Four national associations of real estate appraisers have asked Congress for major regulatory reforms in the wake of an Associated Press investigation that identified key failings within the existing system.
Led by the Chicago-based Appraisal Institute, the groups said Wednesday they want the Congress to approve more money so that state appraisal boards can boost enforcement efforts. They also called on lawmakers to increase the oversight authority of the federal agency charged with monitoring the appraisal industry.
"We have been deeply troubled by the lack of responsiveness by some federal and state appraiser regulators in carrying out (the law)," said Bill Garber, the director of governmental and external relations at the Appraisal Institute, the nation's largest association for real estate appraisers.
The AP's investigation found that since 2005, more than two dozen states and U.S. territories have violated federal rules by failing to investigate and resolve complaints about appraisers within a year. Some complaints sat uninvestigated for as long as four years and as a result, hundreds of appraisers accused of wrongdoing remained in business.
Experts told the AP the failings helped contribute to the current crisis in America's housing market.
"We hope this article proves to be a catalyst for modernizing the existing appraisal regulatory structure and making it more effective," they wrote to the Senate Banking Committee. The other groups signing the letter are the American Society of Appraisers, American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers.
In the letter, sent two days after the AP's published its report, the associations asked that the reforms be added to appraisal legislation already before the committee. But Garber acknowledged that will be a challenge, since Congress is close to adjourning for the year.
"We think we can do it," he said. "We just have to get them moving."
Reps. Paul Kanjorski, D-Pa., and Judy Biggert, R-Ill., the co-sponsors of appraisal reform legislation that passed the House last year, said earlier this week it was unlikely Congress would have time to address the AP's findings. But the staff of Sen. Bob Casey, D-Pa., who sponsored similar legislation in that chamber, said he plans a renewed effort to move it forward in the wake of the AP's report.
"We have to get both sides to work together," Gerber said. "This is too important an issue."
Under the current regulatory system, created in the wake of the savings and loan crisis in 1989, states license appraisers and discipline those who break the law. An independent federal agency, the Appraisal Subcommittee, is responsible for conducting field reviews and audits of the states, and maintaining a national registry of appraisers.
The AP's investigation found the Appraisal Subcommittee knew for years that state appraisal boards were violating federal rules, and that appraisers were facing intense pressure from lenders, mortgage brokers and real estate agents to inflate the values of homes. But former officials acknowledged to the AP they didn't take action, believing they did not have the authority to do so.
Garber said appraisers want Congress to give the Appraisal Subcommittee more authority over state appraisal boards, including the ability to issue fines. That would be a critical reform, since the only tool the Appraisal Subcommittee has to enforce its rules is would effectively halt all mortgage lending in a state. That penalty is considered so severe that it has never been used.
"While some state appraisal boards do a good job of enforcement, for whatever reason, whether it be lack of funding or lack of mandatory licensing requirements, more than a few do a poor job," the groups wrote.
"This cannot be allowed to continue. The Appraisal Subcommittee must hold the states responsible, and more resources must be given to state appraisal boards to conduct investigations and enforcement."