Thursday, February 13, 2020
|For Immediate Release
February 11, 2020
Waters and Clay Request GAO Study to Protect Homeowners from Appraisal Loopholes
WASHINGTON, D.C. -Congresswoman Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, andCongressman Wm. Lacy Clay (D-MO), Chairman of the Subcommittee on Housing, Community Development and Insurance, sent aletterto the Comptroller General of the U.S. Government Accountability Office (GAO), requesting a comprehensive study on the implementation of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by the relevant federal agencies.
In the letter, Chairwoman Waters and Subcommittee Chairman Lacy Clay highlighted the law’s importance in ensuring the safety and soundness of our financial system and that homeowners are protected from mortgages with inaccurate valuations.
“Title XI was enacted by Congress in response to the numerous valuation related issues that came to light as a result of investigations and hearings into the causes of the savings and loan crisis of the mid-1980s,” the lawmakers wrote. “These appraisal regulatory provisions were enacted to help ensure the future stability of the deposit insurance fund. While Congress envisioned that most real estate related transactions would be covered by Title XI, that is no longer the case.”
The lawmakers also expressed concerns about the dilution of the original Congressional intent of Title XI through various exemptions from the requirement to obtain an appraisal.
“The Appraisal Subcommittee (ASC), the entity created and charged under Title XI to monitor the appraisal related actions of the Federal financial institutions regulatory agencies (Agencies), estimated in its 2018 report to Congress that ‘at least 90 percent of residential mortgage loan originations are not subject to the Title XI appraisal regulations,’”the lawmakers wrote. “Over the past few decades, however, the federal agencies charged with implementing Title XI of FIRREA have taken steps to limit the number of transactions for which an appraisal is required….We request that you conduct a review of the impact of these changes, including the potential risks that they pose to homeowners and the safety and soundness of our financial system.”
In September 2019, Chairwoman Waters and Senator Sherrod Brown (D-OH), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, sent aletterto the Appraisal Subcommittee (ASC) Chairman Arthur Lindo requesting answers about ASC’s decision to grant a waiver of appraiser certification and licensing to the state of North Dakota.
In June 2019, the Subcommittee on Housing, Community Development and Insurance convened a hearing entitled, “What’s Your Home Worth? A Review of the Appraisal Industry” to hear from industry experts and examine legislation that addresses longstanding issues in the appraisal industry.
See full text of theletterbelow.
Gene L. Dodaro
Government Accountability Office
441 G St., NW
Washington, DC 20548
Dear Comptroller General Dodaro:
We write to request that you undertake a comprehensive study of the implementation of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by the relevant federal agencies. We are concerned about dilution of the original Congressional intent of Title XI of FIRREA through various exemptions from the requirement to obtain an appraisal. We are also concerned that the current rules implementing the appraisal requirement may be insufficient to protect homeowners from the risks associated with an inaccurate home valuation. We respectfully request a Government Accountability Office (GAO) study regarding these issues, including recommendations for how to ensure that the safety and soundness of our financial system is preserved and that homeowners are protected from mortgages with inaccurate valuations.
Title XI was enacted by Congress in response to the numerous valuation related issues that came to light as a result of investigations and hearings into the causes of the savings and loan crisis of the mid-1980s. These appraisal regulatory provisions were enacted to help ensure the future stability of the deposit insurance fund. While Congress envisioned that most real estate related transactions would be covered by Title XI, that is no longer the case. The Appraisal Subcommittee (ASC), the entity created and charged under Title XI to monitor the appraisal related actions of the Federal financial institutions regulatory agencies (Agencies), estimated in its 2018 report to Congress that“at least 90 percent of residential mortgage loan originations are not subject to the Title XI appraisal regulations.”
Over the past few decades, however, the federal agencies charged with implementing Title XI of FIRREA have taken steps to limit the number of transactions for which an appraisal is required.
Threshold Increases:The de minimis threshold, the amount of the transaction below which an appraisal is not required, has been increased numerous times. The agencies quickly raised the amount from $50,000 to $100,000 and then again to $250,000. Earlier this year the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (FRB) all increased the threshold to $400,000. The National Credit Union Administration (NCUA) has also recently proposed the same increase. According to the National Association of Realtors (NAR) the average sales price of an existing home in October of this year was $270,900.
Regulatory Exemptions:The Federal financial regulatory agencies have adopted thirteen regulatory “carve-outs” to reduce the number of transactions that are classified as federally regulated transactions and thereby covered by the provisions of Title XI. One major exemption is
a residential real estate transaction in which the appraisal conforms to the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation appraisal standards applicable to that category of real estate.
Even though such transactions remain in the lending institution’s portfolio and are covered by the deposit insurance fund, under this exemption they are not considered federally related transactions subject to the protections of Title XI.
Appraisal Waivers:Title XI contains a provision for the ASC to grant temporary waivers if it is determined that there is a scarcity of appraisers. That waiver language was intended for initial transition purposes only, not for use thirty years after the implementation. Additionally, the waiver for the state of North Dakota granted this year by the ASC, the majority of its members appointed by the Agencies, was approved despite the absence of data indicating that a scarcity of appraisers existed.
Evaluations as a substitute for appraisals:The current regulations allow the use of “evaluations” instead of appraisals for transactions below a specified threshold.The agencies’ guidance for conducting evaluations contains no requirements and no standardized methodology; and there is no education requirement for the person conducting the evaluation. Because the agencies’ provisions for evaluations have been issued as guidance, it is not even clear to what extent they are mandatory. It is likely that evaluations will rely heavily on automated valuation models (AVMs). But the agencies have not yet promulgated regulations mandated by the Dodd-Frank Act to implement quality control standards for AVMs.
