we will also explore suggestions to prove the appraisal regulation structure regulations. for example, make more efficient , consistent phrasal oversight by streamlining regulations and redundant efforts to monitor the appraisal industry. finally, some mortgage industry participants have raised concerns about concentration in the appraisal industry as well as the quality and accuracy of appraisal. how can regulations enhance among appraisers and ensure accuracy and appraisal valuation. given the broad interest in the issue of appraisal regulations, i would like to hold at least a second hearing through the 100th congress on the subject here from other stakeholders. so if i look forward to hearing from today's witnesses and i hope today's hearing will provide members of the sub committee with a variety of ideas as to how appraisal regulation can be improved for

consumers and businesses. other to recognize the ranking member, john and illinois, mr. sharon is pure >> thank you for yielding a thank you for holding the hearing. as we perceive the systemic financial system and housing finance reform, it has become increasingly clear will benefit greatly from a clearly defined and found property appraisal. in other words, all industries involved from builders to consumers and benefits from a career in buffalo field and the appraisal system. added forward to hearing about the gao, with the gao found a study found the issue specifically and weaknesses that identify the effectiveness of the duty, specifically enforcement tools and reporting procedures in addition whether the af the default addressing requirement to create and operate a national hotline with compliance and appraisal independent standards in uniform standards of professional

appraisal practice is. i look forward to learning more about concerns of appraisal that representative organizations on the impact appraisal management companies are having, not only on experience to make a living, but on quality of the appraisal for impact. madam chair, the concerns of other stakeholders, realtors, mortgage regarding other aspects of appraisal issues. most important to me and many of our colleagues on the side of the aisle and want to learn how the issue is are affecting consumers, including whether or not consumers receive moneys worth in terms of quality of appraisal if they pay for. are they being fully informed of what they are paying for and are they protected from fraud or do they have the proper means to address their grievances? i understand there's much to cover in this hearing and this is only another step in the examination on this critical issue, therefore i thank you and yield back the balance of my

time. >> thank you, mr. gutierrez. a gentlelady from west virginia is recognized for two minutes. >> thank you, madam chair and ranking member for being you today. there's nothing going on in congress today, so i'm glad we're here to talk about the appraisal. i'd like to thank the chairman for looking into this. i will keep this brief. i want to take a few moments to address an issue i've heard complaints about in the state of west virginia. i believe the process is absolutely essential if the report to the more mortgage process because regulatory structure in which the industry can operate and serve the consumer is of prime importance. i have to get better clarification today is whether the fed committee can handle the role or whether it would be better left for states to act as a regulator. my main focus has been to have a marketplace for the consumer at the consumer can access. i represent a state where home values are relatively low.

we didn't get out of her skis like other places, so a home may appear to be affordable and still strains the budget. i am concerned because i hear of rising costs of appraisals and appraisals and some cases are unfamiliar in which they are making the appraisal comes the local markets and a small state like west virginia may not sound like much, but if you come in charleston, it is a totally different market. it is also 130 miles away. if this is the case the anc said that increased market share in 2008 and i'm curious to know has this contributed to put it another player -- and more increased of the appraisal consumer and the accuracy of the

appraisal is essential. so i'm interested to know of the dodd-frank provisions have absolutely created a more consumer friendly process or not. i appreciate the chairman for holding this hearing. thank you. >> gentleman from california, mr. miller is recognized for two minutes. >> thank you, chairman baker for having this hearing this morning. it's extremely important. the appraisal process is broken, but to some degree still broken. after the passing of dodd-frank i remember arguing vehemently about the process going in the direction we were heading and prove to be right as the disaster and repealed the savanna. there is a lovely green after the process is still having to deal with that of appraisals were significant process. using distress tales as

comparables at often times creates more problems than it does benefit because of an appraiser who is not a local appraiser doesn't understand the distressed property in the rehab is necessary to take place to make that a comparable property to property that is not a rehab come what they do with those areas. there's a lot of confusion and ambiguity has to be dealt with. new home construction is another good example of trying to compare a new home to a piece of property sold for less than sticks and bricks. they are not comparable they don't have to meet the new standards and compliance is of the local agencies and states that passed these mandates on energy-efficient means. a green home in california has another when having to deal with it. builders took off into homes. many areas mandated to do that and they can even use the cost of those improvements as part of the appraisal. i'd like to enter into the

record a letter from the national association of home builders in the second from the leading builders of america. >> about actions toward her. >> when you talk to groups and individuals, you don't hire an electrical contractor to build concrete work and you don't hire your amount of local appraiser to do vocal appraisals. i mean, you give them in an area they don't have expertise. you can't necessarily not know when an area go to the computer and say it equates above are trying to sell. we found out the situation of the hcc when i pass it congressman kanjorski pass that. my argument was perhaps the most corrupt state in the nation and 49 others don't have those problems. we need to allow more i've taken in appraisal and the acidic and is unavailable, where you were quite a lender to basically do

the appraisal and could not be taken to another lender to do the work. there are areas we need to deal with but i don't think we have. we are in a recovery market that we need to do what we can to make sure the market has an opportunity to recover. i think until we fix the appraisal process, that is not going to happen. we don't do a service to people is find a home for those who buy the home and do a complete disservice to those who finance homes and sell homes. a thank you for your generous time and look forward to the testimony. >> thank you. gentleman from texas, mr. green for one minute. >> thank you, madam chair for hosting this hearing. this is an important hearing and i would like to associate myself if i may say so with mr. miller's comment. i did not hear them in their entirety, so i won't associate myself with all of them. but what i heard -- what i did

hear i do associate myself with. would like to enter into the record for the houston association of realtors a letter signed by president -- mr. shad alchemy. actually he is the federal coordinator and also the state share alike as close as chair wayne stroman, the chair of the board for 2012. >> without objection. >> thank you. >> and chair, he has made some salient points. we find ourselves with people making decisions not entirely familiar with the empirical evidence. i do believe that we have to revisit some of these issues so as to tweet a system we have in place. my belief is that this is not salvageable, something doable. i think we just have to find a way to work on this project and focus on the question before us. i've had opportunity to talk to

realtors and first remission about what's going on in my city. firsthand information. after many realtors about this concern and kosovar is attached to people about the actual appraisals for me to have concerns. i thank you for hosting this hearing and i look forward to hearing evidence. as you know, there are many things happening without getting into what is going on tonight been pulled in different definitions, but it have to be here for this because of the importance associated with it. i yield back the balance of my three seconds. >> thank you, mr. green. we are delighted to have our panelists here today. we are going to have to panelists and so we will stand with panel number one. we have mr. william b. shearer, director of financial markets in financial accountability office.

thank you for being here. mr. don rogers, president association regulatory officials. and then mr. park, set to any federal examination council. thank you so much for being here and without objection you're witnessing this will be made hard at the record. you reach will be recognized for five in a summary of your testimony and we will start with mr. shear. you each have each have five minutes. scenic thank you. chairman baker, ranking member of the trs. >> i'm not sure if your mic is on. if it is, please pull a closer. >> can you hear me now quite >> polluted little closer. it moves. >> okay. i'll get it. can you hear me now? okay. i'll raise my voice. chairman baker at, ranking member gutierrez, i am pleased

to be here to discuss their work on real estate appraisal issues. my statement today is based on information from two reporters to be issued in to mandates in the dark frank act. the first of which we issued in july 2011 included an examination of real estate valuation methods, including appraisals as well as conflict of interest and appraiser selection policy through the second we issued in january 2012 included an assessment of the appraisal subcommittee -- >> mr. shear, it is still hard to hear you. it looks like the wires are tight. can you move it a little closer? >> let's try this more. the second issued in 2012 included an assessment of the appraisal subcommittee monitoring function in certain challenges face the asc.

in summary we found first appraisals, which provide a market value at a point in time are the most commonly used valuation that it's for that presidential origination. while there's different approaches for conducting appraisals unlimited, we found sales comparison approach is required by fannie mae, freddie mac and fha and is used in nearly all appraisals. we also found the cost approach in which an estimated value uses data on land value and that it would cost to be placed to reproduce is often used in conjunction with the sales comparison approach. second, conflict of interest policies have changed the processes and the appraisal industry more broadly or specifically, the budget increases of the companies. in july 20 then reportedly concluded by setting minimum standards that address key

functions, on behalf of the appraisal purposes and provides greater assurance of credibility and quality of the appraisal provided by amc. therefore we recommend that these regulators consider addressing several key areas for selecting appraisers and joint rulemaking to set minimum standards and to apply and register and seeds. now i'll briefly discuss their evaluation of the appraisal subcommittee. it's been performing under title 11. we found several weaknesses, which are generally associated with the lack of established policies and procedures and clear definition have potentially limited afc's bluntness. to assess its compliance with title 11 and develop specific policies and procedures for monitoring the federal banking

regulators in the foundation. taken steps to implement these recommendations. chairman biggert, this concludes my statement might be happy to answer any questions. >> thank you so much. mr. rogers. you're recognized for five minutes. >> madam chair, ranking member gutierrez, thank you for the opportunity to testify today. i'm the executive director of the north carolina probe ordered currently president of the association of regulatory officials, which is comprised of real estate licensing agencies. my testimony with focus on issues relevant to state regulators. lack of resources. licensing programs established as a result through credentials and oversee compliance with standards and state laws. part of an approach agency

handles all occupational licensing as a state often use investigators and a signed legal counsel on a per case basis. other standalone agencies handle real estate and may have her staff investigators in full or part-time medical assistance. it has an autonomous board. these do not receive state funding and did not hire the staff. programs that share staff they lack sufficient resources and may not be able to comply with federal requirement. state officials did not understand what the program must be given priority in the back lot for the regencies is just as great. on the issue of appraisal fraud and appraisal is an opinion of value which make that difficult to show appraiser intended to deceive someone. for this reason law enforcement officials often shy away from bringing fresh charges against appraisers of the state and law enforcement task forces with state regulators to share

information today concerns the investigations could be compromised. appraisers are not usually originator of fraud schemes, but are brought into it the promise of future assignment set of large payments would provide the smoking gun tying them to the fraud. the management companies. amcs success for many years have code of conduct, many were established. there were no big relations in place defining for controlling who could own or operate any mc. often appraisers were prohibited from speaking with brokers, boaters are barbers that creates consumer frustration directed towards appraisers as consumers are not aware of the role of the amc in the appraisal process. appraisers had their own issues with amc including numerous assignment condition and request a quote that if the market and deliver stephen david.

