Sara W. Stephens, MAI, Appraisal Institute’s president-elect, addressed the House Financial Services’ Subcommittee on Insurance, Housing and Community Opportunity that the Dodd-Frank Act passed by Congress last year is not being properly implemented by federal regulators in regards to C&R.
One provision within Dodd-Frank calls on appraisal management companies to pay “customary and reasonable” fees to real estate appraisers.
Unfortunately, the Federal Reserve’s Interim Final Rule is not faithful to Congressional intent. The Appraisal Institute thinks Congress’ intent was right on target. We urge Congress to guide the regulators’ aim, directing them to correct the Interim Final Rule to promote credibility over speed and cost.
Many lenders have chosen to outsource the appraisal management function to third-party management companies who pass only a small percentage on to the appraiser actually performing the appraisal service. Current policy leaves consumers completely in the dark. Here, we need transparency between appraisal and appraisal management fees, especially since it is the consumer who pays these fees in nearly all transactions.
Due to the low quality of reports that have been completed by some appraisers that are rushing through numerous appraisals to make enough money to sustain a living as well as the practice of some AMCs hiring the least qualified and competent appraisers, Congress intended to protect consumers by requiring AMCs to pay “customary and reasonable” fees to appraisers.
Last year, Congress passed the most significant legislative update of the appraisal regulatory structure in two decades. In our view, this was only a beginning.
Moving forward, Congress must maintain an active role in oversight of appraisal regulators and build on these reforms to address ongoing weaknesses. We can ill afford to allow another 20 years to pass without a thorough audit of appraisal regulations. Consumers, lenders and taxpayers deserve much better than they have been given to date.
For more information, visit the Appraisal Institute: www.appraisalinstitute.org