal control fraud persist, Calabria stressed that the ways in which these violations manifest have continued to evolve, necessitating vigilance and proactive measures to protect consumers and maintain a well-functioning mortgage industry. Overall, the discussion with Calabria provided valuable insights and a call to action for policymakers, industry stakeholders, and the public to prioritize the preservation of appraiser independence and robust collateral risk management practices, which are essential for ensuring a healthy, sustainable housing market.
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This is nothing new and we didn’t “suspect”, we knew. We are professional observers, after all. This has been going on forever and it isn’t just us. It’s the surveyors, the inspectors, the title companies, the insurance property adjustors. I had an adjustor’s license for about ten years. The last FEMA class I went to consisted of about 400 adjustors who hadn’t had any work in two years. FEMA’s whole point of the class was to tell adjustors to do their jobs right, as if we weren’t aware of that, and don’t bother us. The duplicitous translation of “do your jobs right” was “Do your jobs right unless it made a homeowner or insurance company angry. If they got angry, just bend over and make the numbers work and comply with our guidelines and requirements.” Of course, as in appraising, many times those things are mutually exclusive. At least, that was my interpretation.
Have any of you taken the new USPAP course? Wow, what imaginations the writers have on appraisers having “bias” against protected classes and how we “might” effect that! Have they even come up with one provable case? Regardless, I’m sure they’ll invent such in the near future.
As for everything else, nah, never mind.
Very well written!
Mr Calabria probably didn’t say this when he was in charge, he probably approved of the current trend of eliminating appraisers, after all we are too expensive, too slow and “kill” deals that would otherwise go through unhindered, creating more profit for the GSE’s. If ONLY somebody in government would wake up and realize that eliminating appraisals is increasing the risk which will get passed on to the taxpayer again, oh wait, congressmen & women don’t pay much in taxes anyway, not their problem. The common homeowner/borrower has NO idea what is going on and they probably don’t care as long as their loan goes through. Another nail in the coffin….
Well done ARCC and Mr. Calabria. Now to only have someone as the head of FHFA that will actually do their job, and do it properly to make the necessary changes that should have taken place long ago. Isn’t it also revealing that they are failing in their current duties? Conservatorship over FNMA and FRMC is like having the well fed fox watching the hen house. No enforcement of anything, just sleeping on the job.
In 2044, an attorney will need an appraisal for a divorce or for an estate, and a homeowner will need an appraisal for a tax reduction. But there will be no appraisers. At least in my neck of the woods, where appraisers under 60 are the babies.
“Trump will fix it”
“Appraisals serve as critical safeguards to protect consumers, lenders, and the broader housing market from the risks of inflated property values and predatory lending practices.” Appraisals didn’t seem to protect individuals or the market in the great boom of the 1980s and subsequent collapse of S&Ls. So we got the current regime of state licensing, mandatory continuing education, regulatory enforcement, etc. And then, the New Order didn’t prevent the boom and bust of the 2000s. So appraisers got the HVCC, insulating appraisers from pressure via AMCs (despite the fact that AMCs had been prime players in the run-up to the Great Financial Crisis). And now we have the boom of the 2020s, to be undoubtedly followed by a crash later in the decade. Face it, appraisals as a risk management tool are not capable of protecting against correlated market risks. So are they good for anything?
You only have to look at the declining number of appraisers in the market to understand where things are headed. In California, we lost 620 licensees over the past year, and will drop below 8000 total licensees in the next few months (down from over 20,000 at the peak). This is a severely greying population, with less than 5% of all active licensees below 30 years old. That is the replacement generation, at this point it’s just math. PAREA won’t fix it, if you don’t learn in the field, you’ll never be as good as prior generations (assuming competent mentoring, of course). The market has spoken, this is a dying profession. It’s just a matter of when, not if, at this point.
In 2007 they were raising the education requirements nationwide because too many Appraisers were entering the profession. Dudd-Fwank handed the AMC’s a golden ticket to steal our business without disclosure to the client and here we are. Remind me what is the role of an AMC ?? Why are they needed ?? Hopefully DOGE will get this on their list before we all starve.