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TAVMA Opposes New Consumer Protection Bill

In an announcement Monday, the ""Title/Appraisal Vendor Management Association"":http://www.tavma.org/index.php (TAVMA), a nonprofit professional organization that represent more than 75 companies, said it opposes the proposed federal and state legislation that would dismantle new federal safeguards designed to protect appraiser independence and provide unbiased appraisals to homebuyers and lenders.


This proposed legislation, H.R. 1728, on the federal level and numerous initiatives on the state level would once again permit discredited business practices that were key factors behind the real estate bubble and crash, TAVMA said. Specifically, the association said this legislation would allow mortgage brokers to handpick appraisers and communicate with them regarding property values.

""Fannie Mae"":http://www.fanniemae.com/kb/index?page=home and ""Freddie Mac"":http://www.freddiemac.com/ banned this practice in May 2009, and the ""Federal Housing Administration"":http://www.hud.gov/offices/hsg/fhahistory.cfm (FHA) is expected to enact a similar rule next month. In addition, the new Home Value Code of Conduct (HVCC) was initiated by Fannie Mae and Freddie Mac to prevent appraiser pressure and inflated appraisals. However, H.R. 1728 would, in effect, repeal the HVCC, even though both GSEs are on record as saying the new code has improved appraisal quality.

If passed, TAVMA warned that the new bill would reinstate business practices that have lead to appraiser pressure. Commission-based professionals who get compensated only when a real estate deal is completed would again be in a position to unduly influence transactions, and without firewalls, appraisers would be subject to pressure to ""hit the price"" and appraise a property at the value the mortgage broker needs to close the deal or risk losing future business. In addition, TAVMA said there is an inherent conflict of interest when appraisers are selected by referral sources that have a financial stake in the outcome of the appraisal.

""Unbiased home valuations protect consumers and encourage lenders to provide home financing,"" explained said Jeff Schurman, executive director of TAVMA. ""Turning back the clock and letting parties who are compensated based on closed deals order and interact with appraisers will inevitably lead to pressure and inflated appraisals.""

Schurman said this was clearly one of the major factors that inflated the unsustainable real estate bubble that has just burst and tanked the U.S. economy. If Congress wants to help consumers, and not just a small group of interested parties, it will make sure that it retains safeguards to protect appraiser independence before it discards new rules that are already doing this job, he said.

""For more than 20 years, various federal bodies have struggled with ways to prevent appraiser pressure,"" Schurman explained. ""Finally an effective mechanism has been put in place to prevent this practice, and in less than six months, pressure from the same groups that created the real estate crisis is on the verge of overturning it. Is our collective memory really that short?""

About Author: Brittany Dunn


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