2009 Appraisal Committee
National Association of REALTORS®
2009 REALTORS® Conference
San Diego Convention Center
Room 9, Upper Level
Friday, November 13, 2009
3:00 AM - 6:00 PM

Chair: Selma (Penny) Tiplett, CRS, GRI (OH)
Vice Chair: Thomas (Mack) Strickland, GRI, RAA (VA)
Committee Liaison: David Lockwood, CCI, SIOR (SC)
Committee Executive: Jerry Nagy (DC) Heidi Henning (IL)

Purpose: To serve the specialized needs of those members with an interest in real estate appraisal by: 1) monitoring, reviewing, examining, and analyzing appraisal-related issues for NAR; 2) referring appraisal-related issues to appropriate NAR committees for their consideration; and 3) providing recommendations on appraisal- related issues to the Board of Directors.

I. Call to Order and Introductions – Penny Triplett

II. Approval of Minutes from Last Meeting – Penny Triplett
Previous Meeting's Minutes

III. Reports
A. Appraisal Foundation Trustee Report – Joe Traynor
B. The Appraisal Foundation Advisory Council (TAFAC) – Vic Knight

IV. New Business
A. Tentative: FHFA & Freddie Mac Speaker & FHA Speaker – Thomas Strickland
B. Legislative/Regulatory Matrix - Jerry Nagy
Matrix

1. HVCC
NAR Policy:
NAR does not support or oppose HVCC. However, given the unintended consequences of the HVCC, NAR is supporting an 18-month moratorium. This will grant time to stakeholders to make changes to HVCC that will continue to protect appraiser independence while not negatively impacting the real estate market.

On December 23, 2008, the Federal Housing Finance Administration (FHFA) announced that Fannie Mae and Freddie Mac will implement a revised Home Valuation Code of Conduct (HVCC) effective May 1, 2009. The HVCC is based on an agreement between Fannie Mae and Freddie Mac and New York State Attorney General Andrew M. Cuomo to help eliminate conflicts of interest on mortgage appraisals. The code applies to lenders that sell single-family mortgage loans to Fannie Mae or Freddie Mac and its unintended consequences are having a negative impact on real estate transactions across the country.

Legislation has been introduced, HR 3044, which calls for an 18-month moratorium on HVCC from date of enactment. The legislation is currently in the House Financial Services Committee and has 118 cosponsors. NAR and C.A.R. support HR 3044 and have sent letters to the regulators calling for the moratorium.

Now that roughly two out of every three loans is required to comply with the HVCC guidelines, the FHA has come under pressure to adopt rules that will protect the appraisal process for FHA loans and announced new appraisal requirements to go into affect on January 1, 2010.  While not completely identical to the HVCC, the new requirements will implement many of the same guidelines, these include:

• Prohibiting mortgage brokers or commission based lender staff from choosing the appraiser,
• Allowing for the use of AMCs or other third party organizations for appraisal ordering, and
• The prevention of improper influences on appraisers.

To address REALTORS®’ greatest concern with the HVCC, HUD reaffirmed in their Mortgagee Letter that an appraiser should have knowledge of the market area and have geographic competency for where the home is located.  However, there doesn’t appear to be anything in FHA’s mortgagee letter that will prohibit lenders from merely extending their current HVCC practices to FHA loans; except for allowing FHA appraisals to be portable.

2. HR 1728
NAR Policy:
In 2005, NAR adopted policy that would: 1. Prevent those involved in the real estate transaction from improperly influencing the appraisal; 2. require lenders to get a physical inspection of the property for higher cost loans; and 3. increase the Appraisal Subcommittee's accountability to Congress, while opposing the expansion of the subcommittee's regulatory authority.

On May 7, the House passed HR 1728, the Mortgage Reform and Anti-Predatory Lending Act, by a vote of 300 – 114.  While the legislation was quickly moved and passed in the House, Senator Christopher Dodd, chair of the Senate Banking, Housing and Urban Affairs Committee appears to be in no rush to pass the legislation.  Dodd believes that with the current lack of a subprime market, the new Regulation Z rules, and the tighter underwriting standards lenders are voluntarily now using, there is not an immediate need for the legislation.  It is unclear if Dodd intends to work on this legislation prior to the end of the 111th Session of Congress.

HR 1728 would:

• Prohibit Steering incentives in connection with origination of mortgage loans (YSP)
• Prescribes minimum standards for residential mortgage loans, including a mandatory net tangible benefit to the consumer for refinancing a residential mortgage loan
• Creates liability for assignee and securitizers.
• Prohibits certain prepayment penalties, mandatory arbitration, mortgage loan provisions that waive a statutory cause of action by the consumer, and mortgages with negative amortization
• Requires lenders to maintain a 5% “skin in the game” of non-prime loans.  The hope of this provision is to force lenders to keep part of the risk of a loan, thus encouraging them to do safer loans.

