Update on the Legislative Front

Special Report by NAIFA Legislative Liaison Ann Susko

When I accepted the position as Legislative Liaison for NAIFA, I had no idea 2008 would become such a volatile year for issues impacting the appraisal profession.

NAIFA Breaking News!
A Note From Ann Susko, IFA
Joint Government Affairs Chair

Appraisal Groups Release Model AMC Legislation

The National Association of Independent Fee Appraisers in cooperation with the Appraisal Institute, the American Society of Appraisers and the American Society of Farm Managers and Rural Appraisers has developed model legislation regarding the registration and regulation of appraisal management companies (AMCs). An attempt has been made to provide framework from which the appraisal community, state appraisal boards and state legislatures can draft their own legislation and regulation.

AMCs are presenting themselves as appraisal service providers to the lenders and the public. Consumers are being charged an appraisal fee, but on the HUD-1 statement there is no delineation of the fee split between the appraiser and the AMC. Since the AMCs are outside of any federal or state regulations, they operate however they desire. This model bill is intended to close this unregulated loophole.

As drafted, the model:

Requires the registration of AMCs operating in the state that order residential appraisals from independent appraisers. Provides exemptions for "in-house" appraisal departments, AMCs that order less than 10 appraisals in that state in a year, and for appraisers that subcontract to other appraisers on an incidental basis;

Prohibits AMCs from being owned by individuals who have had an appraiser license or certification denied, refused, cancelled or revoked;

Requires the identification of a "controlling person" for each AMC;

Requires AMCs to have systems in place to verify that they only utilize licensed or certified appraisers, and that all appraisals are in compliance with USPAP;

Enacts requirements that ensure that appraisers are free from coercion or inappropriate influence from AMCs, and

Provides for the adjudication of disputes between AMCs and the independent appraisers.
The appraisal organizations look forward to working with their local chapters, state appraisal boards and state legislators and invite comments from all stakeholders.

A copy of the model draft can be found at www.naifa.com under members only "news" or by clicking here.

Send your comments to Ann Susko, IFA at asusko@cox.net.



From Ann Susko

I have had the pleasure of collaborating with three of our sister organizations-The Appraisal Institute, American Society of Appraisers and Association of Farm Managers and Rural Appraisers. ASA and AI have lobbyists skilled in working in the DC arena.

Our initial venture into the foray was responding to the HVCC (Home Valuation Code of Conduct). I am sure you recall NY Attorney General Cuomo cutting a deal with Fannie Mae and Freddie Mac to forego investigating their financial aerobics if they agreed to the HVCC. Although there are laudable items in the HVCC supporting appraiser independence, compensation, and no pressure or coercion from anyone, there are negatives we addressed. Lenders could no longer accept orders from Mortgage brokers, remov! al of in-house appraisers from lending institutions and the big issue was for lenders to delegate the ordering function to outside entities. That translates to appraisal management companies who are unregulated (out of the frying pan into the fire!) with a mantra of "cheapest and fastest". Our coalition has pushed for total disclosure to the borrower on the HUD 1 delineating the dollars to the appraiser and the dollars to the AMC. We feel it is a RESPA violation to show the appraisal fee as a single line item. As of this time, the HVCC is apparently undergoing restructuring and expected to debut in February or March or possibly not at all.

We supported passage of H.R.3221 the Federal Housing Finance Regulatory Reform Act. The Hope for Homeowners Program requires an appraisal in accordance with Title XI of FIRREA. It amends the FHA Appraiser Roster to required certified appraisers. We have requested an extended time period to allow licensed appraisers to meet the criteria. The law prohibits ANYONE from improperly influencing an appraiser. We were elated that the law also includes nationwide licensing and registration of mortgage brokers and loan originators.

A letter to the US Securities and Exchange Commission urged the use of real estate appraisal and valuation specialists who already have a well developed and supported body of knowledge on market valuation, USPAP and requirements mandated by Congress. This is in lieu of the SEC idea of reinventing the wheel and training CPAs, tax preparers and auditors on valuation theories and practices.

Responding to the Associated Press article "Weak Rules Cripple Appraiser Oversight", we stressed to the Senators the need to support passage of H.R. 3915 which would fix many of the oversight problems noted in the article. That bill is the Mortgage Reform and Anti-Predatory Lending Act which includes more effective and responsive oversight by the Appraisal Subcommittee plus providing greater resources to state appraisal boards for enforcement. We also encouraged use of appraisal services from highly trained professionals such as those who have achieved a designation from a nationally recognized professional appraisal organization. This bill encourages appraiser independence in all mortgage transactions and addresses the need to update Title XI. Our correspondence stressed the downside of using AMCs.

