A nationwide system set up to monitor appraisers in the wake of the savings and loan crisis did little to prevent appraisers, real estate agents and mortgage brokers from colluding to inflate home prices during the housing boom, the Associated Press said in reporting the results of a six-month investigation.

An independent federal agency authorized by Congress in 1989, the Appraisal Subcommittee, is charged with conducting field reviews and audits of appraisers. But the Appraisal Subcommittee has only four auditors and has not had a permanent director since the end of last year, AP said.

The Appraisal Subcommittee is charged with keeping records to aid state appraisal boards in identifying and disciplining rule breakers. But many state appraisal boards have failed to conduct timely investigations or resolve complaints, and federal regulators are effectively powerless over the states, AP concluded.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 recommended that states license appraisers. A private group, The Appraisal Foundation, drew up rules governing appraisers, but eight states still don’t require appraisers to be licensed or certified, AP said.

The AP questioned the effectiveness of an agreement governing appraisals by lenders working with Fannie Mae and Freddie Mac that was negotiated by New York Attorney General Andrew Cuomo (see Inman News story). The agreement, which takes effect Jan. 1, duplicates regulations already in place and lacks enforcement provisions, AP said.

A bill passed by the House last year would give the Appraisal Subcommittee a consumer protection mandate, and more authority to monitor the performance of state appraisal agencies. HR 3915, Mortgage Reform and Anti-Predatory Lending Act of 2007, would penalize attempts to influence the independent judgment of an appraiser through collusion, coercion and instruction, and punish appraisers who have direct or indirect interest in a property or transaction.

The bill, which also includes controversial provisions governing mortgage originations, has been stalled in the Senate Banking Committee since it was passed by the House on Nov. 15 in a 291-127 vote. Sen. Bob Casey, D-Pa., told the AP in a follow-up story Monday that he would renew a push to move the bill forward.


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