a public setting. in addition as part of our commitment to promoting public trust, we worked with several u.s. government agencies at their request on developing specific recommendations to improve their internal appraisal operations, to assist them in their investigative work regarding valuation, and to a system in developing new policies and procedures. as mr. rogers pointed out in the previous panel, there is a close relationship over the past few years. state investigator training with over 300 state investigators now having been trained. we're producing several training videos at 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 for enforcement, we have created something called a voluntary disciplinary action matrix and what that is lists specific violations and recommended disciplinary action.

it also lists aggravating and mitigating circumstances. it's completely voluntary and a tool for states to use. i've been asked to touch on two internal foundation issues. one of them is the foundation strategic plan. it's premature to get into details of the plan because it will not be presented to our board of trustees until next month. assuming it is accepted by our board, the foundation will publicly expose the draft plan as it did with its current plan to saul stake holders for 90 days. this november the board of trustees will take into account public comments received and make a final determination on approving the strategic plan. i was also asked to comment on the appraisal practices board. there's a lot of misinformation about this newest board that was constituted in july 2010. this is the how-to board if you will. how do i appraise with a foreclosed properties and short sales and things like that. number one, the appraisal practice board does not have congressional authority.

adherence is voluntary. they do not operate with any public funds or any grant money. number three, the valuation advisory do not establish new valuation methods or techniques but a compilation of existing ones into one place. and lastly, the valuation advisories are available to anyone at no cost. earlier we heard from the general government accounting office and over the past decade there have been 16,000 disciplinaries actions, 2,300 refations and 1,800 and it's important to remember without the use of any appropriated funds. the appraisal foundation stands ready to assist in in way they can assist this effort. thank you. >> thank you so much. >> good morning.

i thank you for the opportunity to testify. nar represents more than 100 million real estate officials including 30,000 licensed and certified appraisers. i go my frank. i do not speak french. i'm a realtor but earn my living as a real estate appraiser. my qualifications are detailed in my written testimony. nar believes a strong independent profession is important to real estate consumers and the industry and vital to restoring faith to the mortgage origination process. appraisals are critical for the housing market recovery. there's no question about the importance of appraisals in real estate and mortgage transactions. a credible valuation by a

competent, licensed or certified professional provides benefits to the lender, borrower and secondary markets. public trust in the real estate profession is enhanced. there are obstacles to preventing realization of these benefits. among obstacles is weakened apprais appraiser competency. the assertion of appraisal management companies between loan originators and appraisers results in a focus on fee and turnaround time rather than appraiser competency and experience. the most common concern expressed by our members whether they be a broker or an appraiser is knowledge of the local market or geographic competency. the uniform standards of professional appraisal practice requires appraisers to have competency or to acquire competency to understand the nuances of a particular market. the current model tends to disregard this necessary focus

on competency. appraiser competency may be enhanced with education and communication. communication between appraisers and real agents and clients is not prohibited and should in fact be encouraged. of course efforts to intimidate, bribe or coerce an appraiser are and should continue to be prohibited. some amcs provide legitimate services for reasonable fees but many contribute to problems in the appraisal business and the overall housing market. contrary to their claims, there is evidence appraiser independence is compromised by the amc. assignment conditions such as unreasonable turnaround times and unrealistic scope of work for reduced fees interferes with the decision making process necessary for a credible appraisal. experienced appraisers refuse these assignments instead of selecting the best appraiser for the job, the assignment 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 sales selection. staff with only a cursory knowledge interfere by saying specific information be included or excluded from appraisal reports. the altered business relationships between appraisers and their clients unreasonable completion time requirements, diminished fees and interference in the appraiser's independence 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 regulates on two different tracks. exempting some from state registration aggravated the problems. nar believes that all should be registered with state regulatory

agencies. limitations of standard form, reporting format, lagging market information, privacy concerns, the funding structure of appraisal programs and a declining number of appraisers. nar is the only real estate trade association able to speak with authority on appraisals andiand alternative valuation products. appraisals are certainly the gold standard for mortgage origination but there is a role for broker price opinions, comparative market analysis and automated valuation models. through our subsidiary, realnra able to provide tools to assist in determining credible home values. thank you for holding this hearing to examine an issue

which is paramount to restoring confidence in the u.s. housing market. we are dedicated to the idea that homeown ownership matters. our efforts are directed at ensuring that the dream of home ownership is available to the next generation. we look forward to working with the committee on this issue and i'm anxious to answer your questions. >> thank you. mr. kelly, you're recognized for five minutes. >> thank you, madame chair. delighted to be here again. good to see you. i believe that you and your staff have hit a home run here if you look at 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. despite some of our

disagreements, i must say that on behalf of fair coalition, i love appraisers. i've been working with appraisers for 30 years and they are composed of professionalism and my members like appraisers as well. without good appraisers there would be no appraisal management companies. allow me to summarize my testimony. first, regarding appraisal management company operations. members provide necessary services to financial institutions as well as benefits to appraisers and consumers in the course of a mortgage transaction. second, in regard to regulation, we're working pro actively with the federal government and states to implement regulatory requirements of the dodd-frank act and state legislation. third, we encourage the consumer