frequent problem for regulators as they must like the two entities whose interests are often at odds. each group to change laws than those cited pact eligibility to function. as complaints and praise they may lack the resources to investigate companies who have substantial legal resources. other valuation products are generally not regulated by appraisers licensing boards and consumers do not realize what an appraisal was not involved in the process. this limited authority to discipline croakers for a recent development devaluations and are not sufficiently regulated. a valuation of the regulatory system. some of the cooperative efforts the afc and foundation art investigator training program provided no cost to the state. taskforces and consistent enforcement. the foundation issues exposure drazen request, and to propose

changes the appraiser qualification criteria schedule meetings to coincide with conferences. the asc staff attends meetings in the face drafting rules. there continue to be areas that show improvement. state regulators should be represented on the subcommittee as well as the foundation's board. there should be a national repository for appraiser and amc records for the expansion of the national registry for a system similar to the mortgage life consists in. current amc procedures should discourage the public from attending. universal application have been discussed that are difficult to achieve absent federal requirement. it has been in the process of changing policy statements for several months the states have not had the opportunity to see a draft for comment. the lack of enforcement for submission create a situation where directed -- is the only

penalty for violations. to write active event proper enforcement options the ability to make the states and oversight of the registration process. it remains to be seen but affect the coastal have on the programs. thank you for the opportunities to testify today i decline to answer any questions. >> thank you. this park, you're recognized for five minutes. >> good morning, chairman biggert, ranking member gutierrez and members of the subcommittee. thank you for the opportunity, also known as the asc. title 11 created the afc and the agency within the financial institutions examination council. title 11 was passed in the 1980s to address weaknesses regarding real property appraisals used in connection with federally related

transactions. title 11 called for establishment of state programs to credentials and supervised appraisers and created a regulatory framework that involves federal, state and private entities. but the federal level we have the afc. at the state level estate appraisal pregnancies in the appraisal foundation. you see is made up of seven members designated by the regulatory agencies as well as hide, shs say -- powered, fhfa. effective april 1, the the appointed to hide representative as the new chairman also a certified appraiser for us to share the afc. the member agencies remain committed to fulfilling the statutory responsibilities. as part of the core responsibility, to monitor state

appraiser regulatory programs for compliance with title 11. he completed 27 of these in 2011 and 31 are planned for 2012. the afc maintains the national registry comprised of appraisers eligible to perform federally related transactions. the registry contains fewer than 105,000 credentials down almost 14% from its peak in 2007. the registry fee being the sole source of revenue, the reduction in number of credentials comes at a particularly challenging time as the scope of responsibility is increasing doing to the dodd-frank act. in monitoring the foundation, afc attends all of the foundation boards. for fiscal year 2012, the afc approved a grant to the products of a $900,000 to the foundation. the grant includes funds for the state investigator training program, which has been beneficial to stay.

through monitoring, and the afc is a way to foundation is currently working on a new strategic plan. it played no role in development of the plan. however made public the afc will complement on matters related to responsibility. the idiocy continues to make progress in addressing the project requirements. last fall the afc approved a plan to establish the complete national hotline in a great tool for completed towards this implementation. aic member agencies are currently working for internal complaint intake and disposition. watch as the hotline is anticipated before the end of 2012. the dodd-frank act in its report issued last january to gao made three recommendations. first, geo recommended the asc used categories title 11.

it is now corporate and appropriate documents. the sub to revise policy statements that have been approved for publication in the federal register to solicit public comment. the revisions including you find you and definitions to further address the gao recommendation. second, geo recommended the site to recommend posts for requirements developed by the federal financial institutions regulator. finally, geo recommended the fed to develop policies for determining whether the foundations granite dvd are related to title 11. staff is drafting policies for approval to the last two recommendations. other asc priorities include fulfilling responsibilities conferred by the dodd-frank act of grantham rulemaking regarding appraisal programs controlled

fund. therefore the asc will focus on ensuring grant funds used to support the program. what idiocy is of nitrous rulemaking, the repost policy statement would implement the authority given by the dodd-frank act to remove appraisers are up to 90 days. use of any additional interim sanctioning authority would require rulemaking. in conclusion i appreciate the opportunity to appear before the subcommittee and look forward to addressing your questions. thank you. >> thank you, mr. park. this is the time or members of the committee will ask questions and since i am here, i will start. i killed myself five minutes. mr. shear, do you think that the asc has made efforts to reform policies and prevent procedures for determining whether the

activities of the appraisal foundation are title 11 related? >> as mr. park said, we followed up -- we know they have made progress in this area as far as coming up with the definition they would be, how do you define title 11 of committees. so we know they are making progress in this area. >> you think they are moving ahead enough clients >> we are very glad we agree with the recommendation and are putting things down in a formal way to address these issues. >> according to your testimony and based on your july 2011 report, the appraisal subcommittee has not clearly defined criteria is used to

assess state's overall compliance title 11. could you expand on this assertion? >> i would be glad to. one thing we have observed over the years is that the compliance with requirements has been enhanced over the years. so we see that see the establishment of many policies and procedures that are clearly stated. from an internal standpoint we we we to three different categories would bring greater clarity and provide for more oversight of these three categories are more clearly stated and defined and we understand that they're making progress in this area. >> thank you. >> mr. rogers, you provide funds -- and on how the

appraiser regulatory structure can be approved at a national level. can you describe to this committee and went up? >> yes, ma'am i'd be glad to. and looking at the areas of improvement, as mr. park said in his testimony, the policy statement, which are given to the state to follow -- to show compliance with title 11 are in the process of being revived. we have not, at this point, understood the process for several months and it is to add an exposure to the state or have the state, and peered when the foundation makes changes to the standard for the criteria, there's a very robust exposure and vetting process that allows the unintended consequences to get out there. i would encourage the set

committee to get those to the states for comment as soon as possible. also, we believe the states should have representation, both on the subcommittee is either a member or through some sort of liaison and they also should have the same syndication standards and qualifications are. these boards directly affect policies, rules for each of his paid and for them to understand what impact of the unintended consequences might come by the result of changes to rules or regulations is essential. so we think that it's a very essential point. ..

>> i think a lot of the schemes that were taking place in the early part of the last decade -- they are just difficult to perpetrate, given the financial climate that we are in now. the rapidly inflated markets made it easier to perpetrate, were now that certainly does not take place. we have heard of issues of what is now called swapping schemes, where it is misrepresented into the lending institution of property is worth, they assure itself a low amount and in some of the real estate professionals in turn sell the property at large profit as a reversal of the flipping scheme. we have seen some cases in our

state which we are right in the middle of the transition to the economy following where there were subdivisions were a lot of promises were made and no money down. those type of investments, a lot of people bought -- they watch for investment properties and then the market crashed in the middle of it. some of these were from and the fact that they were trying to entice people into making poor investment choices, but the actual market fell out from under them, which was not part of the policy. >> thank you. mr. park, it is my understanding that the appraisal subcommittee was created in response to the savings and loan crisis in the late 1980s and early 1990s in light of significant changes over the past 20 years, what is

the relevant of the afc in today's market? >> the relevance is the federal oversight. >> could you pull your microphone closer? >> the relevant elating oversight that we provide for the state as well as the monitoring and the grandson are part of the appraisal standards were in the appraisal qualifications board. >> the question is, is the model outdated come or do you think the you are in the 21st entry, as far as federal oversight? >> title 11 as originally enacted, and originally had some flaws in it. the dodd-frank act attempted to correct some of those flaws, providing more authorities and

responsibility to those appraisal subcommittee come and while many of those provisions of the dodd-frank act are still being put into place, they should assist the subcommittee in providing greater regulatory oversight for the appraisal system. >> mr. scheer, do you think that there should be a complete overhaul of that to make sure that it is in the 21st century? >> well, we didn't look at various options for restructuring, so i can't answer your question directly. we did look at how dodd-frank changes the role of the appraisal subcommittee and the new authorities and responsibilities, and we think the appraisal subcommittee has some huge challenges ahead as they move forward in implementing recommendations and

taking other actions. i would expect that this committee and others will be taking a very close look to see whether the appraisal subcommittee has the resources and the right type of structure to carry out these additional responsibilities. especially pertaining to monitoring the federal financial regulators. >> mr. park, obviously, the asc failed to perform during the financial crisis. a lot of people made a lot lots of mistakes, too. because of that, do you think that states could assume the role of the asc? >> the will of the asc is not to detect appraisal crockery that is the realm of the state. they are the enforcement mechanism of the system. the asc's role is to create an

environment where fraud can be easily detected, and the states have the ability to enforce disciplinary actions for fraud or lesser offenses, misleading appraisals and competent appraisals and so forth. >> was there a problem with the environment, then? that the asc created at the time of this financial crisis? >> the asc has to work within the confines of title 11 within the authority that it has yemen. one of the problems, one of the inherent problems with title 11 that dodd-frank tried to correct is the fact that the only authority committee only disciplinary authority that the appraisal subcommittee had to use against states that were out of compliance was nonrecognition of the state. the state's program. nonrecognition of the state

appraisal program would in effect shutdown mortgage lending in the state. while it has been addressed with many states were several states and the states know that that is a potential outcome of compliance reviews, they also know that it is a very draconian measure. >> the asc oversees the states and you said that they don't detect the fraud -- have they put out any information about fraud trends and more work with the states to better address on? >> during the compliance review process? the policy review managers talk to the state, gathered information about what they're doing related to fraud, more and more states are getting involved in various mortgage fraud committees and in working with the fbi federal government and state government officials to

address the problem of mortgage fraud and appraisal fraud. >> okay. mr. rodgers, has this happened in your state? has this been a help? >> i do agree there has been efforts on both the level of this on the subcommittee reviews, issues that occur in other states are made available and where of other states, again, the joint investigator training. to focus on some of these issues that he might see. as i pointed out in my testimony, when they have

participated in task force, which i think has been useful in helping identify players in some of these mortgage fraud cases, it is sometimes difficult for the information to be sure both ways because they are in a criminal investigation they fear the advancement of the licensing investigation may compromise the criminal investigation. >> thank you, and i have exceeded my time. i will give some leeway. >> thank you so much. you are so kind. well, i am very generous -- my prescriptions are ready. the panelists, the pre-existing conditions will not be counted against you. you have your kids on health care. it is the law of the land now,

so i feel pretty good about that. a little bit aside, i thought you would like to know what the supreme court has been decided. especially since i know you're not on your blackberry. [laughter] no, i'm not talking to the rest of you read i am very well informed of what has happened, but it is very distinguished and welcomed -- the very distinguished and welcomed witnesses here. so, mr. shear, i think we need to produce a program that produces accurate values all throughout the housing cycle. the interagency guidelines that became effective december 2010, or a vast improvement over 2004 guidance. as we confront the fragmented and what we consider the

dysfunctional nature of the appraisal system and regulatory oversight, the question is, who has the authority and more importantly the ability to coordinate and implement the changes we need to accomplish? >> you race related questions, and i worked to address some of those questions. there is room for improvement with the appraisal, in particular, the new authorities and responsibilities provided by dodd-frank, allow the appraisal subcommittee to do a better job of trying to oversee the state regulators. we have tried to come up with a way of monitoring the federal regulators, given the structure and the small size. there's an awful lot that seems to be writing in with the appraisal subcommittee is capable of doing.

