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H.r. 1500 Veterans’ Appraiser Choice Act Of 2003

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Francois K. Gregoire

Senior Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Hi All,

Yesterday there was a hearing before the House Committee on Veterans’ Affairs to discuss the implications of H.R. 1500, the Veteran's Appraiser Choice Act of 2003. The President of the Appraisal Institute provided testimony.

READ IT HERE!!

The National Association of REALTORS provided written testimony.

STATEMENT OF
THE NATIONAL ASSOCIATION OF REALTORS
BEFORE THE U.S. HOUSE OF REPRESENTATIVES
COMMITTEE ON VETERANS AFFAIRS
SUBCOMMITTEE ON BENEFITS
REGARDING
H.R.1500, THE VETERANS’ APPRAISER CHOICE ACT

JUNE 11, 2003

Mr. Chairman, Members of the Subcommittee, the NATIONAL ASSOCIATION OF REALTORS appreciates the opportunity to submit written testimony regarding H.R.1500, the Veterans’ Appraiser Choice Act. The NATIONAL ASSOCIATION OF REALTORS is the nation’s largest professional trade association with more than 900,000 members and is comprised of 1,539 REALTOR associations and boards at the state and local levels. NAR membership includes brokers, salespeople, appraisers, property managers and counselors, as well as others engaged in every aspect of the real estate industry.

The NATIONAL ASSOCIATION OF REALTORS commends the Subcommittee for its leadership and efforts in fashioning comprehensive legislation that improves the efficiency and effectiveness of the VA Home Loan Guaranty Program and results in broader homeownership opportunities for our nation’s veterans. The NATIONAL ASSOCIATION OF REALTORS is particularly grateful for the Subcommittee’s leadership this session in achieving full Committee approval of H.R.1257, the “Selected Reserve Home Loan Equity Act”, and H.R.1949, the “Vendee Loan Restoration Act”. The NATIONAL ASSOCIATION OF REALTORS is fully supportive of these bills and H.R.1735 which increases the veteran’s guaranty amount to $81,000.

The NATIONAL ASSOCIATION OF REALTORS has a long tradition of support for the VA Home Loan Guaranty Program and we work diligently with the Subcommittee and the Congress to advocate policies that ensure the program meets its mission and objectives responsibly and efficiently. As we celebrate National Homeownership Month it is important to note that the VA home loan program has guaranteed approximately 17 million home loans totaling about $760 billion to veterans to purchase or construct a home, or refinance another home loan on more favorable terms. In just the last four years 1.3 million veterans have been able to obtain loans amounting to approximately $148 billion under the VA home loan guaranty program.

The VA home loan program has made mortgage credit available to many veterans whose loans otherwise would not have been made. Similar to the FHA single-family mortgage insurance program, the liberal terms and features of the VA home loan program have helped many deserving veterans realize the American dream of owning a home. And like the FHA program, the impact of the VA home loan program to our nation’s economy and our mortgage markets vastly exceeds the actual volume of VA home loans.

Recognizing that it is absolutely vital and appropriate that Congress continuously scrutinize the functions and operations of federal mortgage and guaranty programs, the NATIONAL ASSOCIATION OF REALTORS wholeheartedly supports legislative and regulatory initiatives that sharpen the focus of federal programs, facilitate maximum efficiency, and enhance administration and operations. Within that context we welcome this opportunity to share with you our observations and viewpoints regarding the VA appraisal system and H.R.1500 as a potential alternative.

VA FEE PANEL APPRAISAL SYSTEM

As background, the Department of Veterans Affairs (DVA) is required by statute to develop and maintain lists of appraisers, to prescribe uniform qualifications for those appraisers, and to assign appraisers from its list on a rotational basis. Each VA field office has the responsibility to maintain a fee panel of appraisers who have satisfied DVA’s qualification requirements. Additionally, field offices must ensure that the number of fee appraisers on the fee panel is sufficient to ensure that appraisals are provided on a timely basis. Currently, there are approximately 4500 VA appraisers.

The DVA has long believed that the rotational assignment process is the most appropriate method to ensure the quality of its appraisals and to protect the interests of the federal government. The DVA believes a rotational system of appraiser selection limits the opportunity for fraud and abuse, assuring the integrity of the appraisal process on behalf of the veteran. Further, the DVA believes it is vital that it maintain control and management of its appraiser selection system to remove the ability of clients to “shop” for an appraiser who will provide the “numbers” to satisfy the purchase.

Until 1996 the practice of utilizing fee panels was the norm for both VA and HUD appraisals. The panel was comprised of appraisers who had passed a rigid screening process and were required to attend regular seminars to remain on the panels. Field offices monitored the recruitment and training of appraisers, with appraisal assignments allocated by rotation that equally and impartially distributed the work orders to fee panel members. The lenders did not select the appraiser; a computer did.

