Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, April 29, 1990 TAG: 9004270830
SECTION: BUSINESS PAGE: D-2-3 EDITION: METRO
SOURCE: ANN MARIANO THE WASHINGTON POST
DATELINE: LENGTH: Long
The savings and loan bailout legislation ordered six federal oversight agencies and state governments to publish appraisal guidelines and said states must create regulatory boards to enforce the standards.
A provision in the federal guidelines, which will become final after regulators review public comments, said no industry groups, including appraisers, could dominate the state panels.
But now this regulation has been reversed by the oversight agencies after opposition from appraisers and the 820,000-member NAR.
The government's original intent was to appoint "citizen boards" that were not dominated by any professional group, said Ellen Stockdale, a spokeswoman for one of the agencies, the Office of the Comptroller of the Currency.
But after hearing the complaints, the agencies made a "slight amendment" saying it would not be illegal for appraisers to be in the majority on state boards, Stockdale said. Another source of controversy is the Appraisal Foundation, composed of eight appraisal trade associations whose members account for 20 percent to 30 percent of all appraisers.
The foundation, which also has financial-industry associations and other groups as members, is appointed by the law to write standards that states must incorporate into their own regulations. One of the member groups of the foundation, the American Institute of Real Estate Appraisers, is affiliated with the NAR.
This tie to the NAR, a powerful trade organization, worried some members of Congress when the legislation was being drafted. A House-Senate conference report with the bill "expressed a strong legislative preference" for state regulatory boards that had jurisdiction only over appraisers, said Jeffrey A. Tassey, an aide to Rep. Doug Barnard Jr., D-Ga. Barnard heads the commerce, consumer and monetary affairs subcommittee of the Committee on Government Operations.
Congress wanted to ensure that state real-estate boards, usually composed of members of the industry, did not regulate appraisers.
Legislators wanted to avoid having the NAR controlling the appraisal-oversight bodies, Tassey and other congressional aides said.
A real-estate broker's commission for a sale is based on the price the property brings, and the price is tied closely to the value an appraiser places on the land or structures.
Four years ago, Barnard's subcommittee reported that "faulty and fraudulent real-estate appraisals" had "contributed directly to the insolvency of hundreds of the nation's financial institutions and have helped cause billions of dollars in losses."
The same report said some private appraisal trade associations provided "grossly inadequate enforcement of professional standards and codes of conduct."
Since that report was issued, losses stemming from the savings and loan industry crisis have been mounting as federal officials have regularly had to issue new estimates of the total cost to the government.
Despite the subcommittee's negative findings about the performance of appraisers, Barnard said earlier this year that the federal agencies were wrong to prevent appraisers from controlling state regulatory boards.
In a letter to Kevin Blakely, deputy comptroller for supervision with the Office of the Comptroller of the Currency, Barnard said that although appraiser control of state boards was not specifically directed by the law, "appraiser dominance is implicitly recognized."
In fact, Barnard wrote, "there is no group that has a greater interest in the integrity of the real-estate appraisal profession than that of appraisers themselves."
The NAR originally opposed federal regulation of appraisers, but finally decided to support the legislation after lawmakers "removed portions of the overly onerous" provisions of the bill, according to Norman D. Flynn, the NAR's president.
"We don't see a conflict between the brokerage and appraisal functions," Flynn said. State real-estate boards "could easily regulate" appraisers without a conflict of interest, he said.
George Harrison, executive director of the Texas-based National Association of Master Appraisers, said the Appraisal Institute's affiliation with the NAR gives it "tremendous power and political influence."
Whether the interests of the public and independent appraisers are protected depends on effective enforcement of the new federal guidelines, he said.
Appraisers have never been regulated, and thus there is no accurate count of their numbers, although there may be from 150,000 to 250,000.
Some are members of trade associations that set educational and professional standards for their own members, but many work independently.
"I just don't think there will be Faulty and fraudulent real-estate appraisals contributed directly to the insolvency of hundreds of the nation's financial institutions and have helped cause billions of dollars in losses. Commerce, consumer and monetary affairs subcommittee of the Committee on Government Operations even justice" for all appraisers if standards are set and monitored by a minority of industry members, said Robert Connely, a Phoenix appraiser.
"It is vital that the other 80 percent who are not members of the Appraisal Foundation be protected by having equal representation on boards."
Although the legislation specifically bars "discrimination against certified and licensed appraisers solely by virtue of membership or lack of membership in any particular appraisal organization," Connely said he is not reassured.
In addition to the rules on state board membership, the standards issued recently required that appraisers be either certified or licensed, with certified appraisers being those "who are recognized by the states as being more knowledgeable and experienced" than licensed appraisers.
All appraisals must be written and provide more detail on more aspects of a property than in the past.
by CNB