Appraisal Institute Seeks to Prevent Appraisal Waivers

The Appraisal Institute (AI) joins with 35 industry groups in attempting to prevent the Fannie Mae and Freddie Mac (GSE’s) from issuing appraisal waivers by sending a letter to the chairs and ranking members of the Senate Banking, Housing and Urban Affairs Committee, and the House Financial Services Committee addressing its concerns. AI recommends the halt of the waivers until the GSEs can demonstrate that the proposed program does not harm the consumer, is properly monitored, and integrates proper safeguards to prevent fraud. Here is the group’s letter in its entirety:

September 6, 2017

The Honorable Mike Crapo
Committee on Banking, Housing and Urban Affairs
534 Dirksen Senate Office Building
Washington, DC 20510

The Honorable Sherrod Brown
Ranking Member
Committee on Banking, Housing and Urban Affairs
534 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Crapo and Ranking Member Brown:

We are writing this letter to raise concern over the new appraisal waiver programs recently implemented by Freddie Mac and Fannie Mae (the “ Government Sponsored Enterprises.”)  We believe these programs will create unnecessary and unacceptable risks for taxpayers and homeowners, and they come at a time when markets are at all-time highs – when risk mitigation should be tantamount. We ask you to call on the Federal Housing Finance Agency (FHFA) to prevent the Enterprises from implementing the appraisal waiver programs until they can demonstrate the appraisal waiver program:

1) is consistent with safe and sound operation of the Enterprises;
2) does not bring harm to the consumer, especially the affordable housing sector;
3) is properly monitored by FHFA and tested with independent appraisals; and
4) integrates proper safeguards to prevent fraud.

We recognize that the Enterprises have, since 1994, been exempted from appraisal requirements established by Congress on the basis that their requirements exceeded those established by Congress and that they would continue to make responsible decisions. These new programs call this privilege into question.

We view these new programs as an “ arms race” between Freddie Mac and Fannie Mae on who can increase the most market share, while demonstrating a distinct pullback in terms of safety and soundness. Competition between the Enterprises should not result in a race to the bottom in terms of due diligence especially while the agencies remain in conservatorship. It was the same elimination of risk focused underwriting that lead to the Enterprises’ brink of bankruptcy 9 years ago. Unlike an earlier policy change by Fannie Mae which addressed mostly refinances where previous appraisal information is likely available, first purchase transactions by the Enterprises carry higher risk from a property information standpoint. It is standard underwriting practice to obtain a complete interior inspection appraisal for first purchase transactions in order to better understand the potential risk associated with a property’s condition, which is more likely to change between subsequent sales than between refinance transactions. That likelihood is why independent appraisal data, including an inspection, is so important to managing risk and protecting the public trust.

This is not the first time appraisal waivers have been advanced by the enterprises. Similar actions were taken by the Enterprises in the early to mid-2000s, and the resulting decline in risk management by mortgage lenders proved to be disastrous for the economy, damaging the public trust.

It has taken many years for the mortgage finance sector to recover from the financial disaster in 2008-2009, but progress has been made. This significant progress is due in large part to the employment of fundamental risk management activities, such as the requirement for the completion of full appraisals to determine the true equity position of individual properties. Reducing appraisal requirements sends the wrong signal to mortgage loan sellers about the importance of fundamental risk-management practices and the need to continue to employ strong underwriting guidelines to avoid the costly mistakes of the recent past.

For these reasons, we ask you to call on the Federal Housing Finance Agency to prevent the Enterprises from implementing the appraisal waiver programs until it can demonstrate that they are consistent with safe and sound operation of the Enterprises. At a minimum, the Agency should request the estimates of loan purchase and refinance transactions that would be subject to the new programs and make those estimates public for comment by affected stakeholders and other experts. Further, as your Committee develops housing finance reform legislation, we ask that any legislation ensures that the Enterprises’ appraisal  requirements enhances their safe and sound operation so long as the Enterprises remain in conservatorship or otherwise present potential risks to taxpayers and homeowners.

Thank you for your consideration of this matter. If you should have any questions or would like additional information or resources from our organizations, please contact any of the individuals listed in the attached document.


American Society of Appraisers
American Society of Farm Managers and Rural
Appraisal Institute
Appraisers’  Coalition of Washington
Arizona Association of Real Estate Appraisers
Association of Texas Appraisers
California Coalition of Appraisal Professionals
Coalition of Appraisers in Nevada
Coalition of Arizona Appraisers
Colorado Association of Real Estate Appraisers
Columbia Society of Real Estate Appraisers
Delaware Association of Appraisers
Foundation Appraisers Coalition of Texas
Illinois Coalition of Appraisal Professionals
Kentucky Association of Real Estate Appraisers
Louisiana Real Estate Appraiser Coalition
Maryland Association of Appraisers
Massachusetts Board of Real Estate Appraisers
Michigan Coalition of Appraisal Professionals
Mississippi Coalition of Appraisers
National Association of Appraisers
National Association of Independent Fee Appraisers
New York Coalition of Appraiser Professionals
North Carolina Real Estate Appraiser Association
Ohio Coalition of Appraisal Professionals
Oklahoma Professional Appraisers’ Coalition
Real Estate Appraisers Association of California
Real Estate Appraisers of Southern Arizona
Rhode Island Real Estate Appraiser Association
South Carolina Professional Appraisers Coalition
Tennessee Appraiser Coalition
United Appraisers of Utah
Utah Association of Appraisers
Virginia Coalition of Appraiser Professionals
West Virginia Council of Appraiser Professionals
American Society of Appraisers/National Association of
Independent Fee Appraisers

The Appraisal Institute is a global professional association of real estate appraisers, with nearly 19,000 professionals in almost 60 countries throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Individuals of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA, SRA, AI-GRS and AI-RRS designations. Learn more at



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