Our letter to the Honorable(s) Paulson, Bernanke, Shelby, Cox, Frank, Dodd, Bachus and Lockhart commented on the Troubled Asset Relief Program (TARP). The purpose of this emergency legislation is to stabilize and restore confidence in the mortgage and credit markets. However, if it fails to establish requirements that would ensure the competence of those performing real property appraisals, it would not fulfill the intended purpose. We suggested: (1) requiring the appointment of an executive level "Chief Appraiser" at the FDIC; (2) not using an AVM but qualified, expert, "local" appraisers for portfolio analysis; and (3) the use of professional appraisers (particularly designated) for loan restructuring in the new "Hope for Homeowners" program. We offered our services to assist in discussions and structuring of a solution to providing accurate valuations of these properties.

Standard and Poor's is proposing a new rating system for mortgage backed securities. We looked at this as an "after the fact" system and suggested they might want to validate the actual property value at origination. S&P's property review criteria permits the use of AVMs and BPOs. Our correspondence to them contained a comprehensive reason for NOT using either type of criteria for this purpose. In a nutshell the unreliability of both sources was stressed. We have received an inquiry from S&P for further information on our constructive suggestions of reliable valuation methods.

This is a year-to-date summary on the legislative front. More fireworks are expected in 2009. Your NAIFA dues have been put to a positive use this year in supporting our designations and the appraisal profession. I can tell you that the powers that be in DC do know who and what we are. I would like to thank everyone who supported our legislative efforts this year. Our members got involved in letter writing, emailing, calling and encouraging other members and appraisers to get involved. The passage of legislation this year shows that speaking with one unified group voice does result in positive action.

Ann Susko , IFA
NAIFA Legislative Liaison





NAIFA Breaking News!
NAIFA Establishes Cooperation Agreement

Minneapolis - The National Association of Independent Fee Appraisers has entered into an agreement with the American Society of Appraisers' Real Property Committee to develop, maintain and present joint education offerings. The agreement was signed and announced at the ASA Annual Meeting in Minneapolis on August 6, 2008.

The agreement will allow both organizations to provide a more robust and expansive menu of professional education to their members. Both organizations agree to work in tandem to provide the best educational opportunities possible for their members, with the goal of using this cooperation as an initial step toward broader collaboration in the future. "Both NAIFA and ASA are committed to advancing the appraisal profession and ensuring that our members receive top-notch education," said Oliver P. Yandle, NAIFA's Executive Vice President. "This agreement is one more step toward enhancing the value members receive from NAIFA. We appreciate the support and cooperation from our ASA partners and look forward to more opportunities ahead."

A task force of members from both associations negotiated the agreement. NAIFA wishes to thank the following for their efforts:

F. Dale Bynum, IFA; Richard W. Gilmore, FASA; Samuel F. Luceno, ASA; John S. Marrazzo, IFAS; Michael T. Orman, IFAS; W. David Snook, FASA; Ann Susko, IFA; and Charles W. Wallis, IFAC






NAIFA has come out in a letter as officially denouncing the HVCC agreement between New York Attorney General Cuomo and OFHEO "NAIFA applauds the attempt to secure appraiser independence in the real estate process in the proposed agreement" say's Michael T Orman, IFAS, National president, NAIFA. He goes on to say "..Despite its laudable intent, we find that that the current structure of the agreement may lead to unanticipated and potentially damaging results for borrowers, the public, real property appraisers and the users of real property appraisals." NAIFA excerpt press release 5/15/08 see NAIFA website press page

NAIFA, along with an alliance of the Appraisal Institute, American Society of Appraisers, American Society of Farm Managers and Rural appraisers have filed a joint letter denouncing and showing cause for the problems with the Cuomo deal and the HVCC. The contention has to do with the authority of the parties to make such an agreement and the agreements legal basis aside from that.

The Appraisal foundation has now rung in on their opinion of the HVCC in this letter from the .appraisal foundation letter of 4/29/08 It was not so much a denouncing of it but a recommendation for a rewrite.

This link shows press released version of the HVCC by the state of New York. HVCC agreement.

This is a link to a mortgage blogger with an interesting take on HVCC apellas review of Cuomo

NAIFA is also announcing the premier of the NAIFA Certified Appraisal Review Program. It is designed for both appraisers, underwriters and others who use appraisals to be able properly review appraisals and show a dedication to higher education and standards. If you would like to get more information about the appraisal review programs follow this link and go to the bottom of the page.

There is a lot of new information going up regarding the goings on at NAIFA and you should know so you know what your association is doing.