the types of questions that you asked for some very good questions, because even if the appraisal subcommittee does successfully implement new procedures, implement new authorities and takes time to take on new responsibilities, it still poses the question how comprehensive is the system that we have. you know, those are very good questions that become very much part of the whole fabric of mortgage reform under dodd-frank. >> mr. rodgers, could you answer little but more? >> i think there are two questions with regards to what happens on the state level. the question has been raised about dealing with appraisal fraud and joint law enforcement work. largely, the complaints and comments -- helping to resolve

the housing crisis in situations like that. unfortunately come on state-level come you are dealing with a complaints system where the board receives a complaint that it falls under a due process system, for example, in our state, immediately the respondent has 30 days to respond to the complaint before we even initiate the investigation. what you are hearing a lot from participants in the marketplace is that they need somebody that wants and appraisal -- once and appraisal does not meet their needs, they need the ability to appeal or to revisit it or review it. i think that will have to be handled largely in the lending community. >> could ask you to restate your question? >> we have the effectiveness of the system to change and to

improve and to have new effective standards across the country, which change them but have you seen those standards? are they being adopted quickly enough? >> the changes to the appraisal regulatory system have occurred very slowly. the dodd-frank act was the first significant change since it was enacted back in 1989. there has been -- what the dodd-frank acted, was install quite a few significant changes that we talked about earlier, in terms of the subcommittees. >> you think they are actually being carried out? >> yes. we are in the process of enacting tougher provisions of

the enact a dodd-frank act. the subcommittee did not have the authority other than to comment on, but we had no authority during the due process, to look at the funding and staffing of a state program. dodd-frank gave the subcommittee the authority to do that as part of our compliance of due process. >> my time has ended. thank you so much. we will have more questions for you, and i thank you for your testimony today. maybe it is just my imagination, but i have only met two appraisers, and i have had more homes appraised. and i want my 25 years ago, and you know, it is like -- it was like the last time i had the appraiser come over, i almost felt like i was doing some criminal act by telling her about the beautiful tile, how expensive it was before i

installed it, telling her what about my home it was that meet unique so that she could do a better appraisal. i thought, when i talk to the mechanic, he listens to me and then does whatever he wants to do to fix my car. but he doesn't treat me like a criminal in trying to tell them what i think is wrong or good or bad about my car. i hope we don't get the point where we get into an adversarial relationship between homeowners and their most prized possessions. and what it is we think it is worse. in the end, we will make an objective determination and we can get information on american public as we make a decision about what it is something is worth. i think all of you and look forward to the next panel. >> thank you, i would like to thank the panel for the expert testimony. it has been very helpful to us. we will excuse the panel, but

first let me just say that the chair notes that some members may have additional questions for this panel, which they may wish to submit in writing, and without objection, the record will remain open for 30 days for members to submit written questions. thank you very much. with that, we will have a second panel come forward. [inaudible conversations] [inaudible conversations] i would like to recognize the second panel and thank you all for being here. i may just go through the list.

we have mr. david berenbaum, national reinvestment coalition, thank you for being here, we have the president appraisal foundation, and we have the 2011 chair, mr. francois, the realtor's appraisal committee, and mr. john kelly, executive director of real estate valuation advocacy association and on behalf of the coalition to facilitate appraisal integrity reform. we have karen mann. we have ms. sarah stephens, president of the fraser institute. thank you all. we will begin with the testimony, and you or written

statements will be part of the record. with that, we will start with mr. berenbaum. >> thank you. good morning chairman, ranking member, and other distinguished members. i am david berenbaum on behalf of our coalition i'm honored to testify before you today of both consumer protection and the safety and soundness perspective in order to address options for improving the regulatory oversight of stakeholders in the housing finance industry. ncrc provides credit and savings to create and sustain a horrible housing, job development, and communities of vibrance for america's working families. today the u.s. economy is in the worst american crisis and more than half a century.

the valuation issues remain front and center in the financial reform debate. our current economy has clearly earned its moniker, the great recession, and this is not an equal opportunity recession. ncrc calls upon the subcommittee to enforce title 11 and embrace the reforms included in the dodd-frank act and implement the following 10 recommendations that will help all americans, particularly the low to moderate income communities of colors and communities impacted by the foreclosure crisis. we are working to realize her sustain the american dream. to accomplish this, we propose the problem. first, to develop a more modern appraisal process and utilize more robust that can be tailored to today's needs. this is only added further confusion to the already inadequate mandated form. second, require appraisals by

professionals for all residential mortgages about $50,000 regardless if they are originated or are insured by the private sector for fannie fannie mae, freddie mac, with fha. the code limitations associated with the so-called value of a quarter of a million dollars are out of touch with today's realities. there come the role and impact of the appraisal management companies must be critically reviewed by the asc to ensure that they are not negatively affecting appraisal quality. congress should immediately investigate emerging practice of mortgage originators assigning or requiring amc's assume the buyback risk from the market or ensure a claim related to origination. fourth, it enhances safety for consumers.

it must be appropriate under any customary standard that is developed. fifth, the banking regulation regulators, fannie mae and freddie mac in fha, should not escape evaluations safety and soundness review and enforcement. , while automated valuation models serve as a useful and cut method of fraud, they should never use it for all mortgages that exceed $50,000. there is a need for a more effective consumer protection, transparency and education, including a dedicated consumer complaints hotline managed by the cfpb in collaboration with not-for-profit organizations. responsible appraisal practices ensure and extend housing opportunities is as an open society. it is unfortunate today that we still see issues of the age of housing, predominant value and use of comparables, coupled with

objective remarks with regard to the quality of housing in america's lowest income or minority communities. in appropriate appraisal under evaluation is equally damage to homeowners, communities, and investors and insurers. we are seeing widespread under evaluation use of broker price opinions to a short sale process come or a general reluctance to recognize that in some communities from the market is beginning to return. ten, states must suspend the inappropriate action of redirecting funds intended for appraisal compliance, professional development, licensing and oversight to the geral fund. in conclusion, it is imperative for members of congress the cfpb, and financial regulators in the appraisal subcommittee to work in conjunction with one another to ensure that consumers and industries stakeholders benefit from a system of regulation that helps ensure the independence and integrity of

the process. to accomplish this we urge you to consider the recommendations that we have made today. thank you. >> thank you so much. mr. bunton, you are recognized for five minutes. >> thank you so much, madam chair. we greatly appreciate the opportunity to appear before you today to offer our perspective on the regulation of real estate appraisers. by way of background, i have served as a senior member of the past 22 years. part of that was serving as the chief of staff for one of your former colleagues. i should not point out -- i should point out that i am not an appraiser. the appraisal foundation is not a government agency or a regulatory body, it was not created by congress, it is not a phrasal trade association, and we have no individual members. what are we? we are a five o. one c. three not-for-profit educational organization. we were founded by eight national appraisal organizations 25 years ago before the

enactment. we are a number of organizations composed of over 100 organizations and government agencies with an interest in evaluation. we have attached a list the list of those organizations to the testimony. we created this group to foster professionalism. what the appraisal foundation it is the private sector expertise and real property revelatory system under title 11. the foundation does not have any regulatory authority, but we provide the tools to the regulatory community. specifically, we set the minimum education and experience requirements for someone to become a real estate certified or straight razor. we are the authors of the national uniform exam that offer to buy states and territories use. and we are the authors of the generally recognized standards of conduct. that all state licensed and certified real estate appraisers must adhere to. with the work of our boards, we understand the very importance of public trust. and the words public trust

appear in our mission statement, and we have learned over the years only to build and maintain public trust is to promote transparency wherever possible. all of our boards conduct public meetings, they adopt the work product and open sessions, they often involve numerous times, and all comments are posted and received on a website. the people who serve on the boards, we interview them in a public setting. in addition, as part of our commitment to promoting the public trust, we have worked with several u.s. government agencies at the request on developing specific recommendations to improve their internal phrasal operations and assist in their investigative work regarding valuation and to assist them in developing new policies and seizures. as mr. rogers pointed out from the previous panel, the appraisal subcommittee has had a very close relationship over the past two years. state investigator training with over 300 state investigators now having been trained or producing several training videos in a

time of tight state budgets, state regulators can receive training at their desk without having to fly anywhere. and then because all 55 states and territories are using the same document foreign enforcement, we have created something called a voluntary disciplinary action matrix, and that list specific violations and recommended disciplinary action. it also lists aggregating and litigating circumstances. it is completely voluntary, it is simply a tool for states to use, i have been asked to touch on to internal foundation issues. one of them is the foundation of strategic plans. it is premature to get into the detail of the plan because it will not be presented to the board of trustees until next month. as soon as it is accepted by her poor, we will publicly expose the draft plan as it did with its current plan, to all stakeholders for 90 days. this november, the board of trustees will take into account public comments received and make the final determination on proving the strategic plan i was

also asked to comment on the appraisal practices were. there is a lot of misinformation about this newest board that was constituted july 2010. this essentially is a how-to board, if you will. how do i appraiser. the appraiser or does not have any congressional authority, it appears the guidance. we do not the apb is not to establish new valuation methods and techniques. rather a compilation of existing ones into one place. last, the apb advisories are available to anyone at no cost. earlier, we heard from the general accounting office and over the past decade, there have been 16,000 disciplinary actions 2300 revocations in 1800 suspensions. the states have been very

active. title 11, was certainly unique without its flaws, is the glue that holds the safety factors to consider and it is important to remember without the use of any appropriated funds. thank you. >> thank you so much, you're recognized for five minutes. >> good morning, thank you for the opportunity to testify on behalf of the national association of realtors. about appraisal and the regulatory impact on consumers nar represents more than 1 million represent professionals, including proximally 30,000 licensed and certified appraisers. my name is francois gregoire.

