Reindeer Standards As Unenforceable As Appraisal Code
There’s a lot to like about the bylaws of the Association of World Reindeer Herders. The code defines how herders promote professional, commercial and cultural contact in all matters related to reindeer herding. The document sets the gold standard for disseminating information world over about reindeer husbandry.
The bylaws were approved at the first Congress of World Reindeer Herders on March 2, 1997. If you don’t like the 1997 version of the bylaws, there’s a 2001 version, a 2009 version and a 2013 version.
Are the group’s bylaws enforceable in the United States? No. As commendable and insightful as they may be, they are not enforceable here. However, deep in the recesses of U.S. administrative law is a mechanism by which an outside document, like the code of the reindeer herders, could be enforced by a federal agency. There’s a procedure for adopting such a document into law if the need ever arises.
The U.S. Coast Guard has made enforceable a copyrighted, privately owned standard known as the “2001 ASME Boiler and Pressure Vessel Code, Section I, Rules for Construction of Power Boilers.” If you operate a cruise ship in U.S. waters, its boilers had best comply with the private standards or you’ll face fines by the Coast Guard.
Federal agencies have made thousands of such copyrighted codes and standards enforceable over the years. The practice has been allowed at the federal level since the late 1960s. The maneuver is called “incorporation by reference.” But the practice has been abused at times, so federal agencies wishing to enforce private codes must comply with special administrative safeguards. Adoption is a lengthy process that involves ministerial approvals and a notice-and-comment process.
The U.S. Department of Housing and Urban Development is now attempting to enforce unadopted versions of a privately owned set of standards known as the “Uniform Standards of Professional Appraisal Practice.” Because of procedural neglect by HUD, the code has no more force of law at the federal level than the bylaws of the Association of World Reindeer Herders.
In August 2022, U.S. Department of Housing and Urban Development Secretary Marcia Fudge made disparaging comments on a national news broadcast. The former Ohio congresswoman criticized the nation’s 80,000 real estate appraisers, making sweeping generalizations about race and tying race to competency. There’s little indication Secretary Fudge is bothered by double standards. She appears irony-proof. You can view the cabinet secretary’s abhorrent remarks here.
Now her agency is attempting to validate her comments after the fact by encouraging serial refinancers caught in lender debt traps, real estate salespeople and politically connected housing nonprofits to file discrimination complaints with HUD when values concluded by appraisers don’t hit a desired number or make their deals work. There are reported to be about 300 investigations of hapless appraisers currently ongoing at HUD as a result.
One big problem: HUD analysts are accusing appraisers of violating the continually changing copyrighted standards known as the “Uniform Standards of Professional Appraisal Practice.” Neither HUD, nor any other federal agency, has ever formally adopted any particular version of the fluid standards. Each version requires a federal NPRM rulemaking for adoption and enforceability. Similarly, no specific version of the standards is enumerated in any federal statute. It means the standards have never legally existed on a federal level. It means HUD is enforcing them on a bluff.
While the standards are cited generically in 12 CFR 722.4, 49 CFR § 24.103 and 43 CFR 47.60, without reference to a particular edition – there have been 24 versions in total – the defective incorporation violates 1 CFR 51.1(f) and two federal statutes, 12 U.S. Code § 3336 and 5 U.S. Code § 553.
Any federal agency enforcing them is in violation of the U.S. Constitution’s Nondelegation Doctrine and the civil rights of those appraisers being disciplined, since attempting to enforce unadopted regulations violates the Fifth Amendment’s due process protections and the Equal Protection Clause in the Fourteenth Amendment. HUD might as well be enforcing the reindeer herders’ bylaws. Neither one technically exists in federal law.
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“Any federal agency enforcing them is in violation of the U.S. Constitution’s Nondelegation Doctrine and the civil rights of those appraisers being disciplined, since attempting to enforce unadopted regulations violates the Fifth Amendment’s due process protections and the Equal Protection Clause in the Fourteenth Amendment.”
