A storm is brewing between appraisers and broker price opinion (BPO) professionals vying for valuation work for short sales conducted through the Making Home Affordable Foreclosure Alternatives (HAFA) program. The Appraisal Institute — a trade group that represents appraisers — released a public letter it wrote to Treasury Secretary Timothy Geithner on Tuesday, calling for an end of the practice of using BPOs for Making Home Affordable modifications and refinancings, as well as amending the rules for the upcoming HAFA program to require appraisals to determine value for government-incentivized short sales. “Generally speaking, real estate agents and brokers are not independent or properly trained valuation specialists. They have an inherent bias towards quick results and action which produces a fee for themselves irrespective of whether the lender/services/investor/property owner/borrower gets a fair return on the short sale,” the Appraisal Institute said in its letter. “We believe that such conflicts can and should be mitigated by implementing basic requirements reestablishing independence and competency in the valuation process,” the letter also said. Specifically, the Appraisal Institute called for the short sale process to include appraisals conducted under the regulations outlined in the Uniform Standards of Professional Appraisal Practice (USPAP). “Such a requirement is a minimum safeguard to enhance the fiduciary responsibility of lenders, eliminate conflicts of interests, and ensure independence and objectivity in the short sale process,” the Appraisal Institute said. On Wednesday, the Real Estate Valuation Advocacy Association (REVAA), a year-old trade group that represents firms and professionals in the appraisal, BPO and automated valuation model (AVM) industries, issued a media release contesting the letter’s assertions. Don Kelly, REVAA’s recently appointed executive director, previously worked at the Appraisal Institute. [W]e believe that financial institutions and investors should be able to choose from a wide variety of proven and reliable valuation tools,” REVAA said. “Unfortunately, the ability of our customers to order “the appropriate product for the appropriate purpose” is under enormous attack.” “BPOs, AVMs and other alternative valuations are important and necessary tools which reduce costs, increase speed and strengthen overall valuation accuracy,” the letter continued. “Their use benefits homeowners with reduced costs (reduced pass-through servicing costs), mortgage investors (decreased cost of due-diligence) and credit risk departments (to verify appraisal accuracy).” One of the Appraisal Institute’s biggest arguments for using appraisals in lieu of BPOs for HAFA short sales is the potential for fraud. HousingWire broke the news in October that the Obama Administration would launch the HAFA program and recently reported lenders are already bracing themselves for attempted fraud and putting policies in place to deter fraudulent behavior. HAFA is set to launch on April 5. It provides monetary incentives for borrowers, servicers and lenders to who complete a short sale under the program’s terms. Write to Austin Kilgore. Note: included in the April edition of HousingWire magazine is HW Focus, a new supplemental publication that, in the first edition, explores the valuation industry with expert analysis by staff and insight and perspective from some of the industry’s top professionals. Keep on top and get it here.

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