Rep. Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, has requested the Government Accountability Office (GAO) initiate study on the implementation of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by the relevant federal agencies to determine the quality of appraisals on residential properties.
Waters, who was joined in her request by Rep. William Lacy Clay (D-MO), chairman of the Subcommittee on Housing, Community Development and Insurance, expressed concerns that the original Congressional intent of Title XI had been weakened by exemptions from the requirement to obtain an appraisal.
“Title XI was enacted by Congress in response to the numerous valuation related issues that came to light as a result of investigations and hearings into the causes of the savings and loan crisis of the mid-1980s,” the lawmakers wrote. “These appraisal regulatory provisions were enacted to help ensure the future stability of the deposit insurance fund. While Congress envisioned that most real estate related transactions would be covered by Title XI, that is no longer the case.”
The lawmakers also questioned whether federal regulatory increases in the appraisal threshold and the 13 regulatory “carve-outs” to reduce the number of transactions that are classified as federally regulated transactions have done more harm than good for consumers. They also raised concerns on regulations that allow the use of evaluations instead of appraisal for transactions under a specified threshold level.
David Bunton, president of The Appraisal Foundation, welcomed the GAO request.
"Thirty years ago, Congress passed FIRREA to protect homeowners and the federal deposit insurance fund from the impacts of inaccurate and inflated property valuations," said Bunton. "Over the years, however, federal agencies have created loopholes that exempt 90 percent of residential real estate transactions from the appraisal requirement."