i do not go by that name, go by frank, and i do not speak french. appraisals are one of the most critical components necessary in the housing market recovery. there is no question of the importance of it in real estate transactions. incredible valuation by a competent licensed and certified professional provides to the lender, borrower, and market. their obstacles to preventing the realization of these benefits. despite good intentions, litigation and regulation has diminished the importance of competency for criteria of selection and retention. the insertion of appraisal management companies between one originators and appraisers results in a focus on speed and turnaround time rather than preserve competency and

experience. the most common concern expressed our members, whether they be a broker or appraiser is knowledge of the local market or geographic competency. uniform standards of professional appraiser practice requires appraisers to have competency or acquire competency to understand the nuances of a particular market. the current amc model tends to disregard this necessary focus on competency. they may be enhanced with education and communication. mutation between appraisers and real estate agents and clients does not prohibited and should be encouraged. of course, efforts to intimidate, bribe, or coerce an appraiser are and should be and should continue to be prohibited. some mc we provide legitimate services, but many continue to problems in the appraisal business and the overall housing business. there is evidence is compromised

by the amc. unreasonable turnaround times and unrealistic scope of work or at reduced speed, interfering with the decision-making process necessary for incredible appraiser. experienced appraisers refuse these assignments instead of selecting the best appraiser for the job, the sun is often awarded to the appraiser who responds first to a mass e-mail, not the best selection method. the independent judgment of appraisers is compromised when amc reviewers unreasonably question comparable sales selections, non-appraiser amc's that was only a cursory knowledge of the valuation. by insisting that specific information be included or excluded from her included or excluded from appraiser poor. the altered business relationships between the appraisers and their clients, unreasonable completion times acquirements, and does all contribute to the failure to

recognize positive movement in prices and values in many market areas. nar did not support the dodd-frank language that regulated amc's on two different tracks. we agree with you that have aggravated the problems and that all amc should be regulated with state regulatory agencies. additional appraisal challenges include limitations of the current standard of reform, the reporting format, lagging market information, discrepancies and market definitions, privacy concerns, the funding structures of appraisal programs come and the declining number of appraisers. nar is the only real estate trade association able to speak with authorities on appraisals and evaluation of products. we will embrace an all-encompassing approach. appraisals are certainly old

standard, but there is a role for broker price opinions, comparative market analysis and automated valuation models. you are subsidiary, realtors property resource and our valuation committee, nar is able to provide conference of datasets and tools and determine incredible home values. thank you for holding this hearing to examine an issue which is paramount to restoring common sense in the u.s. housing market. nar is dedicated to the idea that home ownership matters. it contributes to our nation, benefiting individuals, families and communities, our efforts are directed at ensuring that homeownership is available to the next generation. we look forward to working with the committee on this issue and i'm anxious to answer questions. i thank you, mr. gregoire. >> thank you, madam chair. i'm delighted to be here again. it's good to see you. you and your staff have hit a

homerun hitter predicate with the panels that have been put together here, tremendous amount of experience, so many of us have known each other in this business for so long, and i won't say how long, just to protect the innocent here. [applause] >> despite some of our disagreements, i must say that on behalf of revaa and a fair coalition, i love appraisers. i have been working with appraisers for 30 years they are a group composed of tremendous professionalism and it has been a delight for them. allow me to summarize my

testimony. regarding operations, we provide necessary services to financial institutions, as well as benefits to appraisers and consumers in the course of the mortgage transaction. in regard regulation, we are working proactively with the federal government and the state to implement the regulatory requirements of the dodd-frank act and state legislature and third, we can encourage the consumer financial protection bureau to continue to rely on the board for peace. they have been responsible for advancements in technology is that benefit mortgage investors, servicers, originators, appraisers and ultimately consumers. the mc is typically operated by national networks of employee base and independent contractors with the completion of the appraisal reports. because mortgage lending has a national undertaking, amc's

resource for mortgage lenders and services that operate nationwide. we owe to a diversity of lending and market place. the work can match assignments with qualified local appraisers. the average appraiser has 15 years of experience in typically travels less than 13 miles when any given assignment occurs. they have performed quality control functions on behalf of the appraisers and lenders to make sure it is part of the selection criteria, our members confirm the physical location of the appraisers office, that location is what they call geocoded and used to calculate the distance to subject properties and other metrics.

in addition, the objective metrics are a flight to performance and they are reviewed by quality assurance teams that specialize in product development and review. contrary to what some have suggested, appraisers directly benefit working with amc by having an advocate to make sure that no attempt is made to improperly influence the appraisal process. in addition, amc provides significant value-added services to appraisers, such as quality control, review, marketing, insurance, technical support and building processes. with loan rate lock-in and time sensitive negotiations, amc's help consumers by reducing the time required for appraisal delivery. to my second point, regarding regulations, amc's are subject to new requirements under dodd-frank and passage of the

act, states are required to incorporate amc. we have been involved we believe it is important to work towards consistency and state laws and uniformity to ensure that amc can operate on a national basis. we believe the relevant banking agencies should ensure consistent set of national requirements in this regard. finally, dodd-frank requires that lenders and agents, amc's, use custom rates for appraisal services. we believe the federal reserve board acted properly and logically to implement the chair of this position. the board has recognized the appraisal services are not one-size-fits-all and has created a compliance structure for fees that reflect market reality and assures that the appraisal costs by consumers

will remain competitive and fair. while the boards rule remains effective for further finalization. we believe this yet to be should articulate criteria among the federal reserve board. which may not reflect local markets and industry conditions. since we last met, states have been active in establishing that registration programs for amc. by and large, states have been using registration for a set fee, security bombs, minimum education requirements, and building protections for appraisers by mc's. however, because mortgage lending is national in scope, we believe it is important to work towards greater consistency and uniformity in amc laws and regular secret we support reasonable loss could prove the appraisal industry as a whole, but we also believe the federal

banking agency should provide codification and guidance for the industry. and given the opportunity to testify. public torture questions. >> thank you, mr. telecommuter recognized for five minutes. >> thank you very much. good morning chairman and ranking member. and members of the subcommittee. i am an appraiser, i am caring man, i have been an appraiser for 32 years and i'm currently the president of my firm. i am part of the national association of appraisers. i am speaking on behalf of it

you go out and call yourself an appraiser with key measure for the problem became -- as a became like the wild west, where people thought that they could be an appraiser at any time. thanks to the implementation of title 11, we found that was in regulations had to fall, it doesn't mean that we always wanted to follow the rules, but we had to. and that makes it more organized zaidi very important role of the appraiser had to recognize that the appraisal industry has changed over the years. as a result of that, we needed something that was the foundation for us and the basis. now we have a standard of accountability in the standard of accountability was the basis of title 11, and now with augmentation of the dodd-frank act, we will have to have a fine

tuning of that standard format. we also believe that the appraisal foundation will express growth in the appraisal profession. currently, 65% of practicing appraisers are not a part of a professional appraisal organization for guidance. the appraisal foundation has been an important element for these appraisers. professional appraisal organizations have been around since the 1930s. however, the presence of approximately 65,000 licensed and certified appraisers were lying on some source of the foundation requires the use and implementation of the foundation of appraisal guidance. it has been important to note that it -- the foundation's decisions involve best practices and altercations and decisions

are open for review by appraisers and decoders. improving the current system is currently in process with the supposed limitation is the appraisal portion of the dodd-frank act. the current regulatory system is adequate, however, we recognize that like anything that is being developed, one must go in and improve it. we agree with the 2012 gao report, regarding the need for greater effectiveness, at the appraisal subcommittee. however, we also believe the appraisal subcommittee is showing improvements trying to increase the scope to be more effective and efficient. we have several issues facing appraisers in today's environment. first and foremost, as an appraiser, customary and reasonable fees. with implementation of the amc, we don't disagree that having a amc is appropriate.

what could be appropriate, but the problem is experienced appraisers don't prefer to work for the amc because these are so low. the amc's will typically charge and it is customary for the va -- it is approximately $450. the amc's to between 30 and 40%, which means the remainder goes to the appraisers. the appraiser then has a lower fee in today's business practice, having a lower fee when expenses are the same, or increasing, and makes it very difficult to stay in business. newer and less experienced appraisers are choosing to work for the amc, which is not a good thing for the consumers, because the consumers may not be getting necessarily the most qualified appraiser. i hear this everyday from homeowners who contact me and say, this person came from

fresno and they are praising a property in san francisco. that is 400 miles, that's a long distance from a completely different market. the next time we have to recognize is that the dodd-frank reform has not yet fully been implemented. the fact that it hasn't been fully implemented, we are working on the presumption that it is going to happen -- that once it is implemented, we anticipate that the improvement to the entire process will be accelerated immensely. the good faith estimate and settlement form of mortgage disclosures do not disclose that the appraisal paid by the consumer is actually two pieces when peace is what goes to get amc and the remainder goes to the appraiser. the homeowner, the property owner should really know what are those which, because they think when they got there, they say well, we paid you $500 for

this appraisal. when they find out that the appraiser is only getting $300 of it, the homeowner feels deceived and they wonder what is going on the process. one other factor that has been a bonus to appraisers for years as dominating and reducing the de minimis. currently, the diminishment and berenbaum minimus means -- a million dollars for commercial properties, do not necessarily mean a typical appraisal, and other types of valuation product reviews. we firmly believe that that compromises the system and the compromises the homeowners -- the consumer of properties was content with less than $250,000. which is a considerable amount and when you consider the average price of a home in the united states. finally, we have other issues of day-to-day operations, but we

don't think that your subcommittee should worry about the minor issues. we will try to endeavor to participate and encourage and try to develop processes that work and help the committee and each other improve our system so that we have a professional appraisal group of professional appraisers for every single consumer. thank you for allowing me to represent my organization. >> thank you, ms. sara stephens, you're recognized for five minutes and i thank you. that them chairman, ranking member, my name is sara stephens, and i am president of the appraisal institute. the largest association of real estate appraisers in the united states, representing 23,000 professionals in more than half of all professionally designated appraisers in the united states. in 2007, chief justice roberts writing for a unanimous supreme court evaluation stated that

valuation is not a matter of mathematics. whether the calculation of true market value is an applied science, even craft. most appraisers estimate market value by simply not one methodology but accommodation. the spurious methods generate a range of possible market value. which the appraiser uses to describe what he considers an accurate estimate of market value, based on data available. so too are these words. the appraisal methods and techniques require judgment. judgment by the appraiser for the choice of methods and techniques are the responsibility of the appraiser. for instance, in valuing residential and commercial real estate, appraisers are trying to decide whether or not to use replacement costs and when and how to adjust sales and concessions. these decisions by the appraiser are dependent on the actions of the marketplace. and should not be mandated. sadly, this is at risk.

timely guidance on appraisal methods does not exist for the appraisal processes of the appraisal foundation is attempting to assert itself as the authority over appraisal methodology. it flies in the face of the supreme court case that are discarded. despite having no authorization from congress in this area, for processes for, they are attempting to dictate appraisal methodology. even though the appraisal foundation maintains that the guidance documents are voluntary, the appraisal foundation is now encouraging states to adopt them as compulsory. furthermore, the appraisal foundation has professed to reference them in the latest document edition of uniform standards of professional appraisal practice, essentially codifying it into law. we believe that congress should emphasize oversight over this insidious attempt to confuse the

public by suddenly abusing existing congressional authority. the appraisal process is not aided by more rule. instead, the appraisal profession is at risk of having innovation curtailed. it supports realigning the appraisal regulatory structure with those of other industries in the real estate and mortgage districts. as a model, we believe congress, -- it is overseeing consumer financial protection bureau. this is not a regulatory organization, but one that is owned and operated by the state bank regulators. see several benefits to a realignment of the licensing and certification system, including enhanced communications among regulators and reduced risks for appraisers. congress sought reason to authorize and assist others within the real estate sector. so, too, can be for appraisers

and appraisal regulars. congress also should remain engaged on issues involving appraisal procurement and appraisal management companies. including the payment of customary and reasonable fees and consumer disclosure of fees paid to appraisal management companies. we often hear from real estate agents, home builders and others, that poorly performed the appraisers -- appraisals are killing deals and holding back economic recovery. these accusations are unfounded and misguided, it's appraisers do not make the market, they report the market. the purpose of an appraisal is not to the sport the sales price, but instead, an integral part of blender risk management. any crisis of confidence regarding appraisals is a direct result the way in which lenders which are under the oversight of bank regulatory agencies, procure appraisal survey. here are the phenomena factor,

not quality and geographic and market competency of the appraiser. the dumbing down of appraisal cannot continue. and we ask congress for its continued oversight. lastly, we know nothing is perfect. the regulatory system that appraisers and trent appraisers operate is 20 or so. we believe it's time for a fresh look. the appraisers do not need a set of arbitrary rules. the careful scrutiny of data should be at the forefront of the appraisal process and maintaining its integrity. we ask for your oversight of these items and we thank you for letting us your testimony today. >> thank you, sara stephens. let's start with myself. we will go five minutes.

