Real Estate Central

Congress Urged to Safeguard Key Role of Independent Appraisers

WASHINGTON, June 27 /PRNewswire-USNewswire/ — A plan under
consideration in Washington will drastically curtail the valuable role of
independent appraisals in home sales and harm consumers. The plan, known as
the Home Valuation Code of Conduct (HVCC), was designed to prevent lenders
and mortgage brokers from coercing appraisers into providing inflated
property valuations. Unfortunately, as written, it will actually harm
independent appraisers, who have no financial incentive and act as the
“auditors” of housing transactions. If approved by federal regulators, the
HVCC is scheduled for national implementation in January 2009.

Tens of thousands of independent appraisers throughout the country are
expressing their concern to lawmakers and regulators in Washington. They
have formed a loose coalition to urge Congress to protect consumers by
safeguarding the critical role of appraisers in providing fair property
valuations.

“While I support the concept of the HVCC, the current version will
decimate our profession and actually is a big step backwards for consumers.
It creates a dangerous, unbalanced playing field certain to result in lower
quality, less accurate valuation of the nation’s housing, right at the time
that we need accuracy and stability the most” said David Biggers, chairman,
a la mode, inc., one of the real estate industry’s most mission critical
and innovative technology companies. “Accurate, independent valuations
protect the interests of consumers, lenders, taxpayers, and investors.”

The HVCC forces lenders to engage regulated appraisers through
unregulated appraisal management companies (AMCs), which retain almost 50
percent of the fees paid by lenders. This means that independent appraisers
- who represent tens of thousands of small businesses across the country -
could lose half of their revenue if the current version of the HVCC is
implemented. These small business people are responsible for more than $6.4
billion in revenues to the U.S. economy, according to Federal Financial
Institutions Examination Council’s Appraisal Subcommittee. Beyond the
immediate loss to the appraisers, there is a negative impact to the
economy, estimated to exceed $5.8 billion, adding a significant impact to
the overall financial downturn. (1)

Physical inspections of properties may be curtailed

Unless amended, the proposed Code will result in lower quality and less
accurate appraisals by creating a system that does not require a physical
inspection of properties. Instead, it creates a preference for the use of
less reliable automated valuation models, known as AVMs.

“We are concerned that major portions of the Code will undermine,
rather than enhance, the quality and reliability of appraisals,”
Comptroller of the Currency John C. Dugan recently wrote to the Office of
Federal Housing Enterprise Oversight, the agency that oversees Fannie Mae
and Freddie Mac. “We have significant concerns that compliance with the
Code will disrupt mortgage appraisal processes that generally are
functioning well for depository institutions and consumers.”

“AVMs have been criticized by government agencies, including the
National Credit Union Administration and others, because they are simply
not accurate,” said Biggers. “They do not take into account special details
that can have a substantial impact to the value of a home, and could result
in consumers getting inflated or deflated appraisals.”

About a la mode

Founded in 1985, a la mode develops desktop, mobile, and Web tools for
the real estate and mortgage industries. a la mode’s mission-critical
products are used by hundreds of thousands of appraisers, agents,
inspectors, and lending professionals to complete the nation’s real estate
transactions. a la mode’s state-of-the-art offices are located in Salt Lake
City, Oklahoma City, and Washington, DC. For more information, visit
http://www.alamode.com.

(1) Data derived from the Federal Financial Institutions Examination
Council’s Appraisal Subcommittee’s (ASC) database of appraisers, the number
of estimated active appraisers, number of appraisals performed annually,
fee per appraisal and an economic impact multiplier of 1.8.

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[Via Real Estate Newswire]