Sunday , 29 November 2020
Appraiser Independence

Appraiser Independence Key to Veterans’ Home Loans

The Appraisal Institute strongly advocates helping our nation’s veterans achieve the American dream of homeownership, and on April 4 urged Congress to protect the independence of real estate appraisers in the federal program that provides housing loans to military veterans.

The Appraisal Institute specifically addressed a central ordering feature of the U.S. Department of Veterans Affairs’ Appraiser Fee Panel during its testimony before the Subcommittee on Economic Opportunity of the House Committee on Veterans’ Affairs. The hearing was called to address the topic “Assessing VA Approved Appraisers and How to Improve the Program for the 21st Century.”

VA Fee Panel

The Fee Panel purposefully is unique, given the charge of supporting our nation’s veterans. The Appraisal Institute believes that VA loan program is an important veteran benefit that performs better than other government loan programs, in part, because it has strong appraisal independence mechanisms.

“The Appraisal Institute supports the basic framework of the VA Fee Panel in contrast to what is currently found in the Federal Housing Administration or the private sector,” Appraisal Institute Vice President Stephen S. Wagner, MAI, SRA, AI-GRS, told the subcommittee. “By comparison, the structure of the Fee Panel facilitates a greater degree of appraisal independence and represents a much more positive environment for real estate appraisers.”

Lack of impact from appraiser shortage

The Appraisal Institute has been tracking appraiser population trends for many years. The trend has been downward for several years, with the ranks of residential appraisal accounting for nearly the entire decline. Real fees for residential mortgage appraisers have been in decline for many years, while the costs of doing business (I.e., licensing fees, continuing education, books, supplies, vendor fees, etc.) have gone up.

Our organization anticipates a continued decline in the number of practicing appraisers, between 20-25 percent, over the next 5-10 years. AI data does not indicate a national shortage of appraisers at this time, but there are indications of temporary shortages in some markets. We anticipate, however, that longer-term shortages will appear going forward should the projected decline materialize.

The VA Fee Panel is somewhat insulated from these national trends in that it is a hand-picked list of approved appraisers. While the national pool of appraisers has narrowed in recent years, there still is an ample number of appraisers to support the VA Home Loan program.

The VA recruits appraisers on an ongoing basis to the Fee Panel, and the Appraisal Institute even has assisted the agency in marketing the opportunity to the appraisal community. But some AI professionals report an uneven response from the VA regarding their applications. While those appraisers who currently are on the VA Fee Panel generally give it high marks, those who are not on the Fee Panel and are interested in doing so have expressed some frustration about the length of approval time or their outright rejection.

Customary and reasonable fees

The Dodd-Frank Act requires creditors and their agents to pay “customary and reasonable” fees to appraisers to reflect what an appraiser typically would earn for an assignment absent the involvement of an appraisal management company. Under the Act, evidence for such fees may be established by objective third-party information, such as government agency fee schedules, academic studies and independent private sector surveys.

The VA Fee Schedule essentially is the only government agency fee schedule that exists, and it is a strong measure of our concern and the inconsistencies between retail appraisal fees and those paid by some appraisal management companies. Changing the VA Fee Panel to the model employed by the private sector would result in stiff fee compression for VA appraisers and come at the expense of the strong appraisal independence components and expertise found in the current VA Fee Panel.

Ideas for improvement

The Appraisal Institute opposes changing the VA Fee Panel to one that mirrors what is found in the Federal Housing Administration or the private sector. The organization does not believe that this would reduce turnaround times for appraisals, nor would it be in the best interest of veterans.

While opposing wholesale changes to overhaul the Fee Panel, the Appraisal Institute, during its testimony, offered recommendations to improve the consistency of the VA loan program and to maintain its competitiveness with the private sector, including:

  • Maintain an independent Fee Panel of VA appraisers;
  • Develop a “stand-by” list of approved VA appraisers;
  • Enhance appraiser recruitment efforts;
  • Encourage lenders to provide better property information at the time of the appraisal assignment; and
  • Address appraiser concerns about unpaid appraisal fees.

Read the Appraisal Institute’s written testimony to the subcommittee.

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About Jim Amorin

Jim Amorin
Jim Amorin, MAI, SRA, AI-GRS, is the 2017 president of the Appraisal Institute, the nation’s largest professional association of real estate appraisers. Based in Chicago, the Appraisal Institute has nearly 19,000 professionals in almost 60 countries.

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