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Appraisers upset as big banks drag feet on new regulations
Despite the massive fraud that has emerged as the U.S. tries to dig itself out of the foreclosure mess at the heart of the great recession, there are still huge numbers of honest folks working in the real estate business.
That's according to professional appraisers in Washington state, dozens of whom have signed an on-line petition.
They're asking Congress and the Federal Reserve Board to put the integrity back into the Truth in Lending Act -- and keep hundreds of them nationwide from going out of business.
Early last week, the petition emerged on the Internet. Within three days, more than five thousand people had signed it. Most of them are professional appraisers worried about their livelihoods or angry about changes in their industry.
It's addressed to the authorities who set the policies that regulate financial institutions. It asks them to stay true to the spirit of a federal law that passed Congress last year.
One aspect of the massive Dodd-Frank Act was to set "reasonable and customary appraisal fees." Appraisers are the people hired to objectively estimate a fair price for a property, before a borrower signs a promissory note to the bank.
The signees say the fees paid right now aren't reasonable; they claim they're being gouged by middlemen known in the industry as AMCs. (That's the acronym for appraisal management companies.) And they say many if not most of these companies are owned by the big banks.
"The appraiser is receiving $300 for an appraisal that, generally speaking, in the recent past, that appraiser probably made $450 or $500 on," says Cheri Farivar, a certified appraiser in Leavenworth, who is also the outgoing president of Washington state's real estate appraiser commission.
She says she signed the petition because she wants banks to stop weaseling their way out of the federal law that went into effect April 1st. They're taking advantage of a loophole.
"And it is forcing some of the best appraisers, who are simply not willing to accommodate that kind of price gouging to leave the industry," Farivar says. " So I think we're seeing a brain drain in the appraisal business."
The fix, she says – is for banks to follow the spirit of the law, get rid of the middle men and restore appraisers' income to the levels they were at a decade ago. If they won't do it voluntarily, she and several thousand others are telling the federal regulators to force the issue.
Ironically, the problem arose because of efforts to ensure that home appraisals are impartial, thorough and accurate.
"Appraisers were hoping the new measure would correct problems they began to experience in May 2009, when a set of rules known as the Home Valuation Code of Conduct was adopted by the profession," writes J. Craig Anderson in The Arizona Republic. Instead, it seems to be devastating to many of the most honest operators in their field.
Meantime, appraisers nationwide say consumers can help – by asking before signing any mortgage documents exactly where the money for their appraisal fees is going.