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Lawmakers Raise Concerns on Dodd-Frank Appraisal Restrictions


WASHINGTON — A shortage of appraisers in rural areas is sparking concerns among key lawmakers that might lead to legislative changes to the Dodd-Frank Act next year.

Several lawmakers flagged the issue during a House subcommittee hearing last week, arguing that government regulations have cut down on the number of appraisers.

"In rural Missouri we have a real problem with appraisers," said Rep. Blaine Luetkemeyer, R-Mo., the chairman of the housing subcommittee. "We have no appraisers in my county. We have a county of 20,000 to 30,000 people and no appraisers."

Conducting appraisals in rural areas can be more complex than in suburban and urban areas because there are fewer sales and comparable properties. In addition, rural appraisers face the same regulatory restrictions and requirements as other appraisers.

"We increased the requirements for appraisals," said Joan Trice, chief executive and founder of Clearbox, which provides services to appraisers, real estate agents and lenders, during the hearing. "But they make about half what they use to make. So no one wants to enter the profession with that kind of economic environment."

Critics blame Dodd-Frank for making the situation worse because it emphasized appraiser independence and the importance of keeping arm's-length relationships between appraisers and lenders. Under the law, almost any effort to influence an appraiser's judgment can be considered a violation of the Dodd-Frank Act.

Yet any person with an interest in a real estate transaction can ask the appraiser to consider additional property information or additional comparable properties. They can also ask to correct errors in the appraisal report.

Sources say the new regulations have created a "stone wall" that make it difficult for appraisals to happen.

"Appraisal independence is a great thing," said David Bunton, president of the Appraisal Foundation. "Unfortunately, it has caused appraisers to be radioactive. The real estate agents don't want to talk with them because they are afraid they will get into trouble and lenders won't talk to them."

Critical information is not being shared between the parties, he said.

"Talking to an appraiser is not coercion. It is communication giving information," Bunton said.

Rep. Al Green, D-Texas, stressed that he wants to work on developing an appeals process to resolve disagreements between sellers and appraisers on the value of a house.

"We are concluding we need a balance and there seems to be a pervasive belief that a balance has not been achieved," Green said.

The average age of an appraiser is 55 and the main barrier to entry into the profession is employment, according to Rep. Lacy Clay, D-Mo.

An appraiser trainee must work under a certified appraiser for 2,000 hours to become certified and conduct single-family appraisals. That makes it hard for a trainee to make any money.

Industry representatives said that issue has to be addressed.

"The core of the problem is it takes a lot of time and a lot of money to become a certified appraiser. At the end of that process, you don't get paid very much," said Joseph Pigg, executive vice president of the American Bankers Association, in an interview.

During the hearing, Trice said: "We have set the bar too high. You can become an airline pilot with less experience."

Exactly what Congress will do next is unclear. A spokeswoman for Luetkemeyer said he would hold more hearings and work toward ways to "modernize appraisals."

The housing crisis exposed "problems in the appraisal industry," Luetkemeyer said at the hearing, and Dodd- Frank attempted to fix it.

"I am sure there are tweaks that need to be done," he said. "At the end of the day, appraisers need to maintain their independence but they need some flexibility."

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