In a survey by October Research, close to 90% of appraisers have reported improper influence to hit a target from mortgage originators, since appraisers rely on referrals and repeat business, 70% feared harm to their business if they did not comply. Pressuring an appraiser to overstate or understate the value of a dwelling distorts the lending process and harms consumers.

3. HR 2336
The FHA and VA currently offer energy efficient mortgages that allow homeowners to finance modifications to their homes at the time of purchase.  The largest barrier to making homes more energy efficient is the upfront cost. The cost of making a home energy self-sufficient can be very expensive. The solar costs alone can range from $20,000 - $30,000 for the average American family.

Representative Ed Perlmutter (D-CO) introduced H.R. 2336.  H.R. 2336 would:
 - Create minimum HUD energy efficiency standards for an existing residential structure, and nonresidential structures and create a loan program for energy capital improvements for assisted housing projects.
 - Would set annual goals for Fannie Mae and Freddie Mac to purchase energy-efficient
 mortgages and location-efficient mortgages and allow Fannie and Freddie to increase a  borrower’s underwriting by $1 for every $1 saved as a result of cost-effective energy  savings.
 - Require FHA to increase their EEM insured mortgages and prevent insurance companies from discriminating against homes not connected to the electricity grid.
 - Create mortgage incentives for multifamily housing that may include the exceeding of dollar limits to finance improvement.

4. Consumer Protection Finance Agency
In June, the Administration unveiled its regulatory reform proposal.  It then began to release proposed draft legislation for members of Congress to consider.  The first piece of proposed legislation was the creation of a Consumer Financial Protection Agency (CFPA). 

On July 8, Congressman Barney Frank, Chair of the House Financial Services Committee introduced HR 3126, the Consumer Financial Protection Agency Act. The intention of the legislation is to create a new agency responsible for consumer protection, thus all but removing this responsibility from the financial industry’s current regulators.  The argument being put forth for this proposal is that regulators who are charged with the safety and soundness of a financial institution can not adequately protect consumers.  Proponents of the CFPA believe these goals run counter to each other in many instances.

The House seems content with moving regulatory reform one piece at a time, the CFPA being the first piece.  The Senate is expected to move all the pieces at once in a single large bill.  Senator Dodd has released details of his regulatory reform proposal which includes the creation of one single regulator for the entire financial industry and thus eliminating the current alphabet soup of regulators.  He hopes to start the legislative process in November, but with the healthcare legislation looming, which Senator Dodd is one of the Senate leaders on, it is likely the legislation will be pushed back until 2010.

5. FHA Appraisal Rules
Now that roughly two out of every three loans is required to comply with the HVCC guidelines, the FHA has come under pressure to adopt rules that will protect the appraisal process for FHA loans and announced new appraisal requirements to go into affect on January 1, 2010.  While not completely identical to the HVCC, the new requirements will implement many of the same guidelines, these include:

• Prohibiting mortgage brokers or commission based lender staff from choosing the appraiser,
• Allowing for the use of AMCs or other third party organizations for appraisal ordering, and
• The prevention of improper influences on appraisers.

The Federal Housing Administration and the Veterans Affairs Loan Guaranty Service have specific guidelines for the appraisal of residential properties subject to VA or FHA loans. The FHA requires, for example, that appraisers note the physical condition of a property's infrastructure--such as HVAC issues that are apparent during a physical inspection. In recent years, both the FHA and the VA have streamlined their appraisal processes as part of their efforts to make FHA and VA loan programs more attractive to consumers.

C. Report of Broker Price Opinions Work Group – Penny Triplett

V. Other Business
A. Update on Appraisal Education Workgroup – Penny Triplett

B. Breaking out Appraiser fees on HUD-1 – Thomas Strickland
AMCs are often perceived as companies that drive down fees for independent appraisers, retain inexperienced licensed appraisers for work, and provide substandard appraisals to lenders and clients. The company offers services to a client, usually a lender, and consumers pay an appraisal fee, which can be found on the HUD-1 form. Typically the HUD-1 indicates the total cost of the appraisal but does not break out fees paid to the appraiser, AMC, or even any fee kept by the lender.

C. Next Meeting:
NAR MIDYEAR MEETINGS - Washington, DC

VI. Final Comments and Adjournment
Ownership Disclosure and Conflict of Interest Policy

** Immediately following the meeting the NAR Appraisal Committee will celebrate the anniversary of the RAA/GAA designations. **