The American Society of Appraisers and the National Association of Independent Fee Appraisers on Tuesday sais they are seeking to halt a proposed change in definitions at federal bank regulatory agencies that the groups claim will "completely undo over a quarter century of effective appraiser oversight and override long standing Congressional intent in the area of appraiser regulation through regulatory fiat."
The issue centers around a proposed change in a key definition associated with the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Title XI of that Act requires federally regulated financial institutions, such as federally insured banks, thrifts and credit unions, to use state certified or licensed appraisers to perform appraisal assignments in federally related transactions.
According to a person familiar with the issue who would not speak for the record, the regulatory agencies, largely at the behest of smaller community banks, want to allow for cheaper and less time-consuming valuations, such as those made by a real estate agent, or a Zillow Zestimate, to suffice for certain types of federally backed loans.
As described by the two organizations in a press release, the changes "would exempt over 90% of appraisals performed in connection with residential mortgage transactions from all of Title XI's requirements including, most critically, those related to enforcement In cases where an appraiser failed to competently perform the assignment or otherwise violated the Uniform Standards of Professional Appraisal Practice (USPAP) or appraiser independence requirements."
It added, "This would strip away key consumer protections from all but a handful of mortgage lending transactions, leaving home buyers no recourse when they believe an appraiser has run afoul of their professional responsibilities."