The Partisan Battle to Eliminate Dodd Frank
Dodd Frank created the illusion…
I had a different “take away” from the Housing and Insurance Subcommittee “Modernizing Appraisals” hearing.
My impression was that there were two simultaneous hearings by the same people in the same place.
There was the actual televised hearing with disparate prepared speeches, and then there was the real underlying reason for the hearing. The partisan battle to eliminate Dodd Frank.
I try very hard to take a non partisan approach to the issues facing appraisers when writing about or for the American Guild of Appraisers (AGA). Obviously AGA is a union organization, though as I’ve said many, many times, we are not your grandpa’s old union. We seek win-win solutions.
It’s important that I also disclose, as I have in public appearances before the Appraisal Foundation (TAF) and the Appraisal Practices Board (APB), I personally happen to be one of the extremely few Republican Union Organizers in America. Those that know me or my history writing here know why I joined an appraisers’ union. I only remind readers of this so that any will understand my views are purely objective and not partisan based. If I could overcome my aversion to traditional unions to organize one, then I submit I AM capable of unbiased analyses. Readers must judge this for themselves.
There is very little in Dodd Frank that (my) GOP objects to, that is important to real estate appraisal. We had appraiser independence requirements long before Dodd Frank. They won’t go away whether Dodd Frank does or not. Frankly, about the only thing Dodd Frank DID do for appraisers is create the illusion that reasonable and customary fees would somehow become enforceable.
We all know what a bad joke that is! Only 38 states of 55 jurisdictions have passed ANY type of AMC regulations to date and very few of those have passed clear or enforceable C&R fee laws (Virginia, NC and LA tried). Dodd Frank merely gives states the right to ignore C&R IF they choose to. There was never a credible enforcement mechanism.
So, it will not truly affect appraisers if Dodd Frank were to be rescinded in its entirety. We’d still have the battle to get federal support for ENFORCEABLE reasonable fees. Can we just drop the pretense of “customary”? Working for less than a fast food worker EVER, is not ‘customary OR reasonable’!
Where Dodd Frank DOES become an issue is in the ongoing partisan war between the Democratic Party and the Republican Party. Dodd Frank created the Consumer Financial Protection Bureau (CFPB) which does appear to have benefited regular taxpaying American citizens and investors already. Case in point is Wells Fargo and its well publicized FRAUDULENT treatment of customer accounts. Dodd Frank does benefit taxpayers. Whether the same protections could be done differently is open for discussion. Those cases are not appraiser issues.
CFPB also is supposed to be the place where certain limited appraisal/appraiser independence/ consumer appraiser rights issues get handled but that system is so murky and disorganized so as to be useless. In my opinion, no benefit to appraisers exists so far.
We’d likely survive the loss of Dodd Frank and CFPB, though as Committee Member Green pointed out, Dodd Frank was not and is not a cause of the appraisal problems in America today. It merely fails to resolve any of them.
It’s erroneous for any to say there were no appraisers on the witness panel. Mr. Park of Appraisal Subcommittee (ASC) is. I believe Mr. Bunton is as well. Mr. Park has been a Member of the Appraisal Institute (AI) for over 25 years. I believe he properly maintains his independence from purely AI-benefit issues. I’ve spoken with him several times now and I believe he is beyond reproach in his actions with ASC despite the grilling he was subjected to by the committee. We all have to remember his is a highly sensitive position politically.
Mr. Bill Garber representing the Appraisal Institute does not appear to be a licensed appraiser anywhere unless it is under a different name. I checked the ASC Registry for Bill and William and he is not found. So we are left to wonder whether despite the title if he is anything other than a paid lobbyist for the AI?
By the way, the AI claimed to be the largest appraisal organization as if that is some kind of inferred representation of ALL appraisers interests. I’d like to check the American Society of Appraisers (ASA) rosters before conceding size superiority of the AI in America. Though they may (or may not) be the largest if worldwide membership is considered. My point is that there are over fifteen (15) other nationally recognized professional appraiser peer organizations PLUS over two dozen State Appraisal Coalitions representing appraisers. Why were none of these included?