>> the appraisal subcommittee is in the process of developing a new standard in rules as required by doctoring. dodd-frank was enacted in 2010. almost two years ago. you believe that the appraisal subcommittee has been affected by taking more than two years and still counting two compliant with the dodd-frank act? will start with you mr. berenbaum and good online. >> thank you, i think that is a very important question. >> could you turn on your microphone, please. >> yes. we are anxious for the appraisal subcommittee to move ahead very quickly in this stage. particularly with regard to monitoring the activity of the other prudential regulars. we have raised issues, such as flopping and the quality of the appraisal compensation, such as

issues with regard to expanded use of automated valuation models and then despite the lessons that should have been learned in this financial crisis, it appears to us that working with consumers across the country, that regulars are not acting quickly enough. the mc should be playing a critical role, as well as working with the fha as well. >> thank you, mr. berenbaum. be brief because i have some other questions. >> i think we are doing much better. it was just seven months ago. i believe they have four of seven members who are not serving. they are new and higher-level policy people. for the first time you have a chair who is in appraiser and i attend every one of their public meetings and the difference between then and now it's monday. >> thank you. mr. gregoire? >> the national association of realtors does not have a specific policy lady to your question.

however, i can't say, unlike a lot of other federal agencies committee afc operates without an appropriation -- it operates on an appraiser checks. they don't have the possibility or the funds to move in the same way that a lot of federal agencies do. i believe that that has to be taken care of. the folks that are funding the operation of the appraisal subcommittee are actual licensed and certified appraisers and there is mr. park, as he testified, that number of folks is diminishing. >> thank you. mr. kelly? >> thank you, we would like to see the afc with a little quicker. as i said in testified, the states are already proceeding with registration and other standard development, so i believe this would be helpful with moving along. >> there is a pressing need for speedy implementation.

>> i think your microphone is not on. >> i'm sorry. there is a pressing need for speedy implementation. by rulemaking, these provisions involve enormous and important issues, including supervision, registration of amc, develop a content development or quality control of the automated valuation models, establishment of an appraisal complaint hotline, and the cfpb's consideration of whether the banking agency is this a dollar threshold, or it is adequate. we look forward to this. >> thank you, ms. sara stephens? >> i think that one of the biggest problems that we see is that the current structure really seems that the states are not capable of administering this entire process of unification and overview. we would like to see that change. that is one of the reasons that

we made the suggestion that a good look be taken at the way that our whole entire system is set up. >> thank you. now, i have two questions that are just a yes or no answer. the first one is, we will start with you, sara stephens and we will go the other way. if the appraisal subcommittee effective? >> in my opinion, no. >> ms. mann? >> no. >> mr. kelly? >> yes to mr. gregoire? >> needs improvement. >> mr. berenbaum. okay, yes or no. should congress consider a complete overhaul of appraisal regulations of consumers and businesses like? >> i think there is a serious need -- there is need to look at it. >> mr. button? guest. >> is your gregoire?

>> mr. kelly? >> by which we should take a look at it. okay. >> improve the existing system. >> ms. stevens? >> yes. my time is expired. mr. sherman from california is recognized for five minutes. >> thank you, matt interpreted mr. gregoire, the gics have created this new uniform appraisal database. which is used on all gs appraisals. how's that working out? >> fortunately, because of the work that i do, i have not had to complete one of those reports, however, i have heard from dozens if not hundreds of appraisers. >> could you be a little closer to the microphone? >> i have heard from dozens of

appraisers about their experience come also from consumers. the uav method of reporting was not implemented to enhance the quality or the credibility of an appraisal report. what it does enhance his data gathering. it does not improve in appraiser's performance or ability to accurately or credibly estimate and opinion of value. it actually makes the report less useful to the consumer. granted the consumer is not an intended user of an appraisal that is completed for mortage finance transaction. ..

for the convenience of the gac. and things more useful to consumers are often excluded from the report to the commander in which the report is to revert to the gac and it's earn. their analysis and on the hall's louis photographs. the borrower and the seller and the lender don't control to preserve port. and they are concerned.

>> the only thing had been told to do something to with location, location and location. what can we do to make sure to get the appraisers understand the neighborhood? thank you again. unlike discussion of the journey. i do understand the competency is determined solely by the proximity paean of praise. geographic competency is determined by the appraisers knowledge of a particular market or knowledge of a particular neighborhood or particular location. it is also determined by the appraisers knowledge of a particular property type. competency can be -- it is not absolutely positively necessary

at the time the appraiser accepts the assignment as long as they take the steps necessary to acquire the competency. but you don't acquire competency and a matter of minutes or hours. and i believe that appraisers are fully capable of gaining the necessary competence if they are given the appropriate and necessary time to spend in a market, interview what is necessary to gather information and give time necessary to properly complete the appraisal report. >> even a competent racer who is giving just one job in some community doesn't know so they can spend hours and hours studying every inning if he's only going to do one appraiser in that neighborhood is probably going to miss some things.

>> i agree. i think the appraisal this provides the appraiser tritons as what to do in such circumstance. that is to decline the assignment. and i believe that we have to hold appraisers to that standard. they have to know what it is appropriate to accept an assignment and when it is appropriate for them to decline the assignment. >> if i can squeeze in one more question, how appraisal is an evaluation effect gene for housing recovery or what we hope to be at a housing recovery? >> that is a pretty broad question, but i believe the concern of the national association of realtors is that there is interference in an appraisers independence to call things the way they see it. i have plenty of anecdotal evidence of appraisers and i

work in a praise in pinellas county, florida. it is a county which is not monolithic. there are areas improving, some dramatically, some not so much and areas that are stable. their appraisers that identify improvement areas and as a result of their data and analysis in reaching an opinion that an area improving has reported that to their clients in the purply positive adjustments to comparable sales to make sure those comparable sales are adjusted to reflect that they would have sold on the effective date of the appraisal. the result has been reported is the better we think the data sales time adjustments. that is interference with an independence. and it results in a misleading appraisal group were in a report that does not reflect a current and improving market in a specific area.

>> the gentleman yields back to a gentleman from california come a recognizer five minutes. >> thank you, madam chairman. >> i guess we don't know the mortgage broker, those who do without these problems. the data they see an 80% of appraisals done our refinances. so let's put those in one category. hbc was so efficient at changing the landscape that even though congress came back and said no, we don't like that, if hfa nsa never listen. they are still implementing the concept of hec which was a disaster. a time in a mortgage broker now call it an originator could do something. they are excluded.

many times representing a client on worker and with the house is buying it. go to wonder and say they didn't come and say what a difference they appraisals. is there an error. different issues we need to consider here. those are up to table. and doug frank, i made sure the language included in their sent appraisal would be portable. you go to one lender and they do it in-house appraisal and are not giving appraisal to the other wonders. make of that to appraisals or three when it could've been in the first time in the house based on understanding of what an appraisal should be and who should do at appraisal. angiography -- at that plant

matter? if these two honors the way, that makes it real tough. they say well, i should virchow cheekiness and present an appraisal. there's the conflict in the industry and fair-minded turn the word down. people are trying to grow businesses that, but portability is huge. it is not taking place. the problem i have come especially in the industry today, appraising many distressed homes and undervalue and unless it is out there on site make sure he knows the distressed when it's not distress, they really don't know. you've got to drive it to the door and let him understand what you're dealing with. especially when it applies to new marketplace. i'm not believe the economy will

come back to the housing industry can that. there's nothing showing me will happen until the industry comes back full swing and the economy turned around. he's got elders and communities that are buying lunch basically through the town marketplace in recent years to do the improvements. save that appraisers appraising advice for senate would would cost to do the improvements before. and all the requirements being considered. his status and yet does someone who understands the issue in the market and a realistic value in the home based on current market conditions. and if that doesn't happen, you're going to continue to stress the marketplace. new product can be built unless he is realistic values of what fair value is in today's market. when you have a buyer willing to buy any seller willing to sell

and the appraiser comes down here, everybody looks at each other scratching their head saying what do we do? that's what the problem is today. you need to be able to say, i think he made some mistakes in your appraisal here, which are excluded, can't do that. conflict of interest. you have to get back to some realistic approach to the concept of value at market rate and putting a lender together with the buyer and seller to be able to move forward in the marketplace. i think we hurt ourselves and hurting this economy right now realistically looking at that. i guess when you look at the feet of the appraisal selected by performance of an appraisal, knowledge of an area and type of the product, and ms. stephens, is that happening? it's not that much steps are taken to be sure the appraiser

understands what they're looking at. we restricted and we not come for circle the correct unit. >> we hear from many of our appraisers and many other causes that this is not hat theme. we are not sending it into an area. one of the problems this weekend that most of the function of today's presidential market is vested in time. not all out there not doing a good job. we are saying there is consistory people are traveling great distances to work on a residential assignment when there are qualified people, professional people in the area who would do that job. >> a problem with traveling the great distance as it is a cost factor for the appraiser. they are traveling, not doing something else.

time lost in a car when they could do to appraisal somewhere else. i think that is the inherent conflict based on the industry today is nobody wants to turn the job done and i don't blame them. but there is not adequate compensation based on the impact associated with what they have to do to get the appraisal done to expect a reasonable approach. i know you've been generous in my time is way up the entirety of our questions, i yield that. thank you very much. >> monday to insert into the record william cavanaugh, president impact advocacy advisor group? >> without objection. mr. miller, i'm going to ask a few more questions. >> mr. gregoire -- i. know i just said that.

what can be done in your opinion to fix that problem? [inaudible] >> i just got an e-mail from a tally of the appraiser. this appraisers in tallahassee and he wanted to let me know about an assignment that he was given yesterday. there is the nation might appraisal management company with a conventional tenet for appraisal for purchase located on property and churches. pattern or cairo georgia is, but it is but it is in georgia, not. if you're interested in working with us on this and future appraisals, please reply to this e-mail with your estimated turn times and fees. this appraisers license, actually certified in florida, not in georgia. that is an example. i know how many other appraisers

in florida received the same e-mail. that is the primary driver of allotted amcs determinations as to who gets the assignment. the turn time and the fee. no question whether or not he's even certified in georgia or what his qualifications are, whether it's a designated appraiser. >> i do like appraisers. i'm not impugning anybody. please don't anyone mischaracterize when insane. everyone is shopping for business. when a lender receives an estimate from physical to him for this amount of money. that's a good deal. doesn't matter your 800 miles away. >> thank you. how it can be corrected. first developed by a believe that consumers should be entitled to an appraisal report that is commensurate with their feet at the consumer pays for the appraisal report. they are not getting that now.