In 1996 HUD implemented legislation allowing its lenders to select their own appraisers to improve the efficiency of FHA lenders and eliminate reliance on HUD’s field office staff to assign appraisers and to improve the quality and reliability of appraisal services for HUD’s mortgage assistance programs. Additionally, the number of staff in HUD’s field offices had been reduced and the remaining staff had difficulty assigning, maintaining, and monitoring the fee panel appraisers. HUD/FHA believed that devolving this responsibility to lenders freed its field office staff to perform other duties and functions. It also furthered HUD’s goal to privatize some of its functions and to help the Department modernize this function to conform with the conventional market since lenders were already adept at selecting appraisers for conventional home loans.

As can be expected, the change to a lender select in the HUD/FHA program was met with support from the lending community but opposition from the appraiser community. And, the change to a lender select system relegated the VA as the last entity to utilize a rotational fee panel system.

The NATIONAL ASSOCIATION OF REALTORS recognizes that the current rotational system is outdated and flawed and is in need of an overhaul to address several problems. The principal concerns to our members pertain to imbalances in the number of appraisers in differing regions of the country that have contributed to delays well beyond DVA’s expected response time of four to seven days. Additionally, because the fee panel “guarantees” work, it is viewed as secure employment and often contributes to unprofessional conduct or behavior of some fee panel appraisers since they don’t have to market themselves to lenders or compete with other fee panel appraisers for work.

H.R.1500, THE VETERANS’ CHOICE APPRAISER ACT

The NATIONAL ASSOCIATION OF REALTORS commends Representative Adam Smith (D-WA) for his leadership in introducing legislation proposing an alternative to the VA appraiser fee panel system. While H.R.1500 does not alter the VA fee panel assignment process, it does provide the veteran the opportunity to select an appraiser from the list of fee panel appraisers. Although the DVA would retain control of the process, the NATIONAL ASSOCIATION OF REALTORS is concerned with this approach. Very simply, most veterans will not know the work or reputation of VA fee panel appraisers. As a result, the goal of obtaining a properly conducted appraisal and appropriate market valuation could be jeopardized placing the veteran at risk of some unfortunate consequence.

Additionally, H.R.1500 could erode the objectivity necessary in an appraisal assignment. Veterans involved in the appraiser selection process may wrongly presume that the appraiser has some fiduciary duty to the borrower. This could result in unfair or undue instructions to the appraiser contrary to the appraiser’s obligations to the DVA and/or the lender. It may also result in inappropriate client pressure on the appraiser to either meet a target value or ignore repairs required by DVA regulations.

The latter is noteworthy because reports of undue client pressure against appraisers motivated HUD to issue a proposed rule January 2003 holding lenders equally responsible for the quality of appraisals in meeting FHA guidelines under its lender select appraisal system.

CONCLUSION

The NATIONAL ASSOCIATION OF REALTORS believes the independence of the appraisal process is fundamental to assure participants in the mortgage transaction that the value of a home is unbiased and reflects a true market valuation. This protects both the lender and the buyer in the mortgage transaction. Within the context of the VA fee panel appraisal system a changing mortgage marketplace and continuous reports of insufficient fee panels, professional misconduct, and processing delays warrant appraisal processing improvements and corrective measures.

continued in reply
 

Francois K. Gregoire

Senior Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Florida
The NATIONAL ASSOCIATION OF REALTORS recommends an immediate expansion of the VA fee panel to include more qualified appraisers from which to select, particularly in markets where there are acute shortages. We also recommend that the DVA promptly undertake and implement internal control quality procedures such as directing its field offices to randomly select a percentage of completed appraisals for field and desk review by DVA Headquarters staff for mathematical accuracy, reasonableness, logical conclusions, and the adequacy of any adjustments made in determining the appraised value. The results of these reviews could be used to rate the appraiser’s work and identify appraisers who may not be adhering to DVA’s appraisal guidelines.

Finally, the NATIONAL ASSOCIATION OF REALTORS wants to share with the Subcommittee that, stemming from a REALTOR policy discussion of H.R.1500 during our May 2003 MidYear Legislative Meetings, we are forming an internal task force comprised of REALTOR-appraisers and REALTOR residential members to identify constructive solutions to the problems pertaining to the VA fee panel system. We welcome the opportunity to share with you our findings and recommendations.

The NATIONAL ASSOCIATION OF REALTORS appreciates the opportunity to share its views and observations and we stand ready to work with the Subcommittee to improve the VA fee panel appraisal system.
 

