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Appraisal Regulatory System Modernization

Background

The Federal regulatory structure for real estate appraisal essentially has been untouched since the enactment of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”). In the intervening years, the marketplace has changed and technological advancements have been made.

Therefore, the Appraisal Institute believes that it is appropriate and timely for Congress to review how well the current relationship of Federal versus State responsibilities is serving appraisers, consumers and other market participants. The recent rapid decline in the number of appraisers and stagnant interest in entry to the profession beg for action to improve the appraisal business and regulatory environment.

Since the beginning of the 114th Congress, multiple hearings have been held related to “regulatory burdens” on financial institutions. That being the case, it is our view that valuation and, specifically, appraisers need to be included in that review. The House Financial Services Committee’s oversight plan for the current Congress includes appraisal regulation. Appraisal remains one of the most highly regulated professions in the United States, impacting not just mortgage-related appraisals, but appraisers practicing in litigation, tax and financial reporting services, advisory and other valuation services.

Issues of primary concern to professional appraisers include the following:

  • Federal Regulation. Appraisers are regulated by the States, but also face heavy Federal oversight and constantly evolving standards and qualifications. State appraiser regulatory agencies have been fully operational for many years to where continued direct federal oversight no longer may be necessary.

  • State-by-state Portability. Appraisers often work in many states and are faced with increasing regulatory obligations, including state-by-state background checks for renewals, reciprocity licenses and temporary practice permits in many situations.

  • Un-level Playing Field. Where appraisals are not required by Federal law, in many states, valuation services may be provided by a wide range of people who are not held to the same standard as appraisers. Rigid appraisal standards restrain appraisers from providing competing services for which they are the most qualified to perform.

  • “Recipe” Approach to Appraisal. Some have suggested that appraisal “methods and techniques” should be developed as a set of homogenous rules. Appraisal does not need additional rules as a profession and real estate industry stakeholders deserve better than to have all markets treated the same.

  • Federal Agency “Rules.” A bevy of rules affecting appraisers have been issued by federal agencies since the passage of the Dodd-Frank Act. Such rules merit Congressional oversight.

Currently, no legislation has been introduced in either the U.S. House of Representatives or the U.S. Senate that addresses the regulatory burdens appraisers face, or to modernize the regulatory structure of the appraisal profession. However, Congressional staff have written draft legislation and shared it with many different industry groups for their input. Specifically, the Appraisal Institute was asked for input on one such draft that reflects many of the Appraisal Institute’s concerns regarding the appraisal regulatory structure. We shared those concerns with the House Financial Services Committee during testimony in a 2012 hearing.

With that in mind the key principles the Appraisal Institute has shared, and will continue to share, with Members of Congress are:

What Can Be Done?

Modernize Appraisal Oversight

  • Align appraisal regulation with regulatory structures of other industries, such as insurance and mortgage origination recently enacted by Congress. These regulatory structures address multi-state licensing through technology or a common licensing platform.
  • Explore a nationwide platform, or portal, for appraisal practitioners, users of appraisal services, and state regulators to use to process license applications and renewals, thus eliminating redundancies and “red tape.”

Improve Enforcement

  • Provide clear audit processes for states’ appraiser regulatory agencies, allowing state regulators to focus on licensing administration and enforcement.
  • Improve information-sharing among state regulatory agencies through a common platform.
  • Improve Appraisal Quality
  • Improve appraisal quality by re-engaging highly-qualified real estate appraisers.
  • Authorize financial institutions to “raise the bar” when hiring real estate appraisers, utilizing professional appraisal designations that exceed minimum licensing requirements when procuring appraisal services.

Appraisal Standards

  • Establish appropriate levels of oversight and reasonable limitations around Congressionally-authorized bodies, consistent with previous Congressional action.

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