Appraisal Institute urges Congress to address feeble oversightMortgagePress.comAppraisal Institute, Congress, appraisal oversight, mortgage fraud, Jim Amorin
In testifying before Congress, the Appraisal Institute told
lawmakers that mortgage reform legislation is needed to address
structural weaknesses in mortgage industry regulation. Calling
current regulatory oversight "feeble," the Appraisal Institute
called upon Congress to provide state and federal appraisal
oversight agencies with greater enforcement power, the lack of
which has contributed significantly to mortgage fraud.
"Too often, the appraisal has been relegated to a formality in
mortgage lending, a gimmick to push a deal, rather than an
essential element of risk-management. It is a dangerous precedent
for lenders to outsource their risk management functions," Jim
Amorin, MAI, SRA, president of the Appraisal Institute, noted in
his testimony. "Confidence in our financial system will be restored
only when serious attention is devoted to prudent lending
To address weaknesses plaguing the mortgage lending industry,
Amorin presented the U.S. House of Representatives Subcommittee on
Financial Institutions and Consumer Credit with a short list of
recommendations that the Appraisal Institute believes will protect
the safety and soundness of mortgage transactions. His
recommendations included the following:
• The introduction and passage of mortgage reform
legislation addressing the inappropriate pressure of appraisers,
providing greater accountability of federal and state appraiser
regulators, and promoting professionalism among appraisers.
• The establishment of a high-level agency Chief Appraiser
position for collateral valuation review, with oversight of all
appraisal and valuation issues across the financial spectrum,
including the mortgage and secondary markets, and all financial,
mortgage and real estate-related financial instruments.
• The undertaking of an immediate review of the new loan
modification guidelines (Home Affordable Modification) released by
the Treasury Department last week, to ensure that consumers and
neighborhoods are being protected and that proper valuation is
being utilized, including questioning the allowance of broker price
opinions in lieu of appraisals.
In addition, Amorin identified automated valuation models (AVMs)
and broker price opinions (BPOs) as unregulated methods of
obtaining opinions of value that undermine federally created
appraisal standards. Lenders' use of these unregulated methods put
both banks and consumers at risk of receiving inaccurate
"Our organization is concerned by the Administration's decision
to rely heavily on unregulated valuation services such as brokers,"
said Amorin. "Frankly, we are shocked. Once again, we are not
treating the valuation process seriously. Computer-generated
analyses cannot approach the valuations prepared locally by
hands-on appraisers who are experts in their communities."
Amorin, representing 25,000 real estate appraisers from the
Appraisal Institute, also voiced the need to regulate appraisal
management companies (AMCs). "Currently operating as unregulated
institutions, AMCs act as a conduit between bankers and appraisers,
but often fail to inform the consumer that the company retains as
much as 60 percent of an appraisal fee. As a result, such practices
typically attract new and less qualified appraisers," he said.
"With the rise of AMCs, we are concerned that the appraiser
independence problem simply may be diverted from one formerly
unregulated entity (mortgage brokers) to a new one (AMCs),"
To view Jim Amorin's testimony to the House Financial Services
For more information, viait www.appraisalinstitute.org.