We request that you conduct a review of the impact of these changes, including the potential risks that they pose to homeowners and the safety and soundness of our financial system. If you have any questions about this letter, please contact Darrell “Rico” Doss in Congressman Clay’s office at email@example.com, or 202.225.2406.
Wm. Lacy Clay
 See, e.g., 12 C.F.R. § 323.3(b) (2018) (FDIC regulations; “For a transaction that does not require the services of a State certified or licensed appraiser under . . . this section, the institution shall obtain an appropriate evaluation of real property collateral that is consistent with safe and sound banking practices.”).
|Sent from the Committee on Financial Services Democrats
Friday, September 27, 20192019 Event Calendar.pdf
Saturday, August 17, 2019PresidentsLetter 8-2019.pdf
Friday, April 12, 2019Combined Application Response Letter with Exhibits.pdf
Tuesday, February 26, 2019
To All NDAA Members:
First, let me thank all those who renewed their 2019 membership. However, as of today, 28 non-renewals are still outstanding. The NDAA Board of Directors will be personally contacting those individuals that have not renewed to ascertain their intent for 2019.
The NDAA is sponsoring the most requested education offering in Fargo. Please consider attending this course as it will definitely expand your knowledge in residential review assignments. Attending NDAA sponsored educational courses is vital in maintaining a balanced budget.
Temporary Appraisal Waiver:
At the February 13, 2019, Appraisal Subcommittee meeting, the Chairman, Mr. Arthur Lindo, reported that the North Dakota Department of Financial Institutions Commissioner, Ms. Lisa Kruse, is still planning to submit a second waiver request focusing on commercial real estate appraisals. This refocus is definitely an interesting turn of events.
Proposed de minimis Increase:
Again, the Office of the Comptroller Over Currency (OCC), Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC) (collectively-the agencies) are proposing to increase the residential appraisal threshold from $250,000 to $400,000. The 30-member Network of the State Appraiser Organizations contracted with the law firm of Constantine Canon LLP to prepare a formal response to this proposed de minimis increase. (The NDAA Board of Directors voted to contribute $500 to this effort.) The response (a complete copy of the response is attached) was sent to the agencies on February 5, 2019. It requested (1) "…that a hearing be held to more fully explore these issues prior to the agencies finalizing this rule making proceeding" and (2) the agencies move to not adopt the proposal. Additionally, the Network and the American Society of Appraisers, American Society of Farm Managers Rural Appraisers, American Guild of Appraisers, the National Association of Realtors, Appraisal Institute, MBREA, and America's RICS sent a similar request on December 21, 2018. On February 7, 2019, a response from the agencies was received detailing that "…We do not believe that holding a public hearing would elicit relevant information that could not be conveyed through the comment process described above." Personally, I cannot fathom as to why a public hearing would not be beneficial. Numerous written comments were received and, reportedly, "…We will carefully consider your written comments." The next step is undoubtedly to contact our congressional representatives to express our displeasure with their response. I will keep you posted as to a future "game plan".
Attached is a legislative update provided by Berry Wilfahrt, our legislative lobbyist. It provides a detailed analysis of the four Senate Bills that the ND Appraiser's Board and NDAA were following. Thanks Berry-greatly appreciated!
The only bill in which the NDAA testified was Senate Bill 2259. This bill related primarily to commercial "condemnation" appraisal assignments. If passed, it would have "opened the door" to the use of non-arms-length negotiated settlements in determining "fair market value". The measure of equitable damages is already addressed in the Century Code. The proposed changes would have created additional confusion but, more importantly, it would have created excessive non-market based awards that, ultimately, the taxpayer would absorb. The NDAA, the only appraisal group to testify at the Senate Finance and Taxation Committee hearing on January 21, 2018, presented a detailed response opposing this bill. The response was presented by Corey Kost. If it were not for the NDAA, the state appraisal profession would have had no voice at this hearing. This is an excellent example as to how the "voice" of the NDAA is working.
Lastly, just a reminder that the 2019 NDAA Annual Meeting/Educational Conference is scheduled for November 21 & 22, 2019, in Fargo. Please place this on your calendar and make every effort to attend.
Joe Ibach, MAI
2019 NDAA President
Tuesday, February 26, 20192019 Legislative Update for 2019 ND Legislative Session.pdf
Tuesday, February 26, 2019Comment of Thirty State Appraiser Organizations, Constantine Cannon LLP.pdf
Wednesday, November 21, 2018
See the attached letter from NDAA President Dean Rylander regarding a BRAND NEW proposal by the Federal agencies to reduce the appraisal requirements of ND banks and credit unions.
This action will be one of the ‘hot topics’ discussed at the upcoming NDAA Annual Conference and Education Event in Bismarck on December 6-7, 2018, along with the current status of the appraisal waiver request filed by the ND Governor’s Office.
Will you be there to protect your profession and your own interests?
Early bird pricing ENDS TODAY. To register for the NDAA Conference and Education Event in Bismarck, or to find out more, go to www.ndappraisers.org
Tuesday, November 20, 2018
Please join us in Bismarck for the NDAA Third Annual Conference and Education Event: See the attached Event Schedule for details. Register Now!
Event Calendar Dec2018.pdf
Wednesday, September 26, 2018ND-SD SBA letter-Final.pdf
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