As many of you may be aware, I have been collaborating with Joan Trice, members of CRN, members of the National Appraisal Congress and the National Association of Appraisers to raise awareness of concerns relating to the future of the appraisal industry.
In conversations with chief appraisers and senior management at various lenders and appraisal management companies, many are reporting increasing challenges outsourcing appraisal assignments in a growing number of markets around the country. Changes in the acceptability of trainees and licensed appraisers have exacerbated the problem.
In reading recent articles and listening to presentations on the subject, the focus has been on the number of credentials on the Appraisal Subcommittee National Registry and the message is that the number of appraisers is actually increasing.
The ASC National Registry contains data reflecting state licensed and certified appraiser credentials. It does not contain data on the number of trainees. It also reflects the number of credentials, not practicing appraisers.
At the recent AARO conference in Phoenix, Arizona, Jim Park, Executive Director of the Appraisal Subcommittee indicated the ASC data shows approximately 8,000 to 9,000 trainees nationwide, but also advised that data is based upon their annual compliance reviews of the various state appraiser regulatory agencies so some of the data is not current.
Prior to the AARO conference, I recently conducted a survey of the state appraiser regulatory agencies asking for data relating to the trending of appraiser trainees and shared the survey results with those in attendance at the April 14th Collateral Risk Network meeting in New Orleans. What follows next in this article is much of what was covered in that presentation.
The title relating to Appraiser Trainee credential is also referred to by the various states as Provisional Appraiser, Associate, Limited, Appraiser Intern, Apprentice, Appraiser Apprentice, State Licensed Real Estate Assistant, and Appraiser Assistant. For the purposes of this study, they will be referred to as Appraiser Trainees.
None of the five Territories – Guam, American Samoa, Mariana Islands, Puerto Rico, Virgin Island, have Appraiser Trainee Credential programs or reported data relating to a trainee credential program.
Of the 50 states surveyed, 46 have some form of credentialing program for Appraiser Trainees.
Of the 46 states surveyed, 34 responded to the survey request.
Missouri began credentialing trainees in 2014 and Wyoming began credentialing Trainees in 2015 so limited data was available.
- 20 states reported they are experiencing declines in the number of credentialed trainees
- 4 states reported they are experiencing an increase in the number of credentialed trainees
- 8 states maintain no appraiser trainee trending data
- 1 state reported a 26% swing in the rise and decline resulting in the same number of credentialed trainees between 2010 and 2015
- 1 state is still gathering information
Below is the list of states reporting declining numbers of appraiser trainee credentials or applications, the time period of the survey and the rate of decline over that time period.
|State||Time Period||Trend Results||Rate of Decline|
|Alaska||2005-2015||14 / 1||-93%|
|California||2011-2015||450 / 294||-35%|
|Connecticut||2006-2016||588 / 112||-81%|
|Florida||2011-2015||903 / 486||-46%|
|Illinois||2005-2015||1231 / 55||-95%|
|Kansas||2010-2013||25 / 11||-56%|
|Kentucky||2013-20165||222 / 188||-15%|
|Louisiana||2009-2015||487 / 169||-65%|
|Maine||2008-2016||59 / 25||-58%|
|Minnesota||2011-2015||389 / 231||-40%|
|New Mexico||2012-2015||10 / 6||-40%|
|North Carolina||2010-2016||469 / 346||-26%|
|North Dakota||2012-2016||46 / 35||-24%|
|Ohio||2011-2016||279 / 266||-05%|
|Oklahoma||2010-2015||136 / 82||-39%|
|Oregon||2011-2015||69 / 68||-01%|
|Pennsylvania||2010-2015||72 / 52||-28%|
|South Carolina||2008-2015||600 / 150||-75%|
|Utah||2008-2016||592 / 72||-77%|
|Washington State||2010-2016||435 / 188||-57%|
Whether you are looking at the rate of application, renewal, or the actual number of trainee credentials, the survey results received from the state regulatory agencies confirm the concerns the Collateral Risk Network, the National Appraisal Congress, and the National Association of Appraisers have been expressing relating to the potential appraiser shortage that will be facing the industry unless significant and immediate changes occur within the regulations governing entry into the profession.
We are not aware of any other compilation of this comprehensive Appraiser Trainee data, and the significance of the alarming trend it reflects should be a sobering reality to the inability of the appraisal industry to respond to an increase in market demand for appraisal services within a very few short years as the number of appraisers continue to leave the industry and the number of potential replacements is declining at an even greater pace.
So that brings us to the next question – is there really a shortage of appraisers, or as suggested, the number of appraisers are actually increasing, not decreasing?
We are currently working on an answer of how many appraisers are actually completing appraisal assignments nationwide for mortgage lending assignments. Until we have those results, a deeper dive into the data on the ASC National Registry will provide a bit more clarity into the recent discussions regarding the number of credentials.