What about the National Association of Realtors (NAR)? Clearly THEY are the largest real estate trade group in America. NAR also has its own appraisal disciplines and designations.
Let me repeat that. WHY WERE NO APPRAISAL ORGANIZATIONS included beyond the one with a paid lobbyist and their own *self serving agenda? (Ref: * promotion of alternative appraisal standards for limited use by their members – see CA AB624 and similar bills passed/proposed in TN, IL and TX).
The battle between the AI and TAF is no secret. So it’s no surprise that they oppose the Appraisal Practices Board created by TAF. Let’s not lose sight of the fact that they were removed as sponsors of the TAF or the reasons.
AI serves a very specific & very small segment of appraisers in America. They have many respected educational offerings. They are not the only ones that do however. ASA & National Association of Certified Valuators and Analysts (NACVA) are as highly respected in their own right, as are many of the other nearly three dozen UNREPRESENTED appraiser peer and state professional associations absent from the hearing.
Mr. Garber’s written proposals were not presented to listeners beyond his stated belief that the APB should be disbanded, and that cheaper, big data driven alternative appraisal products and standards are desired by the AI.
Ms Trice is also not an appraiser (no current license on Federal Registry). Her voiced views sounded very reasonable. The devil is of course in the unknown details of the proposal she submitted that was NOT discussed or summarized in the hearing. Ms. Trice is known to have represented or advocated for the interests of Appraisal Management Companies (AMCs), to the detriment of most appraisers needs, but let’s keep an open mind until we hear all the details of her specific proposals to the Committee.
Ms Wagner of Mountain States law largely cited ancient history – events that predated the collapse of 2008/2009. She referred to (inferred) recent loan modifications related to high rate predatory lending but no one has offered the type of pick a payment, option ARMS she described since 2009. In any case, her concerns serve as an ongoing caution. She too opposed big data driven alternative products that are less reliable than real appraisals.
Mr. Brady of National Association of Home Builders (NAHB) had several legitimate appraiser concerns but none that rise to the level of requiring congressional oversight. He proposed something similar to the VA’s “tidewater” system where if a value issue is noted in the development of an appraisal, the appraiser would stop and contact buyers and or sellers to discuss it. No pressure there, right?
The point he missed is that builders’ sales reps ALREADY HAVE THE ABILITY for that type of input! These are no individual consumers with limited experience in real estate that require special protection as some veterans might. They are professionals “in the business”.
They have their “tidewater” opportunities BEFORE the appraisers ever show up to do the appraisal! ALL they have to do is their jobs. That’s it. They could follow the NAR Code of Ethics regarding appraisals. They could LEARN to have information available to support their prices BEFORE the appraiser completes his or her work. They COULD get loan funding commitments from lenders in advance as builders did for over 40 years before Home Valuation Code of Conduct (HVCC). If he is serious I invite him to reach out to me through the AGA. His concerns are the easiest to solve.
He had a valid point about appraisers not always being qualified to do new tract housing appraisals. Until C&R fees are paid, that will remain an issue. There are already laws in place that say complex assignments must be done by certified appraisers. New construction by its very nature constitutes ‘complex’ appraisal until such time as open market resales are generated and most builder defect warranties have lapsed.
I know many licensed appraisers that CAN do great work on these, but that’s not who the AMCs hire to do them. Even if certified appraisers were required, many will still lack adequate experience with new developments.
If NAHB wants expertise, then they should be willing to PAY for expertise, not appraisers that still brag that they can complete two or three appraisals a day start to finish all by themselves.
A proposal was made for a national appraiser license similar to NMLS so that appraisers could appraise across state lines with little or no restriction (or enforceable area competency). Mr. Garber conceded it may not be applicable for residential appraisers where local knowledge is critical but commercial appraisers weren’t bound (as much?) by those.
Ms Trice supported the NMLS style licensing.
Neither addressed the impact of such licenses on that old belief about real estate. The three most important things are location… location… and location.
