Politics & MoneyInvestmentsMortgageReal Estate

Appraisers accuse federal regulators of recreating housing crisis conditions

Appraisal Institute blasts proposal to eliminate appraisal requirement on certain home sales

As one might expect, appraisers are none too pleased about the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve proposing to eliminate the appraisal requirement on certain home sales of $400,000 and below.

Earlier this week, the FDIC, OCC, and Fed proposed increasing the appraisal threshold from $250,000 to $400,000, meaning that some home sales of $400,000 and below would no longer require an appraisal.

According to FDIC data, increasing the appraisal threshold from $250,000 to $400,000 would have exempted an additional 214,000 mortgages from the agencies’ appraisal requirement in 2017.

And while that would mean that there would be 214,000 fewer appraisals, and therefore 214,000 fewer appraisal fees for appraisers, that is not the appraisal industry’s chief concern.

According to Appraisal Institute President James Murrett, the newly proposed rules would add significantly more danger to the lending environment and harken back to the way things were just before the financial crisis.

“The Appraisal Institute strongly objects to the FDIC’s proposal to raise residential appraisal thresholds,” Murrett said in a statement provided to HousingWire.

“Congress just considered establishing a residential appraisal exemption and instead chose to enact a vastly different allowance involving appraisers in rural areas,” Murrett continued. “This proposed rulemaking flies in the face of this action, and recreates the same type of environment that led to the housing crisis.”

Murrett said that increasing the appraisal threshold will “threaten the vital role” that appraisers have in real estate deals.

“This action would undermine the crucial risk mitigation services that appraisers provide clients and users of appraisal services,” Murrett said.

“Raising the threshold means more evaluations will be allowed in place of appraisals. The Appraisal Institute anticipates that will result in a return to the loan production-driven environment seen during the lead-up to the financial crisis, where appraisal and risk management were thrust aside to make more – not better – loans,” Murrett continued. “Apparently, the FDIC has learned nothing from that experience.”

According to Murrett, reducing regulations may make some sense early on, but “the FDIC’s announcement raises significant safety and soundness concerns that the Appraisal Institute finds deeply disturbing.”

Most Popular Articles

NAR bans “pocket listings”

The National Association of Realtors board of directors voted 729-70 on Monday to ban the controversial practice of “pocket listings.”

Nov 12, 2019 By

Latest Articles

Uh-oh: Borrowers’ satisfaction with their lender is falling as originations rise

By all accounts, 2019 is going to end up being the best year for the mortgage business in at least three years, but is there appears to be a serious fly in the mortgage business’ ointment. A new survey shows that borrowers’ satisfaction with their lender dropped significantly in the second quarter as lenders struggled to deal with the surge in mortgage demand caused by falling interest rates.

Nov 14, 2019 By