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According to Kenneth R. Harney's recent column in The Columbus Dispatch, The Trump administration wants to eliminate professional appraisals on a large number of home-sale transactions. The FDIC, the Federal Reserve and the U.S. Treasury recently issued a joint proposal that would make traditional appraisals unnecessary for many new mortgages originated for less than $400,000. Instead the homes would be evaluated by individuals not subject to current regulatory oversight.

The goal in loosening standards is to lower costs and reduce time in home-mortgage transactions, according to the agencies. There is already an exemption from mandatory appraisals for new mortgages less than $250,000 when a loan is not intended to be sold to government-backed investors such as Fannie Mae or Freddie Mac, insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).

The new proposal would increase the $250,000 ceiling to $400,000, significantly expanding the reach of the no-appraisal approach. The agencies estimate that if their plan had been in place during 2017, about 214,000 home transactions would have been affected. The median existing home price nationwide in October was $255,400, according to the National Association of Realtors, far below the proposed $400,000 threshold.

Appraisers are reacting to the regulators’ plan with outrage — not surprising given the dent it could leave in their incomes. But appraisers say the issue goes far beyond money and instead gets to the “safety and soundness” responsibilities the federal agencies have concerning banks and mortgage lenders. Without a truly independent, professional valuation of a home — its interior, exterior and recent comparable sales — the door could be open to more loans on houses with inflated appraisals designed to “hit the number” needed by the lender to close the deal.

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