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Archive for June, 2010

Breaking News: HVCC ENDS, BPOs Weakened, Higher Appraisal Fees

June 27th, 2010

**BREAKING NEWS** FINALLY-Good News for Appraisers in Financial Reform Bill Agreed to by House-Senate Conference Committee

It appears as though we may have some good news to report to real estate appraisers who have suffered through so many days of bad news during the past several years.  While we are attempting to verify the final language adopted in the version agreed to by the committee and sent back to Congress for ratification, we want to share some of the highlights.

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Higher Appraisal Fees!

The congressional bill appears to take some of the language from the FHA (see FHA Mortgagee Letter 2009-28) regarding appraiser compensation and includes the following language:

“Customary and Reasonable Fee:

IN GENERAL—Lenders and their agents shall compensate fee appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.”

The bill, however, goes further than the FHA mandate in describing manners in which customary and reasonable fees are to be determined:

“Evidence for such fees may be established by objective third-party information, such as government agency fee schedules, academic studies, and independent private sector surveys. Fee studies shall exclude assignments ordered by known appraisal management companies.” Please note that we have added italics to this last sentence to emphasize its importance.

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HVCC to End!

“SUNSET. Effective on the date the interim final regulations are promulgated pursuant to subsection (g), the Home Valuation Code of Conduct announced by the Federal Housing Finance Agency on December 23, 2008, shall have no force or effect.”

What does this mean exactly? Well, it does not mean that real estate and mortgage brokers can go back to playing “pick an appraiser who will hit the number”.  The congressional bill contains numerous provisions mandating protection for appraisers to prevent pressure from mortgage lenders or their agents.  We will have more to say about this in future newsletters.

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New Regulations for AMCs!

The congressional bill contains the following language regarding Appraisal Management Companies:

‘‘SEC. 1124. APPRAISAL MANAGEMENT COMPANY MINIMUM

REQUIREMENTS.

(a) IN GENERAL.—The Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration Board, the Federal Housing Finance Agency, and the Bureau of Consumer Financial Protection shall jointly, by rule, establish minimum requirements to be applied by a State in the registration of appraisal management companies. Such requirements shall include a requirement that such companies—

(1) register with and be subject to supervision by a State appraiser certifying and licensing agency in each State in which such company operates;

(2) verify that only licensed or certified appraisers are used for federally related transactions;

(3) require that appraisals coordinated by an appraisal management company comply with the Uniform Standards of Professional Appraisal Practice; and

(4) require that appraisals are conducted independently and free from inappropriate influence and coercion pursuant to the appraisal independence

standards established under section 129E of theTruth in Lending Act.”

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Limitations on BPOs!

While this does not go far enough and excludes many current uses of BPOs, the congressional bill appears to have following provision regarding Broker Price Opinions:

‘‘SEC. 1126. BROKER PRICE OPINIONS.

(a) GENERAL PROHIBITION.—In conjunction with the purchase of a consumer’s principal dwelling, broker price opinions may not be used as the primary basis to
determine the value of a piece of property for the purpose of a loan origination of a residential mortgage loan secured by such piece of property.

(b) BROKER PRICE OPINION DEFINED.—For purposes of this section, the term ‘broker price opinion’ means an estimate prepared by a real estate broker, agent, or sales person that details the probable selling price of a particular piece of real estate property and provides a varying level of detail about the property’s condition, market, and neighborhood, and information on comparable sales, but does not include an automated valuation model, as defined in section 1125(c).’’

Once again, we at Appraiser Help want to note our support for the positions taken by the four appraisal organizations which authored the March 8th and April 20th letters that we have previously discussed opposing the use of both BPOs and BOVs (Broker Opinions of Value of Commercial Real Estate).  Links to these two letters are here:

Letter Regarding BPOs.

We also again request that Andrew Cuomo take one final action as Attorney General, before his coronation as Governor of New York, to read our letter dating back to August 4, 2009 (go to www.EndBPOsNow.com to see) and use the powers at his disposal to help bring an end to these unseemly financial practices.

The Bottom Line

First, we need to receive confirmation that the various provisions outlined above which impact appraisers have made it through the committee as indicated.

Second, both branches of Congress need to ratify this legislation and the President has to sign the measure.

Third, we need to have some patience while these measures are implemented and work with our various appraisal organizations to make sure that the good portions of this legislation are not weakened and that additional measures (i.e. ending all forms of BPOs and BOVs) are taken in the future.

Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!

We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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