When the winds of influence and valuation bias are howling, where can an appraiser find shelter from the storm of client pressure? As the independent, objective third-party involved in the real estate transaction, the appraiser plays an integral role in protecting both lenders and consumers from abusive lending practices. So where does the appraiser look for shelter from the storm? It appears that help is on the way.
While the appraiser's strongest defense against the storm will always be his or her personal knowledge, experience and ethics, it does not hurt to have interested champions in the form of the federal government and the vendor-management industry. Appraiser independence and objectivity are acknowledged as critical to the integrity of the collateral valuation component of the lending process. As such, independence and objectivity should and must be maintained when selecting appraisers, ordering appraisals and reviewing appraisals for all lending activity.
Congress is taking steps to address this issue. On March 16, 2005, Reps. Bob Ney (R-Ohio) and Paul Kanjorski (D-Pennsylvania) introduced the new Responsible Lending Act, to address, in Kanjorski's words, the need for "strong national lending standards with appropriate enforcement mechanisms." While the bill tackles complex issues such as requirements for high-cost loans, state law coordination and the establishment of minimum standards for mortgage brokers, it does not stop there. Title IV of H.R. 1295 provides some welcome definition and clarity for the appraisal industry. Under the proposed provisions, the bill would require a physical appraisal of the property for certain loans by a certified or licensed appraiser that meets or exceeds the criteria issued by the Appraiser Qualifications Board of The Appraisal Foundation, Washington, D.C. Further, the bill provides for state reciprocity and allows professional designations to be considered when selecting an appraiser.
While the debate continues on topics ranging from the strength of the various provisions to the benefits of federal versus state oversight, it is my belief that H.R. 1295 is a step in the right direction, providing some much-needed protection for the independence and professionalism of appraisers through improved oversight and accountability. Apparently, there are others who share this view.
"For the appraisal community, this bill addresses the toughest issues we have raised over the last several years," says Don...