Just How Effective is the Appraisal Subcommittee?

The AP recently published a fascinating article on the appraisal regulatory structure. There are countless quotes in the article that we will likely discuss in the future. However, the portion that stood out most to me is the one from Ben Henson, former Director of the Subcommittee, regarding non-recognition proceedings:

“When the agency does find a state failing to follow the law, the only tool available to force compliance is a death sentence known as “non-recognition” — a penalty that would ban all appraisers in that state from handling deals involving a federal agency.

Do you know what that would have meant? The net effect is it would have effectively shut down mortgage lending in that state,” former subcommittee director Ben Henson, who retired in December, told the AP. “To take that action would have been an unbelievable disruption to the economy. I wasn’t going to do that.”

Conventional wisdom suggests that the Subcommittee will most likely never initiate non-recognition proceedings, due to the reason Ben laid out above. However, I find it interesting to see Ben Henson admit to it publicly.

Justin Morton

  1. Beverly T. Davis

    I do not believe MORE REGULATIONS will solve any problems.
    “…The Appraisal Subcommittee is supposed to help states remove from the system those appraisers who agree to “hit a number.” But it has only four employees to conduct field reviews and audits of 50 states and four U.S. territories, and hasn’t even had a permanent director since the agency’s former chief retired at the end of last year….”
    This statement is taken directly from the AP article on the ineffectiveness of the appraisal regulatory system. I can see why 4 employees couldn’t handle the monumental task, but why have they not reached out the the individual states to find and use qualified appraisers to conduct field reviews for and conduct audits of the state regulatory boards? An organization that will not police itself is less than useless — it borders on criminal … hence, the state regulatory boards are useless because they won’t use licensees of their body to perform the functions required, and abetting criminality because they turn a blind eye to the criminal conduct of some of their licensees. As a consequence ALL appraisers will be painted with the same tainted brush!!!!!
    It really ticks me off!!!
    I have performed field reviews for years and always ask the client “WIll YOU SUBMIT THIS REPORT TO THE STATE FOR REVIEW IF THE SUBJECT REPORT IS FOUND TO BE SUSPECT OF FRAUD?” The answer is usually a vague “not sure”, “possibly”, etc…. One fraudulent appraisal isn’t of much concern to a lender. Of course, now they’ve discovered that an accumulation of fraudulent reports is a great concern!
    The lenders requesting reviews generally remove any identifiers from the report so it does me no good to submit a suspect report to the state. However, if I can figure out who prepared the suspect report, I save that report for future reference.
    When my state’s Appraiser Board was first formed, I submitted reports I believed were suspect and attempted to get “hit-the-mark-appraisers” removed from the rolls. In the beginning the system seemed to be working. Then the politicians got involved in the “appointment” of board members. It didn’t take long to realize that, while some culprits were dealt with appropriately, others were dipped in the “good old boy” batter and given a free pass to do whatever they wished. Members of so-called national appraiser organizations, who are supposed to be above reproach, were also given a pass by the board members who were fellow members of those organizations. (Some of the new regs would make membership in or holding a designation from such an organization a standard for FHA approval??!!!)
    I feel sorry for people who are losing their homes because of the greed of mortgage brokers/lenders pushing annual refinancing and 125% loan to value ratios and appraisers who were too spineless to do their job according to the principals they supposedly swore to adhere to.
    I do not believe the American Taxpayer should be saddled with the job of bailing them out.
    Each individual case should be reviewed to the point that the loan applications, appraisals and all other paper work associated with the defaulted loan should be given a forensic review and anyone found to have conducted any form of fraud in connection with the transaction held to account — primarily in the form of fines and seizures of liquid assets to repay the American Taxpayer.

  2. Justin Morton

    I tend to agree that what we really need is enforcement of current regulations, rather than the creation of new rules and laws.
    That said, if the state or federal government can craft a new rule in such away as to make current laws easier to enforce, then more regs may in fact be helpful.

  3. Beverly T. Davis

    Justin .. I hope you’re right, but I have yet to see a group of politicians craft ANYTHING that makes already existing laws easier to deal with or enforce…. The problem still lies with the lack of enforcement of even the most rudimentary laws. Understand, please, I can only speak with much knowledge about the state I am licensed in, but without the will and desire to do the work and spend the time necessary to enforce existing laws, new ones adding teeth to the enforcement process won’t help…. No one wants to be responsible for putting someone out of business, but if they are breaking the law, and committing fraud is breaking the law, they need to be put out of business.
    Unless the new law states the government will give whatever is needed to the states to achieve full enforcement, including manpower willing to do the work, I don’t see much change occurring…. Just more paperwork and hoops to jump through for the law-abiding.

  4. Justin Morton

    Beverly, adequate funding is crucial to enforceing the laws on the books. And unfortunately, you are right in that most states don’t care that much about the appraisal profession and only allocate enough money to barely operate.

  5. Nothing will chance as long as long as the appraisal founditation is controlled by banks and the appraisal institute.
    commercial appraiser, commercial appraisal

  6. mister d

    The institute and foundation are a joke and everyone knows it. IN my state the worst of the worst are in fact tha SRA’s and MAI’s who believe they can act with immunity which they usually get. As the first MAI I worked for out of college put it “They will never call their own kid ugly”.