Some regulators who oversee appraisers are taking issue with an Associated Press story that characterized oversight of the industry as "crippled" and "ineffective" despite an overhaul of the system after the Savings and Loan crisis.
But four other groups that represent appraisers themselves said the story — the product of a six-month investigation — underscores the need for better enforcement of existing laws.
The AP’s investigation of the regulatory system put in place by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) concluded that more than two dozen states and U.S. territories failed to investigate and resolve complaints about appraisers within a year of receiving them, as required by law.
An independent federal agency authorized by Congress to conduct field reviews and audits of appraisers, the Appraisal Subcommittee, has only four auditors and has not had a permanent director since the end of 2007, AP said. As a result, regulators were ineffective in preventing appraisers, real estate agents and mortgage brokers from colluding to inflate home prices during the housing boom, AP concluded.
Responding to the story, the Association of Appraiser Regulatory Officials (AARO) complained that FIRREA "established an unfunded federal mandate" requiring states to organize, administer and pay for their own regulatory programs for appraisers.
Any deficiencies in the system "stem largely from the lack of adequate funding at the state level," the group said in a press release. "This condition exists because appraiser license fees collected by a regulatory agency typically end up in that state’s general fund with only a portion of those revenues being returned … for the operation of the agency."
In defense of the current system, AARO said minimum pre-certification qualifications for appraisers include a college degree, at least 2,500 hours of supervised appraisal experience, and a passing score on a "rigorous" national appraiser examination. Regulators have handed down sanctions including license suspensions and revocations to about 10,000 appraisers since the system was instituted, the group said.
"Overall, the vast majority of appraisers in this country are ethical and competent appraisers and the quality of appraisals has improved since the enactment of FIRREA," AARO said. "Similarly, the majority of appraiser regulatory jurisdictions function properly and in compliance with federal law."
But four other organizations representing appraisers said the AP investigation highlighted issues they have been trying to get Congress to address since 2001. Those organizations — the Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers — wrote Sen. Chuck Hagel, R-Neb., urging him to support regulatory reforms included in HR 3915, the Mortgage Reform and Anti-Predatory Lending Act.
"For too long, federal appraiser regulators have failed to oversee properly the activities of state appraiser regulatory agencies, while many of those state agencies have failed to conduct active oversight or enforcement over licensed appraisers," the groups said. "Many complaints against appraisers have gone unheard and uninvestigated, allowing these individuals to continue to remain in the appraisal profession."
Passed by the House last year, HR 3915 would give the Appraisal Subcommittee more authority to monitor the performance of state appraisal agencies, and penalize attempts to influence the independent judgment of an appraiser through collusion, coercion and instruction.
The groups representing appraisers called "onerous" other proposals introduced in Congress that would require appraisers to carry a surety bond. The proposals would cost individual appraisers as much as $50,000 a year, and "cripple the residential appraisal profession" without solving the underlying issue — a lack of enforcement of existing laws and regulations — the groups said.
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