Killing Consumer Property Value Protection
Dear Ms Kahng:
My name is Mike Ford. I am Vice President – Special Projects; & Chairman of the American Guild of Appraisers National Appraiser Peer Review Committee; AGA#44, OPEIU, AFL-CIO.
I am writing concerning the upcoming June 20th hearing addressing “What’s Your Home Worth? A Review of the Appraisal Industry”
There is currently so much deliberate misinformation about real estate appraisers and appraisal needs in America, that we believe it is critical the House Committee and any related Sub committees hear from recognized national experts that are currently practicing independent appraisers. Further, those appraisers should be recognized professionals with no hidden agenda. Respectfully they should not be separate self-serving appraisal management company owners or managers. Nor should they be national appraiser franchisees circumventing AMC laws, that also directly benefit from reduced restrictions and standards for professional appraisers. Professionals nationally recognized for their efforts and contributions in preserving appraisal integrity and professionalism should be sought.
Jonathan Miller is such an individual.
So too is Pat Turner, SRPA of the Virginia Coalition of Appraiser Professionals (VaCAP), Richmond, VA; or Maureen Sweeney, SRA, Chicago, IL, and Mark Skapinetz, AGA Executive V.P. American Guild of Appraisers, Atlanta, GA.
Their email addresses are above. All are nationally recognized appraisal profession leaders. Maureen was also a former state appraisal regulator.
I’m told Jonathan is prepared to fly down from New York to attend. The others mentioned could or respectfully, should be contacted for follow up since some may not be able to attend. Each of us has at various points met with Mr. Jim Park of the Appraisal Subcommittee (firstname.lastname@example.org) and shared our views and concerns with him. Collectively we believe Mr. Park as Executive Director, ASC to be an honorable and ethical steward of the Public Trust and responsibility given to him by the ASC. We also know that he is often subject to incredible pressures from lending interests; AMCs, and individual banks across the country seeking to take advantage of FIRREA loopholes to obtain unwarranted appraisal waivers based on spurious ‘support’.
We believe Mr. Park deserves the committees reaffirmation and recognition for his efforts to preserve the national financial services health via the FFIEC, and taxpayers interests arising from proper collateral value confirmation that only formal appraisals prepared by ethical professionals produce.
Ms Kahng, all appraisers need to be assured that the Honorable Chairwoman, Congress Member Waters is aware of the concerted effort there has been in the past two years to strip away consumer protections memorialized under the Dodd Frank Act. The entire focus of the Treasury Department Financial Reform Efforts; Mortgage Information Standards maintenance Organization (MISMO); and appraisal management special interests such as REVAA, and various predatory lenders has been to foster or promote the falsehoods of appraiser shortages; delays, rising costs and ability to substitute professional services with automated ones already proven to be complete failures.
The trend via GSEs, led by FNMA is to coerce or deceive borrowers into waiving appraisals on purchases; or to accept AVM influenced (driven), so called bifurcated hybrid appraisals. They hold out the bait to borrowers that they may save hundreds for appraisal fees ($650 to $1,000) without pointing out the very real risks of overpaying tens of thousands of dollars for property; or being left with undisclosed property defects that can lead to uninhabitability and ultimately foreclosure. Coincidentally, these unspecified alleged savings never filter down to the borrowers. The lenders Appraisal Management Companies still charge them the same amount. They just get to keep more of the spread between lowest fees paid to appraisers, and what they collected from the borrowers.
A false claim most associated with these hybrids is that they will be inspected by engineers, insurance adjusters, contractors, experienced brokers and other qualified ‘professionals.’ In practice they are universally inspected by part timers with little of no training. No successful or skilled broker is going to do property inspections for $8 to $65. That is the compensation range for half-day “trained” unregulated, non licensed and incompetent interlopers.
Property inspection for real estate appraisal purposes requires formal appraisal training and experience. It is an integral part of the overall process. Contrary to the falsehood promoted by hybrid advocates it is as much (if not more) of a fundamental part as data research or desk analysis AFTER a competent property inspection that includes the overall neighborhood and comparable properties too. It takes hundreds of properties and perhaps thousands of hours combined education and experience before appraisers become fully trained in all facets of property appraisal, including inspections. A half day or even week long training course taught by non appraisers to other non appraisers with no license or reputation to protect, is not an acceptable alternative.
Example: A few years ago, the biggest natural gas blowout in the history of the nation happened in the Porter Ranch (Aliso Canyon) area of California (North L.A. / San Fernando Valley). The gas company found the leak 10/23/2015. They did not admit it until 10/28/2015. People were still closing escrow on houses through November and December, 2015 though no new sales were taking place. The smell was overpowering. Driving though the neighborhood, visible signs of soil instability and movement are also (still) visibly readily apparent (in some areas). ANY trained appraiser would see them. Linear as well as cross road cracking; hillside sloughing or collapses throughout the area. No desktop analysis would have revealed the existence of the gas wells. The blowout is a few hundred yards north in Unincorporated L.A. County. The City of L.A. official records (ZIMAS) report no wells in the area. No desktop analysis would have identified the areas problems (hundreds to thousands of people were ultimately affected). No untrained lay person’s property inspection would have resulted in identification of the ‘red flag’ warnings of longitudinal roadway cracking and hillside sloughing back then. No AVM would capture the impact on market value of thousands of pending lawsuits in this multi tiered property value area. This is only one example of issues that will slip through any proposed use of non appraiser ‘inspectors’.
FIRREA and Dodd Frank were both passed to preserve and protect the financial housing markets and the availability of sensible, affordable financing. The MINIMUM acceptable standards for federally regulated transactions require appraisals performed by licensed or certified real estate appraisers. Congress was so concerned that minimum standards must be followed, that every state was required to implement corresponding appraiser qualification criteria.
Before the ink was dry on FIRREA 1989, special interests were snipping away at it. Originally proposed field review requirements in FIRREA drafts for 1 in 10 appraisals would have made the Great Recession (TARP) impossible. Now those same interests are stripping away at the last vestiges of consumer and taxpayer property value protection. The formal appraisal. The MINIMUM level of protection that should be insisted upon.
Congress did it’s job in 1989; and again with Dodd Frank. Now is not the time to let those great appraisal-integrity preservation bills to be undone.
Respectfully submitted, for The American Guild of Appraisers, #44 OPEIU, AFL-CIO
Michael F. Ford, AGA, GAA, RAA, Realtor(R)
California General Certified Appraiser #AG002512
FHA Panel #CAAG002512
Vice President -Special Projects; & Chairman
AGA National Appraiser Peer Review Committee
(714) 366 9404