Tom McDowell

Member
Joined
Jan 19, 2003
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
North Carolina
Boy that was a lot of words to say nothing, now wasn't it.
 

Dave Fitch

Junior Member
Joined
Jan 1, 2003
Professional Status
Certified Residential Appraiser
State
Indiana
Tom,
I thought they did a very good job of straddling the fence so that they are politically effective for all parties concerned, no matter what side a person might be on. In essence, they are very good at speaking out of both sides of their mouth at the same time. Don't you just love the political side of things. What a bunch of deception and BS. :yellowblack:
 

Francois K. Gregoire

Senior Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Originally posted by Francois K. Gregoire@Jun 12 2003, 02:08 PM
The NATIONAL ASSOCIATION OF REALTORS recommends an immediate expansion of the VA fee panel to include more qualified appraisers from which to select, particularly in markets where there are acute shortages. We also recommend that the DVA promptly undertake and implement internal control quality procedures such as directing its field offices to randomly select a percentage of completed appraisals for field and desk review by DVA Headquarters staff for mathematical accuracy, reasonableness, logical conclusions, and the adequacy of any adjustments made in determining the appraised value. The results of these reviews could be used to rate the appraiser’s work and identify appraisers who may not be adhering to DVA’s appraisal guidelines.

Tom and Dave,

Seems to me, despite the number of words, there were specific suggestions made with respect to the proposed legislation and a means to improve the VA Appraiser Panel. There was no obfuscation. Instead, a clear and specific suggestion for improvement.

In addition, problems with the H.R. 1500 were specifically stated in no uncertain terms.

The Appraisal Institute and the National Association of REALTORS solicited comments from their members prior to crafting these responses. It would be interesting to hear the suggestions you provided to the Appraisal Institute or NAR, or to the professional appraisal organizations in which you are active. Were they more specific, less wordy? Did your organization, testify before Congress? Did your organization take a position, attempt to make a change for the better or otherwise get involved?

In the event there is an organization out there with a better plan and a more effective means of getting things done, I'm all ears.
 

Dave Fitch

Junior Member
Joined
Jan 1, 2003
Professional Status
Certified Residential Appraiser
State
Indiana
Francois,
The National Association of Realtors (NAR) reccomends an expansion of the VA fee panel where there are acute shortages. Also they want prompt reviews and removal of incompetent appraisers. Yes, there was quite a bit of obfuscation. The VA fee panel is not broken and does not need to be fixed. Ask who is REALLY pushing HR1500, and you will find it is the builders and lenders. They do not have control (Thank, God!), but who want control of the appraisal process, just like they railroaded themselves into control of the FHA fee panel. The actual bill itself is written as though it is the poor defenseless Veteran who has been taken advantage of, and needs all the help, as though they are victims of the system. Any Veteran who has a problem or issue with any appraiser on the VA fee panel can ask for a different appraiser, and the VA fee panel has many more to select from. What is really being promoted under this deception is the lending industry is forcing itself into a more powerful position, and could care less about the Veteran. The NAR is siding with this with their large powerful backing.
The NAIFA, which I also am a memeber of has taken the position of resistance against HR1500. They realize that through all the smoke and twists, it is the builders and lending community who really are the ones pushing for this legisation. I commend the NAIFA for taking the correct stance of opposing this bill. It is NOT in the best interests of the appraisal industry and definitely not of benefit to the Veteran. And, yes Francois, I have personally notified each and every one of the representitives in my state to Vote NO on HR1500. As I stated before, the NAR is politically talking out of both sides of its mouth, which in this situation is helping the lending industry, and by no means of benefit to the appraisal industry. Whose side are they really on anyway? Both? I don't think so!!! :yellowblack:
 

Francois K. Gregoire

Senior Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Dave,

Thanks for the response. Some of your comments, however, fly in the face of the facts of the situation.

You state "The VA fee panel is not broken and does not need to be fixed."

This is in direct contradiction to statements made by Keith Pedigo, Director of Loan Guarantee Services, Department of Veteran's Affairs. Mr. Pedigo recognizes there are problems with the VA panel in parts of the country and is working to make changes to solve those problems.

You state "Any Veteran who has a problem or issue with any appraiser on the VA fee panel can ask for a different appraiser, and the VA fee panel has many more to select from."

This may be the case in your neck of the woods, but it is not true in many parts of the country. Nationwide, there are only about 4500 appraisers on the panel. In some regions and states, there is a shortage. VA appraisers are asked to work outside their areas of geographic competency, and due to their caseloads, often are not able to meet the time constraints imposed by the Veteran's Administration.