they are getting only a fraction of what they are paying for because the bulk of the fee is going to a party other than the person completing the assignment. the bulk of the fee is go to, a company that has no value to the transaction. they are strictly a broker, strictly a middleman and despite the claim of quality control and adherence to the appraiser's qualifications, in most cases, it is not. it is simply a means of siphoning off money. very often the appraisal management come it is associated with were affiliated with the wonder. it is the means for the lender -- >> on a contract basis. >> so we have to think that the consumer needs to get what they're paying for her. if the lender wants to use the services of an appraisal management company to broker

these services, the ants he claims they operate as in agent for the lender. by golly, let the lender pay for that service. don't make the appraisal pay for it or the consumer. the lender is the one getting the benefit and makes the lender pay for the benefit. >> i admit that i'm getting old, but has been in the real estate for 40 years and i really have tremendous effect for appraisers, especially when i used to make application and they relied on their usually in-house appraiser to go gave the fair market appraiser because they were taking the risk lending me the money. they did what i considered a fair market appraisal. they did a good job. one would rather sell a house, date-based and non-the house a block away and appraise the house and out on the road and really understood the area. what we did with the hg tc was overturned the apple cart to such a degree that nobody

figured out, even though we directed them how to put it back the way it was, government doesn't change rapidly. coming back the other way, it is not any good job. then it disservice to the appraisers who do excellent work. it's hurt them, created a situation where the lenders are no longer having appraisals to compare with tears and they can't do with issues of air is thick could not pass and the appraiser can be as much because one person is paid for it is proprietary. with increased a situation that they put out and do things on a boat basis. irrespective of the letter you read to me about geography. i took notes on what you said earlier any tact about geography, wholly capable and guidance. everyone of them was followed within an. and proximity doesn't matter if

fully capable as, provide guidance status. the problem is defining it. it opens up a huge problem that we started to move god to correct. now, the realtors are out trying to provide this service to buy a seller. the mortgage brokers are providing a service and the appraisers provides service to everybody in such a difficult situation that is just not working we put them in a situation where i believe tom fashion of stifling the economy to recover because we've decimated value in homes that they are with the economy and were not doing to start building it back up her letter, and a natural basis. we are stepping it and stopping it right there because we've mandated things that don't work. now i hope somebody is trying to listen but hey, we are not happy

with who we did. we are not happy with what we're listening to correct what we did wrong and that is the problem today. we've got to fix it. it's got to be done. and somebody needs to listen. mind share, you can more than generous. i would deal back my time twice. thank you. >> thank goodness. [laughter] >> madam chair, cannot respond quickly? i to appreciate her discussion of the plate and i agree with much of what you said. however, i don't believe that you should consider legislating on the basis of anomalies or hearsay. i mean, i have heard the stories -- >> i didn't mean to do that. >> i know you wouldn't and i appreciate that.

>> amcs -- there's 350 of them in the country. are they out the best and good quiet note. are there good and great ones? yes there are. and there is with my association, but they do indeed provide real value to the process and the reputable amcs indeed to help protect the appraiser, but they also allow for the types of transactions are talking about to be facilitated. you mention in her testimony earlier that eps, abms and other methodologies could be utilized to either check appraisals were to give a sense of what the trends are in any given neighborhood or any property and those sorts of tools are very much available and used in today's world. i was delighted to see my friend karen and using an ipaq to give her testimony today and as you

know from your real estate experience to date technologies of the day back in our day was the memory code and a select typewriter. things have changed. things are indeed available that can go to the issues. >> is your opinion on what he just said? >> i think there's a couple things and comment on all of us that we need to make sure change. one of those is lenders are held accountable for these appraisals and for the opinion and further action. but we also need to make sure that people who are regulating this industry, where the regulators come in and are well-versed in that we have a sufficient staff to take care of the problems that are coming in to make sure what is happening in the appraisal business is

well-maintained and understood as they try to do their job. >> i'm not disagreeing with what she said. but i was saying is they all make mistakes. we did. congress did come he came back and tried to correct that. but what we did was exclude everybody from being able to be involved in participating in the appraisal process. dealing with areas we think were done wrong, areas that might have been made. it happens in every business. but we have taken and excluded that ability to be competitive, compared to and dealing with states that just occur. that is what i'm saying is the reason i said. not impugning any appraiser anywhere. it is saying, let's get back to a system of accountability and affordability and reliability. and that is all in the same. anyone in any way to danny

seaman opinion anyway it was not intended that way. i'm saying we goofed up another people make mistakes, too. this gets a system where those mistakes and come up with something really good for everybody. thank you, madam chairman. >> thank you. with that of recognize myself for five minutes. an outline of thinking commonness stephens, you've offered an alternative regulatory structure for real estate appraisers. how would this structure differ from the one we have today? >> let me start by emphasizing that with the appraisal institute is thinking about what we are proposing is that a false regulatory organization like some have mentioned, self-regulatory organizations above industry, whereas the licensing system is owned and operated by big regulators come in this case can escape inc.

supervisors. fundamentals of the certification and licensure and inherent standards of professional practice would remain unchanged. a high level sa alluded to before, the regulatory structure assumes states are not capable of mustering the certification, creating agency to intervene with the process. the mortgage licensing system assumes that a state can assume responsibility and a minister maintaining the federal presence out of a last resort. for many years, congress and others a way to advance regulator communication on this mortgage licensing system has developed a solution. we understand they're offering assistance to regulators say the loan origination business and as they are common problems at all state regulators would not be a

leave for appraisal regulators to participate in the system. thank you. >> i thank you. one last question. on page two of your testimony, you call completely inappropriate for a reserve role on customary and reasonable fees as required by dodd-frank and you also mention that this will create a loophole. could you expound on this point? >> let me catch up with you here >> creates a loophole where the amcs are allowed to go out and check customary fees, but within the scope of their investigation they used amc fees as part of the equation, part of the array.

we fell customary fees should be outside of the amc rom and should be from the general marketplace. for instance, va, fha, appraisals done for other purposes, whether it be for this solution are flurries today. just get an idea what the customary fee is for an independent appraiser in the field, trying to make a living in their small business. >> mr. kelley, do you have a response to that? >> yes, i do. we believe appraiser should be paid appropriately. fees for appraisers, comp nation has always been said in a market as a supply and demand equation quite frankly. appraisers indeed deserve reasonable customary fees, today for the services they provide.

the notion that amc are somehow i'm driving down the for appraisers is really mistaken. we don't set fees for appraisers we work for lenders. we are the agents of the lender. we are doing the risk assessed that uses out what the lenders have traditionally done. we provide if they indicated in our testimony services for lenders and appraisers. one of the things i've been told and all the years i was with the institute is one of the largest cost for appraisers postmarketing. that in addition to the risk, the insurance and those types of things are real cost for appraisers doing real tail assignments. much, if not all that has been

offloaded to the amc and said there is a sharing of.com haitian. that risk in those duties are no longer done by the traditional appraiser and the consequence they get is when they agreed to and has been negotiated with disable you do the same in on one, 23 maple, et cetera, et cetera. what is your feet? pc $300 or whatever it may be a strike an agreement. they made the anomalies i'm not, just like we talked about anomalies on traveling. those are truly anomalies as far as i can tell. i haven't seen any evidence. >> thank you very much. i think it is important to distinguish the importance of what has happened over the past eight years. at the height of the market, 60% of mortgages were originated by mortgage brokers.

the majority were professional lenders. however, we all know we saw many problematic nontraditional subprime loans. we also saw issues were appraisers were working exclusively with companies within the request, brokers are overvaluing prop piece. the code of conduct was to ensure that armed and transaction. we agree it should be changed. the reality today, jumping forward to today some of the unintended consequences of efforts to improve performance in the marketplace. appraisers tell us when we asked them about valuations to consumers with regard to accuracy issues in the past that have a day to produce -- or more, to produce for a lender. today they expect to do two to three in the same time. the fact of the matter is they are leaving the design profession because they can't make ends meet. that is not a product of quality.

they are committed to providing quality products are not in fact the subcommittee working with the regulators to ensure safety and soundness and the return of further funding. thank you. >> i would like to thank all of the witnesses today. before i dismiss you, i just have to add into the record units can and to insert the following material into the record. the statement from the national association of home builders. june 28, 2012 for the american appraisers to two. statement from the american guild of enterprise appraisers june 20, 2012. the mortgage bankers association. june 28, 2012 of mortgage

brokers, june 28, 2012. statement from the leading builders of america. and with that, the sharing of some members may have additional questions for the panel on which they may wish to submit in writing. without objection the record will remain open for 30 days for members to submit written questions synthetase responses in the record. but that i would like to thank you for your expertise that you brought to this panel and to help us as we move forward. i thank you all for being here. and with that, this hearing is adjourned. [inaudible conversations]

[inaudible conversations]

>> harry truman goes to the white house and says to elinor roosevelt, can i pray for you? and she says, no. we need to pray for you. >> there's a lot of promises made or they would have to grant a large home, larger than this one today all the people jack

kennedy promised the vice presidency to that year. >> a man who is president believes strongly that the limits of governmental power and particularly federal power to resist this foundation to extend it. >> max, you're in on the transition in iraq, with the state department has been taking control of the u.s. missions and combat troops left the country at the end of 2011. witnesses in include acting state department inspector general as well as stuart bowen come a point pointed inspector general for iraq reconstruction.

this house oversight subcommittee on foreign operations is about 90 minutes. >> the committee will come to order prettily to get vicinity of her sick committee mission statement existed to secure two principles. first, americans have the right to know the money of washington takes tremendous buzz band and second workers deserve efficient and effective government that works for them. our duty on the committee is to protect these rights. our solemn responsibility to hold government accountable to taxpayers because taxpayers are as they get they get atmospheric who worked tirelessly with chris and watchdogs to deliver the facts to the american people and the genuinely foreign to the federal bureaucracy. this is the mission of the government reform committee. at the outset i appreciate you all being here. the country has invested a lot of time, money, blood, resources to the mission in iraq.

this is an interesting day on capitol hill given everything that's happened and what is happening on the floor. this is strictly involved in this committee. we see up ahead number of members participating today. we do believe it is vital to develop the testimony shared his today. the question today will be probably somewhat limited understanding of everything on capitol hill. we were faced with whether to delay this. and i would push us back latter part of july, perhaps even ask ask if there is pathetic to see fairly first quarterly tape about eating hearing given that, so we appreciate testimony and hope you have an understanding of the complexity that is the state. today's hearing is entitled assessment of the military to civilian led mission in iraq. and want to begin thank you all for participating.

