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RISMEDIA, April 28, 2009-In testimony before Congress last week, the Appraisal Institute told lawmakers that mortgage reform legislation is needed and called for a “back to basics” approach to mortgage lending. President Jim Amorin, MAI, SRA voiced support for the recently introduced H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act of 2009. The bill, introduced in March by Representatives Brad Miller (D-N.C.) and Mel Watt (D-N.C.), is aimed at curbing predatory lending, which has been a major factor in the highest home foreclosure rate in the United States in 25 years. The bill also will strengthen the appraisal regulatory structure and oversight by the Appraisal Subcommittee.

“It is imperative that we return to the fundamentals of mortgage lending with the focus being on the three C’s: the capacity to repay the loan, the credit-worthiness of the borrower, and the underlying collateral value,” Amorin noted in his testimony. “These are the basic tenants of sound lending practices, which are being ignored by ineffective regulatory oversight and lax underwriting standards.”

Focusing on the regulatory loopholes plaguing the mortgage lending industry, Amorin presented the House Financial Services Committee with a short list of areas the Appraisal Institute believes are in need of reform in order to protect the safety and soundness of mortgage finance system transactions.

His recommendations included the following:

-Federal requirements for regulation of appraisal management companies (AMCs)
-Removal of compensation caps placed on appraiser fees by HUD and customary practice.
-Requiring the separation and disclosure of fees paid directly to appraisers as well as any administrative fees charged by appraisal management companies.

In addition, Amorin stressed the need to close regulatory gaps, like those that allow unregulated valuation products for mortgage origination. Recently, Freddie Mac clarified that broker price opinions (BPOs) were prohibited for mortgage origination purposes, and Amorin suggested this provision should apply to all mortgage loans, in line with his call for refocusing on fundamentals.

Amorin, representing 30,000 real estate appraisers from the Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers and the National Association of Independent Fee Appraisers, testified for the second time this year in front of Congressional leaders. Last month, he spoke to the U.S. House of Representatives Subcommittee on Financial Institutions and Consumer Credit about the need for mortgage reform legislation.

“We believe that H.R. 1728 will go a long way in restoring confidence in mortgage lending,” Amorin concluded. “And we are grateful to Congress for allowing us to share our views.”

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