Action Alert #1
Click Here to Call Congress about Fannie/Freddie's Risky Appraisal Waiver Programs
Freddie Mac & Fannie Mae have embarked on programs that waive appraisal requirements in first purchase and refinance transactions, using propriety models and generally unreliable data from MLSs and public records for collateral risk decision making. According to Fannie & Freddie, this is being done to lower costs and shorten closing time for consumers. While Fannie Mae has indicated the appraisal waivers will represent only 5 percent of their loan portfolio, Freddie Mac has thus far being unwilling to provide estimates, indicating that as much as one-third of their portfolio may be offered appraisal waivers. These programs will create unnecessary and unacceptable risks for taxpayers and homeowners, and they come at a time when markets are at all-times - when risk mitigation should be tantamount.
Congress is once again turning housing finance reform, and as they deliberate, they should hear from appraisers on why appraisal waivers are a bad idea and a risk to taxpayers.
Action Alert #2
Click here to to submit comments in support of maintaining the residential and business loan appraisal threshold levels and opposing the proposed increase in the commercial real estate appraisal threshold level.
On July 31, the federal bank regulatory agencies released a proposed rule to carve out a commercial real estate loan appraisal threshold level at $400,000, inviting comments, once again, on potential increases to the residential loan and business (owner occupied) loan appraisal threshold levels. This week, the Appraisal Institute and the American Society of Farm Managers and Rural Appraisers submitted a comment letter to the agencies in support of maintaining the residential and business loan threshold levels at $250,000 and $1 million respectively, while opposing the proposed increase in commercial real estate loans to $400,000.
The Agencies’ comment request is your opportunity to once again express your view on the appraisal threshold levels and in support of sound collateral risk management by regulated financial institutions. AI professionals – particular those working for banks and financial institutions - are encouraged to submit comments to the agencies, citing personal stories and experiences that illustrate the importance of emphasizing collateral risk management and problems that may result from deemphasizing appraisal requirements in residential, commercial real estate, and business lending.
To leave a comment on the Federal Banking Regulators Proposed Rule, please take the following easy steps:
1. Click here.
2. Please copy & paste the text below into the section marked “Comment”.
The Agencies have proposed establishing a separate commercial real estate loan appraisal threshold level at $400,000 and have invited comments on potential increases in the residential loan and business (owner occupied) loan appraisal threshold levels.
Increasing the appraisal threshold levels will increase risk to the banking system and conflict with safety and soundness goals. The proposed increase to the commercial real estate appraisal threshold level is particularly concerning given recently prices increases in the commercial real estate market and recent problems with risk management in commercial real estate, particularly amongst community banks. Bank failures are frequently contributed by lax risk management, particularly by smaller community banks. The Agencies’ proposal sends the wrong message at the worst time, when concerns about a commercial real estate bubble have increased, supported by significant price increases. If anything, the bank regulators should be emphasizing stronger risk management activities – not loosening a fundamental risk management obligation.
These concerns are shared by those closest to the issue – chief appraisers and appraisal managers within banks – who disagree with raising the $250,000 threshold level, and overwhelmingly disagree with raising the $1 million business loan appraisal threshold level. Chief appraisers and appraisal managers agree that increasing the appraisal threshold levels will increase risk to borrowers and lenders.
3. Supplement this information with any personal observations or anecdotes involving institutional controls which may be beneficial to the financial institution regulatory agencies.
Submit your comment following instructions found on the page.