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Columbia Society of Real Estate Appraisers Inc.

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New York's Oldest Nonprofit Organization for Real Estate Appraisers

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In The News - Call to Action

October 2017

Freddie Mac & Fannie Mae have embarked on programs that waive appraisal requirements in first purchase and refinance transactions, using propriety models and generally unreliable data from MLSs and public records for collateral risk decision making. According to Fannie & Freddie, this is being done to lower costs and shorten closing time for consumers. While Fannie Mae has indicated the appraisal waivers will represent only 5 percent of their loan portfolio, Freddie Mac has thus far being unwilling to provide estimates, indicating that as much as one-third of their portfolio may be offered appraisal waivers. These programs will create unnecessary and unacceptable risks for taxpayers and homeowners, and they come at a time when markets are at all-time highs and when risk mitigation should be tantamount.

 
Let Congress hear from you if you are against the Freddie Mac and Fannie Mae waiver programs.
 

 

Industry Groups Attempt to Prevent Fannie Mae and Freddie Mac from Implementing Appraisal Waivers

September 6, 2017

Today 35 industry groups, including the Columbia Society of Real Estate Appraisers, sent a letter to the Senate Committee on Banking, Housing and Urban Affairs, and to the House Committee on Financial Services, attempting to prevent the new appraisal waiver programs being implemented by Fannie Mae and Freddie Mac.  The waivers are being allowed for loans where Fannie and Freddie feel there are sufficient loan-to-value ratios and enough in-house data to warrant Automated Valuation Models (AVMs) instead of appraisals.

The industry groups disagree.  They feel that full appraisals are needed to safeguard taxpayers and homeowners in the home-buying process.  Here is the letter:

September 6, 2017

We are writing this letter to raise concern over the new appraisal waiver programs recently implemented by Freddie Mac and Fannie Mae (the “ Government Sponsored Enterprises.”)  We believe these programs will create unnecessary and unacceptable risks for taxpayers and homeowners, and they come at a time when markets are at all-time highs – when risk mitigation should be tantamount. We ask you to call on the Federal Housing Finance Agency (FHFA) to prevent the Enterprises from implementing the appraisal waiver programs until they can demonstrate the appraisal waiver program:

1) is consistent with safe and sound operation of the Enterprises;
2) does not bring harm to the consumer, especially the affordable housing sector;
3) is properly monitored by FHFA and tested with independent appraisals; and
4) integrates proper safeguards to prevent fraud.

We recognize that the Enterprises have, since 1994, been exempted from appraisal requirements established by Congress on the basis that their requirements exceeded those established by Congress and that they would continue to make responsible decisions. These new programs call this privilege into question.

We view these new programs as an “ arms race” between Freddie Mac and Fannie Mae on who can increase the most market share, while demonstrating a distinct pullback in terms of safety and soundness. Competition between the Enterprises should not result in a race to the bottom in terms of due diligence especially while the agencies remain in conservatorship. It was the same elimination of risk focused underwriting that lead to the Enterprises’ brink of bankruptcy 9 years ago. Unlike an earlier policy change by Fannie Mae which addressed mostly refinances where previous appraisal information is likely available, first purchase transactions by the Enterprises carry higher risk from a property information standpoint. It is standard underwriting practice to obtain a complete interior inspection appraisal for first purchase transactions in order to better understand the potential risk associated with a property’s condition, which is more likely to change between subsequent sales than between refinance transactions. That likelihood is why independent appraisal data, including an inspection, is so important to managing risk and protecting the public trust.

This is not the first time appraisal waivers have been advanced by the enterprises. Similar actions were taken by the Enterprises in the early to mid-2000s, and the resulting decline in risk management by mortgage lenders proved to be disastrous for the economy, damaging the public trust.