Just because a property produces income does not mean investors for that specific property (or type) accept the same rates of return in New Jersey as they would for Kansas or Alaska. State laws that could impact value in California are not necessarily the same as in coastal Florida locations.
Then again, big data doesn’t like to get bogged down in too many details.
The committee’s conclusion as to why there is a ‘shortage’ of appraisers is seriously misleading. I sincerely hope it was not a window dressing Congressional meeting to provide cover for a foregone conclusion that was predetermined behind closed doors.
Not long ago, TAF (AQB) proposed and modified requirements for entry level appraisers and those seeking higher licenses. Many from the AI asked rhetorically why anyone would support “lowering” standards by eliminating college degree requirements (that were add on requirements, just like APB is an add on). Now I ask THEM the same question. “Why do the AI, AMC Trade Groups and certain Committee Members want to lower appraisal standards?” If ‘Big Data’ were so reliable, then how come it couldn’t get the recent election polls or results right? How come it cannot reliably predict the stock market? “Big Data” has been getting it wrong for decades now. Modern computers merely help get the wrong answers faster.
I understand that there is currently a survey (created by Mark Skapinetz, an AGA member out of Georgia) with so far over 600 appraiser responses, and the number one concern remains adequate fees and the manner in which they are paid.
Before forwarding any recommendations to the full Financial Services Committee or Congress I hope the sub committee will make an effort to assure greater outreach to ALL stakeholders.
That includes appraisers.
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The next change will be driven by the stakeholders with the biggest financial stake, the banks and the realtors. They want the process quicker and more rubber stamped. If it means lower quality appraisals it will happen. The pendulum is swinging in that direction. Short term it means more business, but not in the traditional sense. There will be more products that are technology driven. It’s not going to be pretty and every appraiser will have to be very careful on what they sign off on because there will be a blowback like there has been twice before.
Mike…You are the man ! Glad to have you on our side!!!!
Mr. Bunton is not shown on the ASC Appraiser Registry web site. Mr. Park may be, if his middle initial is ‘R.’
Mr. Park is a member of the AI and has been for over 25 years (his words-not mine). Yet, in my limited contact with him I’ve never had any instance where he let the AI perspective interfere with his duties or his ability to look at things impartially.
I’d LIKE to see ASC come down harder on states when they are remiss or misinformed in their obligations but his is a political office and I suspect anything beyond quiet, confidential warnings to regulators is akin to putting a bulls eye on his back for very powerful senators and congress members with opposing views.
I think he does what he can without committing vocational suicide.
My first thought upon seeing the article’s photo was:
“If I were accepting appraisal orders today I would either need considerably more medication than shown in this photo (two hands full) or to have my head examined”.
Great article!
Damnit, I should have taken the blue pill. You cannot regulate a market of this magnitude without a fines based on income aspect, because these guys continue to make simple analysis of risk vs reward. I move for a new rule that we will immediately make it illegal for foreign entities to speculate in American residential housing markets. Nobody is revisiting the IVPI proposal. If people want to make yet another change, they should revisit the IVPI proposal. Then we’ll hear all the sorry waa waa’s from the amc’s since this would interfere with the ongoing profit sharing market. The truth is out there, somewhere. If a computer could have done this job properly it would have a very very long time ago. You know why they went with XML? The metadata. The end game is clear in the coding choice selected. FNMA CU data will be attempted to be used to replace humans. XML is what allows them to scrape data then rebuild it and reparse it on a massive scale, ignoring all that pesky human analysis.
Until the gse’s track and publicly present long term performance, there will be no solution. Tell me FNMA CU data is secure when all lenders have some measured access to it. Just trust the government, they’ve got this all figured out and are forming yet another committee to figure it out even more. If they screw up, someone will be there to cover the losses, so investors don’t necessarily need to worry about effective regulation. Imagine lending 250k out of your personal funds account, do you think you’d be foolish enough to go with the 2 a day 200 dollar cheaper appraiser? An entire array of companies exist which do not seem to recognize this is supposed to be real money being lended. Then again, it’s not ‘real money’, is it? Logical challenge question: What’s the ‘underlying collateral’ of a debt based petrodollar? The beat skips on.