we will focus our efforts in iraq since the military withdrew on december 31, 2011. we assist the administration's progress through six for his the strategy should be used as the model for a tennessean in 2014. i cannot emphasize enough we need to learn from the experience as they have said that as we go through this in another situation we can make the most of it. on november 17, to decimate the bush administration and government of iraq agreed to withdraw troops by december 31, 2011. keeping with the agreement the defense department has removed all but 275 uniformed personnel. the remaining troops were under the chief of mission authority of the office security cooperation. state department has greatly expanded footprint in iraq and approximately 2000 direct hire personnel and 14,000 support contractors, roughly a 71 ratio.

this is 7000 private security contractors for facilities and personnel throughout iraq. leading to the strother department mission single player. patrick kennedy testified the mission was designed to maximize key location and later said it will continue the police development programs moving beyond basic skills to provide police forces the capability to uphold the rule of law. security will close forces capability. does the unprecedented mission for the state department. nonetheless, the chorus function without protections of a typical host nation scared richard support that many believed he would have. as a result the embassy spends roughly 93% of its budget on security alone. without a doubt, this is an enormously complex and difficult mission. six months and the transition they must assess whether it's

accomplishing it mission. the state department has made progress it appears to face difficult challenges in a number of areas. the oversight offered criticism based on testimony today, including government accountability office noted the state and defense department security capability are not finalized. the iraq reconstruction state that dozens of projects can transfer and will not be sustained and us will to meet their intended purposes. the defense department inspector general's office explains the lack of status of forces agreement has been actively induce agreement, passport visa requirements come air and ground movement and foreign military sales program. the usaid inspector general's office testifies that according to usaid mission for security situation is hampered to the program and mission personnel are occasionally able to travel to the field for a site visit

and embassy personnel have also told committee staff the united states government has difficulty registering vehicles that the iraqi government in iraq is the subject point according to an official the liaison to have to figure out where we'll get our trucks through. these are some of the challenges the state department is facing in iraq today. perhaps as a result of condition iraq appears to be evolving in an effort to be more efficient state department evaluates the properties and personnel in identifying possible reductions. the rapid strategy raises the number of questions. are we on the right track? re: redefining the mission? but surely expect that in hindsight, this is a well-managed draw. the purpose is to gain clarity about efforts in iraq or examine whether such transition as possible and how we executed in afghanistan. our nations with is only two

years away, likely present a greater challenge than iraq. we need answers before we commit billions of taxpayer dollars. we continue to look at issues over the coming months and look forward to hearing testimony from the pmos had said before. would like to recognize the ranking member, gentleman from massachusetts, mr. tierney for his opening statements. >> thank you, mr. chairman. this is basically an ill-conceived adventure in the beginning and implementation for much of the time were there. withdraw concept is particularly difficult. i'm when they ask unanimous consent that my remarks be placed on the record so we can expedite the hearing and hear from the witnesses. >> so ordered. >> thank you. i really do appreciate it. members have seven days and we now recognize their first panel. ambassador patrick kennedy for management at the department of

state. mr. peter verga for post-its unit to experiment and any honorable mara rudman for the middle east spirits u.s. agency for international development. pursuant to committee rules, all witnesses sworn before they testify. please raise them right your right hand. do you solemnly swear or affirm the testimony about to give up is the truth, whole truth and nothing but the truth? thank you. he may be seated. let the record reflect they all answered in the affirmative. in order to allow time for discussion, please limit verbal testimony to fight in it. your entire written record of statement will be part of the record. we would now like to recognize ambassador kennedy for five minutes. make sure that microphone is nice and close.

there we go. >> chairman chase says, distinguished members, thank you for inviting me to discuss the state department's operations in iraq after the military to civilian led transition. u.s. was complete withdraw from iraq and december 2011, marking significant milestone in bilateral relationship is strategical continues to be united unified democratic and stable iraq. while security has improved overall common situation in the crowd remains challenging. nonetheless diplomatic engagements are robust. undeceived meets with albini, prime minister maliki, cabinet members, parliamentarians and civil society leaders. the state department is playing to one president or the other comparable u.s. missions, the transition planning called for robust structure that could handle multiple situations.

not very successfully transition, were methodically streamlining their operations in a phased approach, which recalled the glide path. this recognizes security did not deteriorate when u.s. forces departed and the government in iraq also recognizes the value of the streamlined u.s. mission. we've been evaluating presence in reducing personnel, sites and agency programs and a cheap mission authority. expect to reduce higher staffing, 25% to 30% by the end of 2013. this is not arbitrary. rather re-examine operations and determine how they could be made more efficient we have hired more iraqis to 240 of the 400th and direct hires now aboard and also emphasized to contractors to need to hire iraqis as well. over the next 18 months we consolidate the compound in the language through facilities in baghdad. the police college annex, osc i had porters and the prosperity support nx.

the continue to make adjustments support a robust and secure yet appropriately sized up form. i would like to provide enough attention on a few key elements of our support platform. our iraqi planning began in late 2009 involved their disciplinary team within the department working closely with their dod and aad colleagues. hence the negotiations to the tutsis that u.s. iraq securities agreement were not completed our predicate was that we had to be self-sufficient. october 1 of 2011 the embassy and consulates were fully operational in should keep a ball of spit my plan. while it comes from dod lexicon and has not been previously applied to state operations, were fully engaged in all diplomatic consular support activities come even though some facilities were not fully complete. we've continued to complete facilities and despite the challenging environment we have been and will continue to carry out her diplomatic mission.

task orders for security were awarded under the worldwide protective services contract for a state department site pic of her diplomatic securities perform an increase oversight to ensure professionalism of security contractor personnel. state department request to provide live support services through 2013 under the competitively awarded lockout and defend such as defend such a sticky disease. our partnership with the department of defense remains highly affect you and transition working group meets twice a month to discuss life support we work on local sourcing of more food and fuel and we look forward to state plan to contract to replace wildcat rating and a 2013. under an existing competitively awarded contract or aviation operations support all u.s. government element in iraq, using site dedicated fixturing

and 31 helicopters. missions include medical evacuation, security support, personnel, transportation within iraq and movement of personnel into and out of iraq. we plan to downsize the program under the glide task. in conclusion the scope of the department's diplomatic activity remains are choosing any of our past efforts. a secretary clinton said during remarks at the virginia military academy in april, in iraq we've completed the largest transition from military to civilian leadership since the marshall plan. civilians later partnership with the free and democratic iraq. mr. chairman, we are committed to assisting iraq in securing the team to meet with u.s. assistant towards becoming a secure, stable and self-reliant country efficiently and effectively as possible. thank you again for inviting me here today for ongoing support of the department of state. i welcome any questions you

might have. thank you, sir. >> we now recognize mr. peter verga, chief of staff for undersecretary for the u.s. department of defense. you're recognize for five minutes, sir. >> number attorney, distinguished members i appreciate the opportunity along with my state college to provide an update on the united states transition from a military chief of the land that present in iraq. given iraq's important situated reteach eclair the middle east to remains profoundly in the united states national interest that iraq emerges a strategic partner with the united states coming summer, stable self-reliant nation and positive force for moderation and stability in the region. and the time since he last appeared, the united states has upheld its commitments in the two dozen eight u.s. iraq security agreement by withdrawing all u.s. forces by the end of december, 2011.

the department of defense has worked closely to help ensure a successful transition to civilian led presence in iraq. before, during and after the train addition, dod provided support to the safe success as u.s. forces withdrew from iraq. today the department of defense continues to work with department of state to help meet its needs through assignment of duty personnel and extension of funds and contracting assistance. the focus is now on cementing a normalized presence in iraq with department of state and the lead. that means building on years with iraqis to create a lasting long-term security relationship, including a robust foreign military sales program. currently rss program is the fourth-largest in the region and ninth largest in the world with a total value of $11.6 billion. of all the cases with iraq, the case stands out is the cornerstone of the long-term

u.s. iraq strategic relationship iraq has requested the sale of 36 f-16s and associated training and the value of approximately billion dollars. to date iraq has deposited 2.5 billion towards the ceiling deliveries of the first aircraft are scheduled in september, 2015. we are now at a point were the dividends of our efforts are within reach. dod is worked closely with department of state to ensure a successful transition to civilian led presence in iraq. that transition enables us to concentrate on building the long-term strategic partnership based on mutual interests and mutual respect. finally come iraq through its fms program is demonstrating desired for long-term strategic partnership and commitment to the program is a testimony to the future of the partnership. i thank you for attention with her two questions.

>> thank you very much. we now recognize the honorable mara rudman, administrator for the at the u.s. agency for international development. you're recognized for five minutes. >> thank you, mr. chairman. and ranking member tyranny. thank you for the opportunity to discuss usaid's work on the military led to civilian led us in iraq. our goal is to stable a unified iraq or this is critical to his interest in the middle east as a goal of a possible three enormous sacrifice by american and iraqis alike. the suggesting an line with the strategy and programmatic needs. we are focused on iraq sustainable development under terms of the u.s. strategic framework agreement. there's three distinct stages. immediately after the invasion, the emphasis is on the essential infrastructure and supporting transitional democratic

processes. and that's part of the military and civil encounters urgency campaign they concentrate on stabilizing community and governmental institutions. now with completion of the transition and civilian leadership of the effort in iraq, usaid focuses on helping improve how they manage their resources for development. our ability to adapt to more closely with the government has provided critical continuity to our work. current efforts reflect lessons learned over these years, particularly for oversight and prioritization skating ability. today, usaid provides technical assistance to iraq to improve abilities to finance and implement projects. we're also working with iraqis to strengthen civil society and increase participation, implement reforms come and support development of good government and institutions from the support ethnic and religious minorities and durable solutions for reintegration.