It has taken many years for the mortgage finance sector to recover from the financial disaster in 2008-2009, but progress has been made. This significant progress is due in large part to the employment of fundamental risk management activities, such as the requirement for the completion of full appraisals to determine the true equity position of individual properties. Reducing appraisal requirements sends the wrong signal to mortgage loan sellers about the importance of fundamental risk-management practices and the need to continue to employ strong underwriting guidelines to avoid the costly mistakes of the recent past.

For these reasons, we ask you to call on the Federal Housing Finance Agency to prevent the Enterprises from implementing the appraisal waiver programs until it can demonstrate that they are consistent with safe and sound operation of the Enterprises. At a minimum, the Agency should request the estimates of loan purchase and refinance transactions that would be subject to the new programs and make those estimates public for comment by affected stakeholders and other experts. Further, as your Committee develops housing finance reform legislation, we ask that any legislation ensures that the Enterprises’ appraisal  requirements enhances their safe and sound operation so long as the Enterprises remain in conservatorship or otherwise present potential risks to taxpayers and homeowners.

Thank you for your consideration of this matter. If you should have any questions or would like additional information or resources from our organizations, please contact any of the individuals listed in the attached document.

Sincerely,

American Society of Appraisers
American Society of Farm Managers and Rural Appraisers
Appraisal Institute
Appraisers’  Coalition of Washington
Arizona Association of Real Estate Appraisers
Association of Texas Appraisers
California Coalition of Appraisal Professionals
Coalition of Appraisers in Nevada
Coalition of Arizona Appraisers
Colorado Association of Real Estate Appraisers
Columbia Society of Real Estate Appraisers
Delaware Association of Appraisers
Foundation Appraisers Coalition of Texas
Illinois Coalition of Appraisal Professionals
Kentucky Association of Real Estate Appraisers
Louisiana Real Estate Appraiser Coalition
Maryland Association of Appraisers
Massachusetts Board of Real Estate Appraisers
Michigan Coalition of Appraisal Professionals
Mississippi Coalition of Appraisers
National Association of Appraisers
National Association of Independent Fee Appraisers
New York Coalition of Appraiser Professionals
North Carolina Real Estate Appraiser Association
Ohio Coalition of Appraisal Professionals
Oklahoma Professional Appraisers’ Coalition
Real Estate Appraisers Association of California
Real Estate Appraisers of Southern Arizona
Rhode Island Real Estate Appraiser Association
South Carolina Professional Appraisers Coalition
Tennessee Appraiser Coalition
United Appraisers of Utah
Utah Association of Appraisers
Virginia Coalition of Appraiser Professionals
West Virginia Council of Appraiser Professionals
 

 

Appraiser Qualifications Board Issues Proposed Changes to Real Property Appraiser Qualification Criteria

March 15, 2017

Comment Deadline: May 12, 2017

The Appraiser Qualifications Board (AQB) establishes the minimum education, experience and examination requirements for real property appraisers to obtain a state certification under the provisions of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). As needed, the AQB issues exposure drafts on proposed changes to the Real Property Appraiser Qualification Criteria and the Personal Property Appraiser Qualification Criteria. The AQB reads and discusses each comment that they receive, so please take some time to read the exposure drafts and send your comments!
 

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New - March 2017: Third Exposure Draft of Proposed Changes to the Real Property Appraiser Qualification Criteria

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Comments from September 2016: 2nd Exposure Draft of Proposed Changes to the Real Property Appraiser Qualification Criteria


 

What do you think? Send your comments: AQBComments@appraisalfoundation.org

Past Exposure Drafts

 

Society Responds to California Legislation Impacting USPAP

 

July 7, 2015

 

On July 7, 2015 the Society responded to California State legislation (AB #624 - 2015-2016) that could significantly impact the current Uniform Standards of Professional Appraisal Practice  (USPAP) and allow for multiple standards in addition to USPAP.  This follows on the heels of legislation just passed in Texas that would also allow for multiple standards.  The Society is not in favor of multiple standards for various reasons as listed in our letter to California legislators.

 

View     a copy of the letter that we sent to California legislators

 

Click here     for information about the pending California legislation

 

 

 

 

 

 

 

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