Calling it “a victory for consumers,” the Appraisal Institute praised an amendment passed by a Congressional committee that will help prevent improper pressure on real estate appraisers during the mortgage loan process. “This is an important step for everyone who buys or sells a home,” said Appraisal Institute President Jim Amorin, MAI, SRA. “While this bill isn’t yet a law, we’re pleased that members of the committee protected consumers and further empowered real estate appraisers to independently perform their invaluable role in the home buying and selling process.”
The House Financial Services Committee passed an amendment to House Bill 3126, the Consumer Financial Protection Agency Act of 2009. The amendment directs a new Negotiated Rulemaking Committee to create uniform appraisal independence requirements across federal agencies. Reps. Gary Miller (R-CA), Travis Childers (D-MS), Don Manzullo (R-IL), and Michele Bachmann (R-MN) offered the amendment.
Amorin called the current situation “a piecemeal approach” that includes competing and inconsistent appraisal independence requirements throughout the federal government. He noted that the Interagency Appraisal and Evaluation Guidelines have not been updated since 1994. The Home Valuation Code of Conduct (HVCC) is in effect for Fannie Mae and Freddie Mac loans, yet those requirements differ from those overseen by the federal bank regulators. Last month, the Federal Housing Administration (FHA) updated its policies to conform to the HVCC and to correct previous policies relating to reasonable and customary fees paid to appraisers. Meanwhile, Congress has enacted new licensing requirements for mortgage brokers, and the Federal Reserve just completed an update to the Truth-in-Lending Act (TILA) strictly prohibiting coercion of appraisers.
“This amendment would establish an orderly and transparent process for long-term assurance of appraisal independence,” Amorin said. “With inappropriate pressure on them prevented, appraisers will be able to better and more consistently provide credible real estate valuations. Ultimately, consumers will be the real winners.”
With the HVCC cooperation agreement set to expire next year and the bank regulatory agencies updating appraisal guidelines, a great deal of work lies ahead, Amorin said. Rules drafted by negotiation have been found to be more pragmatic and more easily implemented at an earlier date, thus providing the public with the benefits of the rule while minimizing the negative impact of a poorly conceived or drafted regulation, he said.
In addition to promoting appraiser independence, the amendment:
► Calls on regulators to work with stakeholder groups to establish one set of appraisal independence requirements through a Negotiated Rulemaking Committee to oversee the mortgage industry within 60 days of the bill’s enactment.
► Establishes the minimum conditions for mortgage broker participation in the appraisal procurement process, requiring adherence to the Secure and Fair Enforcement and Mortgage Licensing (SAFE) Act, with additional requirements determined by the Negotiated Rulemaking Committee.
► Ensures that regulations require lenders and their agents to compensate appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.
“We look forward to working to enact comprehensive mortgage reform with the amendment sponsors and Reps. Paul Kanjorski (D-PA) and Judy Biggert (R-IL), and other Congressional leaders who have championed efforts to provide more resources for appraiser oversight and enforcement,” Amorin said.
To view the amendment, click here.
To view House Bill 3126, the Consumer Financial Protection Agency Act of 2009, click here.
For more information, visit AppraisalInstitute.org.