- Sep 28, 2003
- Professional Status
- Certified Residential Appraiser
- New York
TUESDAY, november 29, 2016
Dear Mr. Trump & Dr. Carson:
America’s 80,000+ licensed and certified real estate appraisers are collectively holding their breath right now, concerned over their own future and the future of the housing market.
We’ll get right to the point and say it in under 140 characters (yay Twitter!): Appraisers have a central and irreplaceable role in facilitating proper risk management in mortgage lending. The hearing on November 16th by the Subcommittee on Housing and Insurance did not adequately bring out this point. In fact, the “Key Takeaways from the Hearing” in the news release afterward ominously stated (emphasis is ours):
“The current appraisal regulatory regime is stuck in a 1980s model and does not reflect the advancements of a 21st century marketplace.
The appraisal regulatory structure should take advantage of advancements in alternative home valuation methods.
The Dodd-Frank Act’s impact on the appraisal industry has not enhanced the system for appraisers, consumers or stakeholders.
The decline in the number of professional appraisers is reflective of burdensome qualifications and a changing marketplace”.
Unquestionably, there are many problems with the current system which lead to a declining number of qualified, professional appraisers willing to work for longer hours at reduced fees as appraisal management companies (AMCs) skim a high percentage of the fee allocated for appraisals, a fee oftentimes disproportionate to the relative importance of the role they play. We will not delve into the role of AMCs in our comments today; please feel free to read past issues of AppraiserNews.com on our website (or just call any appraiser!). What is important to emphasize right now is that so called “alternative home valuation methods (AVMs)” are unreliable and dangerous by themselves: their role is to assist in information gathering and analysis by professional, licensed and certified appraisers.
In her testimony at the House hearing, Joan Trice of Clearbox noted that: “The events of the presidential election offer a cautionary tale. Big data failed. Models failed”. While there may be many changes during the next four years, the presence of professional, independent, licensed or certified appraisers helps to provide a “backstop” for those changes that might be ill conceived.
Brief History of HUD & the FHA
The following is a short summary for the benefit of Mr. Carson, if he chooses to accept the position of Secretary of HUD, since he has spent his life outside of government and may lack familiarity with the agency.
~The National Housing Act of 1934 was enacted during the Great Depression to help make housing and mortgages more affordable and to stop the wave of foreclosures. It created the Federal Housing Authority (FHA).
~The Department of Housing and Urban Development (HUD) is created as a Cabinet-level agency in 1965. The FHA becomes part of HUD.
~In 1979, Moon Landrieu becomes HUD Secretary; inflation hits 19%, seriously affecting homebuying and mortgage lending. I guess you could say that interest rates really hit the moon (sorry about that, couldn’t resist).
~In 1989, former NFL quarterback Jack Kemp is appointed HUD Secretary by the first President Bush. The Financial Institutions’ Reform, Recovery, and Enforcement Act (FIRREA) is passed to bail out failing thrift institutions.
~1990’s: various initiatives are taken to encourage homeownership and provide assistance to renters. Andrew Cuomo becomes first HUD Secretary from within the department.
~Homeownership rate reaches 67.7% in 2000, the highest in history.
~Shaun Donovan appointed HUD Secretary in 2009 followed by Julian Castro in 2014.
~After the financial crisis, the percentage of FHA loans relative to all loans rose substantially until credit conditions normalized. FHA loans currently account for approximately 12% of all loans (see below).
Granted, this is a very short summary. Once we are convinced that HUD is not on the “kill” list of government agencies, perhaps we’ll have more to say. In the meantime, feel free to speak with the current management (but please don’t call Andrew Cuomo!).
Tell us what you think!
Email Bill Collins today at [email protected]