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Appraisers – Reliable Valuations of Mortgaged Properties Are Key to Foreclosure Relief Plan

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RISMEDIA, February 25, 2009-The nation’s four largest organizations of professional real estate appraisers-the Appraisal Institute, American Society of Appraisers, American Society of Farm Managers and Rural Appraisers, and National Association of Independent Fee Appraisers-delivered the second of two letters to Treasury Secretary Timothy Geithner urging the Administration to protect homeowners and taxpayers by requiring that the market values of homes under President’s Obama’s Homeowners Stability Program be determined by professional appraisers who are state certified and licensed.

Current bank agencies guidelines require new appraisals in restructuring loans when a material change in market conditions exists. In the letter, the groups affirm that reliable valuation and appraisal products are available from professional appraisers in every community in the country. There are more than 100,000 certified or licensed real estate appraisers in the United States. Because of new technologies and methodologies, these professionals are prepared to deliver a wide variety of necessary services quickly, including summary and streamlined appraisals that are cost effective and highly reliable.

To ensure that all parties have accurate and reliable information when restructuring loans, the letter cautions against the use of real estate sales people to provide broker price opinions. These individuals have no valuation training, do not observe uniform valuation standards, are accountable to no one for their estimates of home prices and may sometimes have an economic interest in whether loans are modified or defaults occur requiring a resale of the property to another buyer. By contrast, all 50 states license, certify and supervise the work of appraisers; and 23 states specifically prohibit realtors from valuing properties for any mortgage related purpose, including loan modifications.

According to the organizations, if the Administration’s mortgage relief plan permits the use of broker price opinions to determine the current value of residential properties, it could lead to widespread violations of state laws. The appraisal organizations also warned against the use of automated valuation models (computer-generated values) which do not factor the condition of properties into their market values and are not reliable in declining markets and in areas with diverse housing stock. The groups also cautioned against reliance on national housing indices to determine the market value of individual properties. These indices often contain data many months old, and generally fail to consider foreclosure or short sales in their calculations. Homeowners who might otherwise be eligible for loan modification could be denied a lower cost mortgage because a BPO, AVM or housing index could improperly value their collateral property.

In the letter, Bill Garber, Appraisal Institute Director of Government Affairs and External Relations, said, “Individuals who become state licensed or certified appraisers must meet meaningful requirements involving valuation-specific training, education and experience; and, their conduct is regulated by appraiser licensing agencies in the 50 states and territories. Real estate appraisers can provide a range of services in a loan modification or refinance situations, including streamlined appraisals, under existing standards. For a stable economy and secure mortgage finance system, valuations must be reliable and those performing the appraisals must be accountable and professional.”

The chairman of the American Society of Appraiser’s Government Relations Committee, Jay Fishman, added, “We believe a foreclosure relief program which relies on valuation professionals to establish the market values of properties collateralizing mortgages will benefit homeowners and protect America’s taxpayers who are ‘on the hook’ for losses resulting from the inevitable defaults on some modified mortgages. The safety and soundness of taxpayer guaranteed loans in today’s tumultuous mortgage markets require reliance on professional appraisers, not on part time salespeople and unreliable computer-generated values.”

ASA is an international organization of appraisal professionals and others dedicated to the education, development and growth of the appraisal profession. ASA is the oldest and only major organization representing all disciplines of appraisal specialists, originating in 1936 and incorporating in 1952. ASA’s headquarters is in the metropolitan Washington, D.C., area.

For more information, visit http://www.appraisers.org/.

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