As mentioned at the beginning of this article, the ASC National Registry contains data on licensed and certified credentials. To drill down to the number of appraisers, a snapshot of the ASC National registry as of 4/12/16 revealed the following:
97,334 = Total Number of Credentials
73,541 = Number of Appraisers Licensed / Certified in one state
8,996 = Number of Appraisers Licensed / Certified in more than one state
23,803 = Number of credentials represented on the National Registry by the 8,996 appraisers
17,119 = Difference in total credentials vs. individual appraisers.
In response to state licensing requirements and concerns over reputational risks, a growing number of chief appraisers and AMC senior management indicate they are requiring their staff reviewers to be licensed in multiple states, which would suggest the number of credentials on the ASC National Registry is not a reflection of additional appraisers, but rather a reflection of the increase in the number of appraisers obtaining multiple state credentials.
As we analyze the number of appraisers available to complete assignments for mortgage lending transactions we also have to take into account the number of certified appraisers working in administrative, management, internal review roles and as such, do not complete appraisal assignments. That number is significant. An example includes a regional bank who informed me they recently hired eighteen certified appraisers representing some of the best and brightest in their market area for internal positions. A polling of members attending the CRN Conference in New Orleans revealed a majority being in administrative / management positions and not completing appraisal assignments for several years.
Now let’s talk about the plight of licensed appraisers.
Earlier in this article I mentioned regulations governing entrance into the appraisal profession as well as the challenges facing licensed appraisers. When Congress mandated that HUD only accept appraisers with certified credentials for the FHA panel, it was the beginning of the end for licensed appraisers.
Not only are they cut off from FHA assignments, most lenders now require appraisal assignments to be completed by certified appraisers in the event a conventional loan may ultimately end up going FHA.
The adverse economic impact to licensed appraisers has been significant and if not resolved in the short term, the approximately 8,000 licensed appraisers will either have to upgrade to certified status or eventually leave the industry for economic reasons. There is however, a slight glitch in that scenario. As of 1/1/2015 an applicant for state appraiser certification must have a 4 year college degree. A noble objective for those aspiring to raise the status of the industry and the caliber of entrants. The reality is that those licensed appraisers who do not have a 4 year degree and failed to obtain their certification credential prior to 1/1/2015 must now obtain that 4 year degree.
To put that into perspective, an appraiser in Texas shared the following…..
He has an associate degree. Sold his home in Austin, Texas, moved to a small community with a 4 year college. Quit appraising and attended college full time. Will obtain his bachelor’s degree in business in 2016. He estimates that between the loss in income for not working for two years and the college expenses, it will have cost him approximately $85,000. Even if he worked part time and extended the time frame to obtain the degree the cost comes out about the same. But with the decline in available work as a licensed appraiser time was not on his side. So now I ask the question, how many of those 8,000 other licensed appraisers, many in their 50s and 60s, are in a position to stop appraising, or even appraise part time, to obtain that 4 year degree – at an estimated loss in income and education cost equivalent to approximately $85,000?
We need an alternative path for licensed appraisers in good standing with their respective state appraisal boards. So I encourage everyone reading this article who is in agreement with me to write to the AQB and encourage immediate development of an alternative path for the licensed appraisers in this country who have been completing highly credible appraisal reports for years and would represent a significant loss to the industry if they cease to provide appraisal services in their respective markets.
And while you are at it, remind all the lenders and AMCs you do business with there are no prohibitions in the Dodd-Frank Act regarding the use of appraiser trainees.
When drafting the AMC Final Rule in 2015, the agencies deliberately included the following comment – The Agencies continue to support the use of trainee appraisers as long as they work under the supervision of a State-Certified and or State-Licensed appraiser as long as they have met the qualifications established by the appropriate State and the AQB. They go on to state The final rule amends proposed §34.213(b)(2) by substituting the term “engage” for the term “use” to clarify that an appraiser may work with a trainee appraiser on an appraisal, but only the appraiser may be “engaged” by the AMC to perform appraisals.
Not only are there no federal regulatory prohibitions to the use of trainees, but from a business perspective, we have undisputable data showing that supervisory appraisers working with a trainee have higher score cards for quality, fewer revision requests and faster turn times than appraisers not working with a trainee.
In summary, the most recent data available is indicating a significant decline in the number of appraiser trainees currently working toward appraiser licensure and certification to ultimately be replacing the appraisers leaving the industry. We have concerns relating to the plight of licensed appraisers and the misconception lenders and AMCs have regarding the use of trainees – all of which have an adverse impact on the future of the industry. The AQB also needs to develop an alternative path to certification for the practicing appraisers holding state license credentials who are in good standing with their respective state appraiser regulators.
So I encourage those in agreement to communicate these concerns to the AQB and to help educate lenders on the ability to use appraiser trainees in complete compliance with Agency guidelines.
In a presentation also at the CRN Conference in New Orleans, David Bunton, President of The Appraisal Foundation indicated the AQB will be publishing an exposure draft on potential changes to the Criteria in the next 30 to 60 days. Whether you communicate individually, or collaboratively, the AQB is anxiously awaiting our public input.
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