WASHINGTON, D.C. (April 12, 2007) – In response to the proposed guidance on subprime mortgage lending, the four largest professional appraisal organizations have called for requirements to stress the need for an independent appraisal process in the mortgage lending process.
In their effort to safeguard consumers from shoddy subprime mortgages the agencies have overlooked the importance of selecting ethical, professional and independent appraisers, said Don Kelly, Chief External Relations Officer for the Appraisal Institute. Specific guidance on appraisal management and appraiser independence cannot be emphasized enough, particularly when fraud in residential mortgage lending has grown to new heights. The agencies need to revise their statement to stress this point, Kelly stated.
The letter from the Appraisal Institute, American Society of Appraisers, American Society of Farm Managers and Rural Appraisers and National Association of Independent Fee Appraisers came in response to a proposed Statement on Subprime Mortgage Lending, issued by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and National Credit Union Administration. The proposed statement was sent to industry leaders in the lending, mortgage and real estate fields.
In their letter the professional appraisal organizations pointed out FDIC Chair Sheila Bairs recent call for all lenders to be subject to certain baseline requirements, suggesting that appraisal requirements should also be included in legislation enacted by Congress in this area. Recent studies conclude that as many as seventy-five percent of appraisers report losing a client or not being paid as a result of their refusal to push values. The organizations also expressed concern about how the appraisal process is being poorly managed by many financial institutions both large and small.
We cant stand by while those with a vested interest in a transaction try to use appraisers as a rubber stamp, noted Kelly. Additionally, to address this debilitating problem for lenders and consumers, we need help from the entire real estate community to develop and accept an industry-wide statement of best practices on real estate appraisal and mortgage lending. With that we start to educate and commit all parties to the importance of an independent appraisal process.
The Appraisal Institute is a global membership association of professional real estate appraisers, with 22,000 members throughout the world. Organized in 1932, its mission is to support and advance its members as the choice for real estate solutions and uphold professional credentials, standards of professional practice and ethics consistent with the public good. Members benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA and SRA designations. Appraisal Institute members adhere to a strictly enforced Code of Professional Ethics and Standards of Professional Appraisal Practice. For more information about the Iowa Chapter visit http://www.aiofiowa.org. For more information on the Appraisal Institute visit www.appraisalinstitute.org.