AI Membership Updates & Legal Wins in Appraisal Industry
In this issue:
- Federal Funding Pause: OMB’s pause on SBA loans and conservation funds disrupts commercial real estate transactions and federal appraisal assignments.
- Membership Changes: Life Designated Membership will be automatically recognized in 2025, with a 40% national dues discount for eligible members.
- Rocket Mortgage Lawsuit: A lawsuit over appraisal influence was largely dismissed, while market challenges and disaster recovery efforts continue.
Insights
Federal Funding Pause Unpaused – The Would-Be Impact on Appraisal
The Office of Management and Budget’s (OMB) January 27 “Memorandum for Heads of Executive Departments and Agencies” pausing federal agency grant, loan, and other financial assistance programs could have significant implications for the finance and real estate industries if the policy remains in place. In a confusing series of events, a federal Judge in Washington, DC, on Tuesday night ruled that implementation of the OMB directive be halted until at least February 3, 2025, pending further consideration of a lawsuit filed by a group of nonprofit organizations. On Wednesday, the administration rescinded the memo, but many opponents claimed the policy was still in effect and was rescinded only to get the courts to drop the restraining order. This led to a second judge later Wednesday issuing another temporary restraining order on the policy.
While financial aid going directly to individuals such as rental subsidies and home loan guarantees (FHA, VA, RHS) appears to remain intact, any pause in funding would affect numerous discretionary funding programs tied to real estate, including high visibility Small Business Administration (SBA) 7(a) and 504 loan programs and the Land and Water Conservation Fund (LWCF).
SBA Loan Program Disruptions and Impacts on Commercial Real Estate
One of the program areas that could face disruption is the SBA 7(a) and 504 loan programs, which are utilized by small businesses seeking to purchase commercial properties with favorable financing terms. These programs require appraisals to determine property values and lending risks. With any pause in funding, transactions relying on SBA-backed loans could be delayed or canceled, reducing demand for commercial real estate appraisals.
The Land and Water Conservation Fund is the largest federal funding source for government-related appraisal assignments, supporting land acquisitions for parks, wildlife refuges, and public recreation areas. A funding freeze here would shut off many land conservation and acquisition projects that require appraisals.
Broader economic development programs at HUD and other agencies provide support to both urban and rural development that promotes real estate development throughout the country.
Fair Housing Initiatives Program and ASC Grants
The Fair Housing Initiatives Program (FHIP) at HUD, which funds fair housing enforcement and education efforts, is also included in the funding pause. The program has drawn criticism from the Appraisal Institute for supporting billboard, print, and radio ads that AI argues unfairly portray appraisers and misrepresent the appraisal process. AI plans to bring this issue to the attention of HUD Secretary Scott Turner immediately upon his confirmation and swearing-in. AI will be working to ensure that the funding for unfair accusations against appraisers is never restored.
Also, the Appraisal Subcommittee (ASC) grant program, which provides funding to state appraisal regulatory agencies for licensing, enforcement, and oversight, is also included in the review.
For a full list of potentially affected programs click here.
Your Benefits
Summary of Life Designated Membership Changes
Effective January 1, 2025, Life Designated Membership in the Appraisal Institute will be recognized automatically rather than requiring an application. This change follows amendments to AI Bylaws and Regulation No. 4 adopted by the AI Board of Directors in August 2023.
This digital badge appears on the Find An Appraiser profile and the Appraisal Institute account page of every Life Designated Member.
Key Updates:
- Automatic Recognition: Designated Members in good standing who have maintained continuous membership for at least 40 years will automatically receive Life Designated Member recognition at the start of the year in which they become eligible.
- Eligibility and Continuity: Members who resign or have their membership terminated will lose eligibility unless they are readmitted within one year.
- Dues Discount: Life Designated Members (not already receiving a discount) will receive a 40% reduction in national dues starting in the next full dues cycle.
- Recognition Display: This recognition is now available on Find an Appraiser profiles where applicable.
- Current Life Designated Members will retain their recognition under this new structure.
Trending Topics Thursdays: Sign up for our next free webinar
The Lexicon of Appraisal: When common terms take on multiple roles
February 6, 2025, 12-1 pm ET
Terms like “market value,” “market rent,” and “fee simple” have nuanced definitions, and the appropriate usage of the term may be dependent on the specifics of your assignment. Our appraisal and litigation experts will help you explore your options and discuss how you can decide on the appropriate information to include in your report.
Our panelists will discuss:
- The meanings of terms such as "market value," "fair market value," “market rent," and "fee simple"
- How these meanings can be dependent on assignment context
- Potential ways of understanding and using these terms in various contexts
- Tips for thinking critically about your usage of such terms
Appraiser-Centric Advocacy Updates
Judge Dismisses Rocket Lawsuit Regarding Appraisals
The Fourth Circuit Court of Appeals in West Virginia has dismissed the majority of a $10.6 million judgment against Rocket Mortgage and its affiliate, Amrock LLC. The judgment, issued last week, was related to a 2012 class action lawsuit that alleged the mortgage company had improper influence over appraisals. The plaintiffs claimed that the companies shared home value estimates from refinance applications with appraisers, thus impacting the independence of the appraisals.
A district court originally awarded $10 million to 2,769 West Virginia borrowers in the suit against Rocket Mortgage. However, the Fourth Circuit’s decision was sent back for reconsideration after a Supreme Court ruling in 2021 in the case of TransUnion LLC v. Ramirez, which requires proof of harm for each class member.
The Fourth Circuit ruled that the plaintiffs did not prove all class members were harmed by the appraisal practices. The court also found no evidence that the appraisers were influenced or that the appraisals were wrong because of Rocket Mortgage’s actions.
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Until next week,
Team Appraisal Institute