First: I want to thank Mike for this article!
Second: Why do I have the feeling we are going into the Wild Wild West in this industry very soon. I find myself with every appointment explaining why an AVM from zillow, trulia, etc they can find online is not the same as an appraisal by a licensed qualified appraiser. I’ll toss in a recent example of Zillow CEOs’ house was estimated at $1.4 million on his website and it sold for $1 million. After the appointment I feel like I need a couple of those pills (thanks RA).
I got you covered on that one Koma. Especially in CO where markets zillowed upward for three straight years, everyone is like zillow said this and zillow said that. “You know why everyone keeps going back and clicking into zillow? Higher numbers!” Zillow is clickbait for the residential housing market.
Hold on what the hell is that? Moderator, strike that, something is going wrong with the tech there.
Just a small hiccup. It’s all good now 🙂
We only need 2 things to happen – SIMPLIFY and ACCOUNTABILITY. The Scope Creep laid upon the appraiser has been mind choking and TIME WASTING to redundancy. Stop the 3 layer review process for misspelled words and trust the appraiser analysis. If an appraiser is caught cheating, manipulating data etc – hold them ACCOUNTABLE and make it public. Problems solved. It should not cost $600 for a simple residential report and it shouldn’t take me 6 hours to produce it. But it does due to the BS we have to endure. It takes me as long to complete a report now as it did when I used a typewriter and had NO MLS!! Simplify.. and hold Accountable. Pay me!! The IVPI could be re-addressed by I propose that a Federal mandate is made to setup state-maintained rotation panels copying the VA model. Allow appraisers on the panel to participate in State benefits, setup CnR minimum fees and allow quotes on complex properties. Problems solved.
Well written
It was obvious a few years ago with all of the republican opposition to Dodd Frank that the pendulum would eventually swing back to deregulation of the mortgage market, and the great real estate collapse would be forgotten. Now that Trump has filled his cabinet with Wall Street and banking executives, and republicans control Congress we will soon be back to those pre-2008 days when a bum on the street could quality for a $500,000 loan with a 125% LTV. My appraisal business was brisk before the financial meltdown and I had more REO appraisals from 2009 through 2011 than I could shake a tape measure at.
Christopher, there were plenty of rules in place in 2007 – but NOBODY WAS ENFORCING THEM!!!
We just need less “management” and more ACCOUNTABILITY.. especially from our so-called “regulators”.
Christopher, let’s not lose sight of the fact that it was not deregulation itself that caused the financial collapse, but rather efforts to shore it up after the repeal of Glass-Stegall 1934. The method of accounting itself was modified which in turn seriously affected the reserve holding requirements of banking institutions relative to their assets.
Personally I’d like to see a return to Glass Stegall in which investment banking is completely segregated from consumer banking. Instead of interjecting clear partisan bias into the discussion, why not stick with the facts?
“Dodd-Frank” was itself named after the two biggest villains in the financial crisis; Barney Frank AND Christopher Dodd. To think that any legislation drafted and promoted by these two self serving political hacks served to provide ANY meaningful regulation is simply naïve. You need look no further than the intentionally vague and feckless provisions for reasonable and customary fees enforcement.
MOST of the burdens imposed by Dodd Frank have little to do with mortgage securities protections. Whether it should be replaced with something meaningful or not is open for discussion; but to pretend it provides any level of protection against the next meltdown is doing all a disservice.
MOST of the “history repeating itself” mortgage abuses have in fact taken place in the past eight years. Whether they will continue is anybody’s guess…
but NOTHING Trump has said or done suggests that he would weaken our banking system. Appointing people that actually know what the hell they are doing does not equate to selling out to Wall Street.
If it did, then every President (republican or democrat) that has hired a Treasury Secretary out of the ex Goldman Sachs executives pool could be argued to have sold out too.
Maybe THEY did.