In other words appraisers being investigated by HUD for USPAP violations can sue HUD for violating the due process protections of the 5th amendment and equal protection clause of the 14th!
Great article Jeremy. Exactly on the money, HUD is prosecuting appraisers with no due process. I know they did it to me!!
The GSE’s are rigging the game against the appraisers.
Value came in short? Racist.
Over-appraised that house? Your black-listed by the GSE’s, get fined/state sanctions, and have the pleasure of buying the loan back.
They all bitch about the lack of appraisers, appraisers leaving the industry, lack of trainees, and appraisers refusing difficult/rural assignments. I wonder why?
But a few more DEI classes and USPOOP training will fix you silly appraisers.
Thank gawd for private and bank work.
You sir have earned a standing ovation.
Brilliant insight and well written, as always, Jeremy. Hopefully, this insight will get picked up by the lawyers representing appraisers in these cases.
The new appraisal profession – Why bother!
In today’s new and unimproved appraisal atmosphere, any appraiser that does not “hit the number” is open to detrimental consequences.
Buyers, Sellers, & Refinancers – The U.S. Government from the top down have provided the media and the public in general with so much toxic misinformation and encouragement that any appraiser doing their job, a job that can lead to lower values than expected, can now be turned to HUD itself, or a state appraisal board for racial bias. So, why bother!
Realtors – They are not your friend. Hit a number lower than the contract price and they go to the lender or even the AMC and demand you no longer receive appraisal assignments. It’s called Blacklisting, it’s illegal, but those that regulate you don’t care! So, why bother!
Fannie Mae & Freddie Mac – They say you’re needed, but…they really hate you! They are systematically trying to eliminate appraisals altogether. Fortunately, there is a US Code that requires federally related transactions be appraised. Unfortunately, Fannie and Freddie have been provided significant latitude as non-government agencies and purchasers of mortgages. In fact, in 2023, Fannie Mae published documentation stating an appraisal was the LAST alternative needed of the five (5) possible alternatives. And…the government did and said nothing. So, why bother!
Further, Fannie and Freddie have now elected to censure your appraisal reports. Any word they have dreamt up as being racially bias is now red flagged. And by the end of this month (Jan 2024), state boards will start receiving those infamous Fannie Mae “Tips”, which will in most cases become state investigations.
U.S. Government/Regulators – They do not care about you, and they are not on your side. In fact, appraiser/appraisal reform was in Joe Bidens presidential running platform. Once elected he immediately started the “witch hunt” via the Housing and Urban Development (HUD) agency, appointing them the new “witch hunters”. HUD’s Secretary Marcia Fudge is the head witch hunter, along with her accomplices from the PAVE movement, which by the way consists of a number of agencies also in the appraisal regulatory line.
So, while there are only a few of the 80,000 appraisers now in the line of sight of HUD and the state regulatory boards, as long as the new normal is reporting the appraiser when you don’t like the value continues, why bother?
Two questions: What is the statue of limitations for appraisers to seek retroactive relief if they were previously penalized under this system?
And; Missing the IVPI proposal yet?
https://www.workingre.com/wp-content/uploads/2013/08/IVPI-Proposalfinal.pdf
Grandma got ran over by a reindeer.
USPAP’s Constitutionality is an interesting legal question and, in fact, there are 4 pages about it in NFHA’s January 2022 report to the ASC regarding USPAP/The Appraisal Foundation. However, it’s a red herring in the context of a HUD investigation. HUD does not address USPAP in these investigations (at least, in the 10+ I am working on). HUD is solely focused on alleged potential violations of the federal Fair Housing Act.
I’d also add that, if USPAP is unconstitutionally promulgated (for which strong arguments exist), most appraisers probably wouldn’t like the easiest fix: present federal financial regulators and HUD would make it. Or, as was proposed in legislation by Maxine Waters, a new federal agency would be responsible for it.