WASHINGTON D.C. (Dec. 25, 2008) – The nation’s largest organizations of professional real estate appraisers – the Appraisal Institute, American Society of Appraisers, American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers – issued the following statement today in reaction to the revised Home Valuation Code of Conduct (Appraisal Code) released by the Federal Housing Finance Agency and Fannie Mae and Freddie Mac:
"Now that Fannie Mae and Freddie Mac have taken steps to improve appraisal quality by establishing an Appraisal Code, we suggest lenders set their policies to use the most competent appraisers available. Now, more than ever, we need to return to the time-tested process of choosing appraisers based on quality, not price. We firmly believe that the best and most efficient way for lenders to identify competent appraisers is to seek out those with advanced education, experience and credentials, including professional appraisal designations.
"We are reviewing the revised Appraisal Code to study its impact on the appraisal profession and the mortgage lending industry. While we applaud the thrust of the Appraisal Code to increase appraisal independence, we have continuing concerns that certain elements are at odds with the goal of obtaining competently prepared appraisals, specifically, provisions that place increasing reliance on unregulated appraisal management companies. Like much of the mortgage industry during the years that led up to the current housing crisis, these entities are unregulated. Further, the current business model of many appraisal management companies places appraisal quality last, while shifting the cost of appraisal management services to the consumer without any disclosure.
"For many years after the Great Depression, lenders sought out competent appraisers as a central component of risk management activities. This system worked. Unfortunately, those tables turned in recent years, as the lending industry became dominated by loan production and computerized risk management.
"Therefore, we – the nation’s largest organizations of professional real estate appraisers – pledge to work with Congress to reestablish and emphasize the fundamentals of collateral valuation as it reviews the future direction of the mortgage lending industry in 2009"