During Congressional testimony Thursday, a representative for the Appraisal Institute handed down a very unfavorable appraisal of industry regulation.
Alan Eugene Hummel, immediate past president of the Appraisal Institute, told members of the Senate Committee on Banking, Housing and Urban Affairs that the industry lacks regulatory direction, disclosure and discipline. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), which was supposed to improve the regulation of the industry, is itself in a sorry state of disrepair, Hummel reported to committee members.
In a survey conducted by the Appraisal Institute, an international membership association of professional real estate appraisers with more than 18,000 members and 99 chapters in the U.S., Canada and abroad, about half of the respondents said appraisal quality has declined since the passage of FIRREA, while 28 percent said they saw improvement since the act.
While the act was intended to guard against corruption in the industry, Hummel said, “Without effective enforcement, financiers still pressure appraisers to come up with the ‘right’ numbers for their deals – just as they did in the freewheeling ’80s.” He said the provisions of FIRREA discriminate against seasoned professionals in the industry while favoring newcomers, and noted that less than 40 percent of appraisers now belong to professional organizations. “Our system is floundering. Discipline and direction can help it make the grade,” he said.
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