all of our efforts designed to sustainability and i is a definite goal, iraqis and it's every one of these projects without u.s. assistance. in addition to considerable acumen o., iraq has great oil wealth. revenues in the industry has yet to reach its full potential supplied at all of the government's budget. sadly the country's institution and ability to deliver services has been graded by decades of war and other fact yours. rebuilding the structure and effectiveness in the turin society where iraq's sunnis hope. programs are focused on improving capacity of iraqi government institutions for technical assistance that requires iraqis to match the contributions on a dollar for dollar bas technical assistance that requires iraqis to match the contributions on a dollar for dollar basis. efforts and in contrast with the larger infrastructure for stabilization projects earlier engaged every work of the government should first

establish object is for new activities and then come to an agreement with the gao on matching contributions and plans for ultimate responsibility for projects to the government. run implementation of a monitor and the prize is. these steps help ensure long-term iraq investment community sustainability of usaid duties that is typically benefit governing institutions. the focus on sustainability is not part as an reflects congressional guidance. in early 2009 state department and the cid in consultation with congress adopted a set of policy guidelines matching for u.s. assistance funds, which require iraqi government contribution for most u.s. funded programs and projects that directly benefit on faulty iraqi central government. for american taxpayers used effectively in our contribution to that progress for sustainable

resolve required careful and consistent monitoring on our part and engagement on other partners. protections against waste, fraud and abuse including terrorist financing, we design and extensive oversight for the operating environment in iraq. usaid contracts with third-party monitoring and evaluation of the mentor that conducts evaluation of all projects. as multiple independent oversight bodies that offer the programs and collectively more than 300 financial audit since 20 -- 2003. finally focus on sustainability is an fy 12 and beyond reduce the number of offices and hire and train more iraqis to perform functions and national spirit and summer programs in iraq user resources and maintain stability

to their well-being. continued ability demonstrates importance we place on benefits of long-term partnership. i too appreciate the opportunity to appear today and i'm happy to answer your questions. thank you geared >> thank you very much, ms. rudman. i now recognize myself for five minutes. ambassador kennedy, how many contract areas and u.s. government says they have is u.s.a. is? >> mr. chairman, we have approximately 16,000 personnel at this time representing the state department and all associated agencies including department of defense and the u.s. agency. 19 others are broken down versus contractors? >> it is approximately 19,000 -- i'm sorry, 1900 employees,

american and iraqis who government employees and approximately 14,000 contracts is a relatively 2,014,000. >> how to separate down quite to that the u.s. personal versus iraqi nationals? >> yes, sir. 1640 plus or minus american u.s. government employees. 240 iraqi employees in 14,000 contractors. >> it or not to break down how the contract as are broken down as far as u.s. versus iraqi. >> most of the contract there is her either americans or country nationals. more increasing every day the number of iraqi contract employees as part of our program. we have informed our contract or is that in certain categories we believe and they are engaging in

that in honor instructions on replacing the third country national contract is with iraqi contractors. >> and how safe are our operations in iraq? at one point you were saying her that and said certainly u.s. personnel to a very outside of the green zone. what is happening now? >> mr. chairman, our personnel have been operating outside the green zone since i was in iraq in 2003 in 2004. we go outside the green zone every day. in the last quarter, up 2011, calendar 2011, there were 3000 missions, security missions are personal executed outside the green zone and i believe this year the number is almost up to 4000. >> it is my understanding the

usaid has had 25 iraqis to oversee projects because usaid employees are adult men to leave the embassy because of security concerns. is that accurate? >> for 25 field monitors hired are not overseeing the project here they are monitoring the works, so it is added staff for monitoring and evaluation work. overstock manning our staff to be able to be on the field on a regular basis to help with monitoring evaluation work. >> why can't our personnel be out there? is that accurate data security concerns? >> it is accurate or security concerns the way we describe it would be that the security environment in iraq is improving. it is still not a normal security environment in the sense of what we would have at embassies elsewhere.

in terms of having the best possible monitoring and evaluation work for a project, it is seen as a good thing for our work to have the iraqis doing the work. it's also frankly sustainable development effort to have the iraqis have the capacity to the works of the project could eventually be handed over. >> i would like to ask you just to ponder what needs to be done to create a level of security and confidence for our personnel to get out there. but i'm running out of time. i didn't want to ask you, man, the gao has reported that iraq has created a surplus of over $50 billion of which 10 billion is available for future spending. why are we pouring a lot of money into iraq when their budget is certainly in better shape than ours? >> we've been on a glide path to

reducing the amount of program money that we are putting into iraq. ..

>> 250 iraqi nationals that contractors self america and others they do live support

support, medical, we aviation and the small number found in other activities. >> 14,000 people to take care of 2000 it? >> that is correct. >> about the embassy in egypt? >> beta have the security concerns. about 6500 our security personnel. fears the presence we have been arad and afghanistan directly related to the security conditions. improving but not that we

can rely on our own personnel cement company sites. >> they are responsible 130 or 14. >> what is the nature? >> the embassy compound compound, logistics' and ex net office of security corporation which is across the street from the embassy. the police training site in addition to the baghdad airport the council it at the airport to the north

there is the joint state department site in. also been some of sites where they carry out the foreign military sales that my colleague referred to in his testimony. >> what lessons are relearning in iraq and we should take heed going into the afghan situation? what should we be well prepared for? >> the way we have approached the work with

iraq as been formative. will gain to sustainable development the working in partnership with them to ensure they have the buy yen the aspect that you required of us is not just theoretical. and the design of the programs and vse the shift in the programming.

that is the single most important lesson. >> is the requirement for advanced planning and continuous monitoring and the process. it is a good lesson to interagency cooperation that made this successful. >> there are three points. plan. plan. plan. just like football to go to a line of scrimmage sometimes you call the honorable but we prepared. third, we have a glidepath

and it dissipate problems and the scope to make sure we are a safe and secure. that is the place to reduce staffing is a year doing in iraq. >> are you done the? >> one more question. ambassador kennedy you mentioned in the index facility. is my and standing taxpayers have put $100 billion into this site prepared to house of police department that is now being downsized and now

the entire facility is turned over at no cost. there are only land-use agreements 45 out of wall sites operated. and with the police doublemint program and what about compensation for these facilities. >> rehire closing the site as a failure for land-use rights is factually incorrect. we do have the land-use agreement. it is part of the program

with periodic reviews. that is not part of the general responsibility. it is always our plan to make adjustments overtime but the statement to have everything cold out from under us is false. for other properties we have agreements for every single property except one which is the interim facility in basra that is the reincarnation of a former military facility. there is a long-term agreement signed rum bigger

plenty that we've swapped properties then they are committed to provide us with the 10-acre facility of our choosing. we are covered. >> we will hear from the gao in the next panel. if this is an important responsibility to be a watchdog over taxpayer dollars. as i question to earlier, a lot of money and blood hit iraq. we have to be careful we're not wasting or spending any more money than is necessary and carefully girding the

assets of united states government. and this is something we could keep an eye on. this was a very busy legislative day to get testimony and. >> i want to phoenix the witnesses for their testimony. we will expedite to move forward. i will yield back. and with this committee it is admirable and committed

to being transparent to the american taxpayers. we will take a short recess and resell them as soon as they are seated. two minutes. we are in the sense. [inaudible conversations]>> thed back to order as we

recognize the second panel. we have the acting director of the traditional affairs and trade from the gao and also the acting inspector general at the u.s. department of state. special deputy inspector general for asia. the deputy inspector general from u.s. the moment at u.s. agency. special inspector general for iraq reconstruction. all witnesses will be sworn please rise and raise your right hand. do solemnly swear or affirm the testimony you give this the truth, the whole truth, nothing but the

truth? what the record reflect the speaker's answer did the affirmative. is a busy day today. we ask you limit testimony at five minutes. the entire reinstatement will be a part of a record we invite you to summarize your remarks. >> good morning. i a.m. please do discuss the transition from the military presence toots civilian presence as a continuing effort with the planning and execution with the suit presence there gao was asked to testify with the support

capabilities in iraq and provide security. the primary message is the state department plan for a civilian led presence but it is still unclear. and then the baller abilities are not being fully track. with the personnel most of these word to the contractors of security and logistical support and then to reduce the number of sites but the largest

diplomatic presence in the world. first point*, sorry. second point* talks about establishing kasich piper structure such as housing and water supply. those behind schedule with of combat force with good delays and challenges proposed state and dod have not finalized capabilities they face numerous threats of roadside bombs and kidnapping. of the state department conducted assessments with the number of mitigating stepsuderepted

deference they have not fully tracked the efforts. largest diplomatic presence, it remains unclear. still very much to work in progress and all the operational it is not mission incapable. the dod of birds they gain to of extent it may be at risk. this concludes my prepared remarks. i will address any questions you may have had. >> thank you. our next guest is recognized. >> thank you.

members of the subcommittee thank-you for us to discuss the civilian led transition. the gao has conducted 35 investigations, 27 affections than the department has ben responses to the recommendations. it was reported with they were managing department advisers and now have called responsibility and consulting with officials to evaluate the security needs. bid their reports and final funding decisions you what the department oversight of the civilian assistance programs march 2013. the and recreation for

security corporation with the security forces, they found they raffle operating capability. we will continue to monitor progress. may 2011 it was reported the department continue to face challenges to establish a provincial post with land use agreements, staffing and construction. while they prevented construction the consulate repeals it kirkuk assert -- cruelly serve as operations sites. they remain concerned of personnel contractors. zero leu ag reported

security risks are mitigated with the government of iraq and security forces. during the fieldwork '08 chief found their routine the detaining contractors and check plants and it is jeopardize same potential routes. 2013 we will look at private contractors and the department procured aircraft will establish operating routes between and line and baghdad between kuwait city and baghdad $1,600 round-trip compared to commercial roundtrip fares that were available between

six and $800. we will audit the program to consider the loss deficiency of air travel. zero leu ag reported the cost would be considerable and the department contractor that it will have the medical operations october 2012 may 20110 leu ag reported baghdad left at a quick response plans and reported that the consulate had created emergency action plans with department guidelines and had conducted regular briefings and drills. may 2011 oig facilities were near capacity due to

relocation of staff and contractors. oig will audit the master plan july 2012 and consider the facts of the 25% downsize. we have woeful inspection early 2013 for further evaluation. is uniquely qualified. we have 19l been investigations we remain committed to to provide the department and congress the copperhead's the spectrum from the enduring u.s. presence in iraq. mr. chairman and the subcommittee thank you for the opportunity. i am pleased to answer any

questions. >> mr. mcdermott you are recognized. >> good morning. distinguished members of the subcommittee come with a q for the opportunity to discuss the assessment from the military said william blair and regime in iraq. we are charged with security system functions to maintain alone term strategic partnership with the governments of iraq. recognizing the importance this that the security systems program, we started this series of oprah's five difference.

is in 2010 return meant osci planning the operators planning within the u.s. forces. also identified shortcomings and recommend central command issued details and assess procedures and with the planning guides for us to or the various. and 2011 they assess the establishment and provide the averts with effective operations with the 2011 in iraq they were on track to identify shortfalls but we determined those were to the iraq specific plans also

looking at the capability and reserved to indications and with the interior with the assistance programs. with the flow of information is senior iraqi officials but the center of the man responded by having a plan with co-operation. on april 16, issuing a third report with the management of private security contractors is an iraq girding locations. >> what it was successful so

there is the ability to become fully punchinello in the post 2011 operating environment. march to may 12 osci officials indicated the absence of agreement was affecting its operation. so anybody to extend the land-use agreement, and air and ground movement. >> it but to have better authority is perceived to have the liu and would

facilitate long-term relationship building. in closing, we year committed to provide oversight with osci and looking at the strategic partnership with the government of iraq. we will return early next year to continue the assessment with osci. thank you for this opportunity and a look forward to answering any questions you may have. >> thank you. your now recognized five minutes. >> distinguished members of the subcommittee i appreciate the opportunity to brief the committee on and iraq and the otc four challenges for the future.

they were not part of the massive process of the aid programs. we've started our on oversight and with investigators but we have done over 16 points and conducted 153 and financial audits within to open 105 investigations investigations, prosecutions , convictions, 10 suspensions. we have done a substantial amount but funding has been coming o