You state that builders and lenders are behind H.R. 1500 and that "The NAR is siding with this with their large powerful backing."

The truth is the bill was prompted from a small community in Washington State. Builders had nothing to do with it. One lender and one real estate broker contacted their member of congress. It does not have the backing of the Washington Association of REALTORS and most definitely does not have the backing of the National Association of REALTORS. Nowhere in their testimony does the NAR come out in favor of the bill. Instead several concerns are specifically stated:

"Although the DVA would retain control of the process, the NATIONAL ASSOCIATION OF REALTORS is concerned with this approach. Very simply, most veterans will not know the work or reputation of VA fee panel appraisers. As a result, the goal of obtaining a properly conducted appraisal and appropriate market valuation could be jeopardized placing the veteran at risk of some unfortunate consequence.

Additionally, H.R.1500 could erode the objectivity necessary in an appraisal assignment. Veterans involved in the appraiser selection process may wrongly presume that the appraiser has some fiduciary duty to the borrower. This could result in unfair or undue instructions to the appraiser contrary to the appraiser’s obligations to the DVA and/or the lender. It may also result in inappropriate client pressure on the appraiser to either meet a target value or ignore repairs required by DVA regulations. "

Do these read as comments favorable to the proposal? In fact, there is quite a bit of similarity between the NAR comments and those in the NAIFA Official Position Letter. The main difference appears to be the lack of a specific statement of opposition in the NAR testimony and the lack of any specific suggestion for improvement of the situation in the NAIFA letter.

You ask "Whose side are they really on anyway?" The answer is obvious: the Veteran Borrower.

Frank
 

Dave Fitch

Junior Member
Joined
Jan 1, 2003
Professional Status
Certified Residential Appraiser
State
Indiana
Frank,
You state that the entire reason for HR1500 is because of a small community in Washington state has a shortage of VA appraisers. But then you go on and state that it does not have the backing of the Washington Association of Realtors??? If this really is the problem in certain smaller locations why in the world do they need to change the entire national roster???
You then go on to state "Very simply, most veterans will not know the work or reputation of VA fee panel appraisers". Where and why would this be an item of concern as long as the qualifications of the appraiser met the necessary guidelines of competence? Where is this ever an item of concern in any other form of appraisals (FHA, FNMA, etc) to the borrower. I don't buy this argument for a split second!!!
Your arguments in this discussion raise more the question of what really is going on (a grab for more power and control in the appraisal process by parties that want to dictate their own selfish needs upon others and little concern about the Veteran Borrower. This is not a paranoia of mine or some conspiracy theory, just basic simple human nature. Believe me, the little guy (the Veteran borrower) is not the one who is pushing this bill. :yellowblack:
 

Francois K. Gregoire

Senior Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Originally posted by Dave Fitch@Jun 16 2003, 09:34 AM

You then go on to state "Very simply, most veterans will not know the work or reputation of VA fee panel appraisers". Where and why would this be an item of concern as long as the qualifications of the appraiser met the necessary guidelines of competence? Where is this ever an item of concern in any other form of appraisals (FHA, FNMA, etc) to the borrower. I don't buy this argument for a split second!!!

Dave,

The words you cite are not mine. It is a letter from the NAR to the COMMITTEE ON VETERANS AFFAIRS, SUBCOMMITTEE ON BENEFITS.

Those words, and the idea expressed, sure seem consistent with the NAIFA position:

"It can be realistically assumed that in most of the cases, the veteran will not know of or be acquainted with an appraiser. It can be taken as certain, that mortgage brokers, loan officers, or other entities that will be originating such VA loans, will have knowledge of less than objective appraisers who will be willing to appraise the property to accommodate the interests of the real estate broker, the lender, and the veteran in those instances where it is desired that the subject property be appraised higher than market value. They will simply tell the veteran which appraiser to select

NAR goes on to say:

"Additionally, H.R.1500 could erode the objectivity necessary in an appraisal assignment. Veterans involved in the appraiser selection process may wrongly presume that the appraiser has some fiduciary duty to the borrower. This could result in unfair or undue instructions to the appraiser contrary to the appraiser’s obligations to the DVA and/or the lender. It may also result in inappropriate client pressure on the appraiser to either meet a target value or ignore repairs required by DVA regulations. "

The NAIFA Comment:

"NAIFA feels that this small appearing change has the potential to open a veritable “Pandora’s Box”, and further increase pressure on appraisers to appraiser for a target value that accommodates the interests of the parties involved, rather than to be impartial, independent, and objective, as required by USPAP. "

NAR is not expressing support for H.R. 1500. NAR is suggesting changes to the VA Fee Panel. What is beef with offering suggestions for improvement?

Frank
 
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