financial protection bureau to continue to rely on the reason utilized by the board for customary and regulatory fees. they have been responsible for advancements in technologies that benefit mortgage investors, servicers, appraisers and ultimately consumers. amcs operate national networks of employee based and independent contractors for the completion of appraisal reports. because mortgage lending is a national undertaking, amcs act as a centralized resource for mortgage lenders and servicers that operate nationwide. there are approximately 315 amcs in operation today going to the diversity of the lending industry and the competitive marketplace. amcs work to match assignments with qualified local appraisers. the average appraiser utilized

by an amc has 15 years of experience and typically travels less than 13 miles on any given assignment. amcs perform quality control functions on behalf of the appraiser and the lender to ensure delivery of high quality reports. they work diligently to assure quality. as part of the selection criteria, our members typically confirm the physical location of the appraiser's office, that location is what they call geo coded and used to calculate distance to subject properties and other metrics. in addition, objective metrics are apprised to performance and reviewed by quality assurance teams that specialize in product development and review. contrary to what some have suggested, appraisers benefit by having an advocate to ensure appraisal independence and that

no attempt is made to influence the appraisal process. in addition, amcs provide value added service to appraisers such as quality control, review, marketing, insurance, technical support, and billing processes. with loan rate lock ins and time sensitive negotiations, amcs help consumers by reducing the time required for appraisal delivery. to my second point regarding regulation, amcs are subject to new regulatory requirements under dodd-frank and prior to passage of the act several states have begun process of enacting laws to require registration of amcs. we've been involved since inception of these laws and supported transparency in the process. we believe you should ensure that amcs operate on a national basis. we believe the appraisal subcommittee and relevant

banking agencies can and should contribute to ensuring consistent set of national requirements in this regard. finally, dodd-frank requires that lenders and their agents compensate appraisers at a customary and reasonable rate. we believe the federal reserve board acted appropriately to enact the congressional intent of this provision. appraisal services are not one size fits all and it's created a compliance structure for fees that reflect market realities and ensures that the appraisal cost born by consumers will remain competitive and fair. the board is awaiting final review. to reconsider the issue could result in additional confusion and even lead to setting a fixed fee which may not reflect local market and industry conditions.

since we last met, states have been active in establishing registration programs for amcs. by in large, states have been diligent and required registration for a set fee, background checks for employees, bonds, minimum education requirements and built in protections for appraisers. because mortgage lending is national in scope, it's important to rowork toward grear consisten consistencies. we believe the federal banking agency should provide clarification and guidance for the industry. thank you for the opportunity to testify. i look forward to your questions. >> thank you, mr. kelly. ms. mann, you are recognized for five minutes. >> thank you very much. good morning, chairwoman and

ranking member and members of the subcommittee. i am an appraiser. i'm karen mann. i've been an appraiser for 32 years and currently the president of my firm mann and associates in northern california. i'm here to testify on behalf of the american society of appraisers and the national association of independence fee appraisers. that's niafa. i'm speaking for their behalf today. the current appraisal regulatory structure is a dramatic improvement over what was in place prior to the savings and loan debacle. prior to that, you could own a clipboard, you get a business card, get a tape measure, and you go out and call yourself an appraiser. the problem became as it 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 there were rules and regulations that us appraisers had to follow and

it was good. doesn't mean that we always wanted to follow rules but we had to. and that makes a more organized society. it's very important. the role of the appraiser had to recognize that the appraisal industry had changed over the years. as a result of that, we needed something that was a foundation for us. a basis. so now we have a standard of accountability and the standard of accountability was the basis was title 11 and now with augmentation of the dodd-frank act we'll have a fine tuning of that orange standard format. we also believe that the appraisal foundation has been and continues to be an indispensable and positive factor in the growth of the appraisal profession. some 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 relying on some source of a foundation requires the use and implementation of the appraisal foundation guidance. it has been important to note that the -- it is important to note that the foundation decisions involving standards, qualifications, best practices and qualifications are made in a transparent manner and are open for comment, review, and recommendation by appraisers and stake holders. improving the current system is currently in process with a proposed implementation of the appraisal portion of the dodd-frank act. the current regulatory system is adequate however we recognize like anything that's being developed one must tweak it. one must go in and improve it.

we agree with the 2012 report regarding the need for greater effectiveness at the appraisal subcommittees. however, we also believe the appraisal subcommittee is showing improvements. they are trying to increase their skill sets and are more effective and more 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 amcs, we don't disagree having an amc is appropriate or could be appropriate. but the problem is the experienced appraisers don't prefer to work for a mcs becaus fees are so low. amcs will charge and customary for the va to publish that fees for appraisers are approximately

$450s. they keep it between 30% and 40% which means the remainder goes to the appraiser. the appraiser has a lower fee and in today's business practice having a lower fee when your expenses are the same or increasing makes it very difficult to stay in business. a lot of the newer and less experienced appraisers are choosing to work for the amcs which is not a good thing for the consumers because the consumers may not get necessarily the most qualified appraiser. i hear this every day from homeowners who contact me and says this person came from fresno appraising a property in san francisco. that's 400 miles and that's a long distance. completely different markets. the next item we have to recognize is dodd-frank reform has not yet fully been i implemented. we're working on presumption that it will happen but once

implemented we anticipate that the improvement to the entire process will be accelerated immensely. the good faith estimate and settlement form mortgage disclosures do not disclose that the appraisal fee paid by the consumer is actually two pieces. one piece is what goes to the amc. the remainder goes to the appraiser. the homeowner, the property owner, should really know which part goes to which because they think that when we go out there, they say we paid you $500 for this appraisal. and when they find out that the appraiser is only getting $300 of it, the homeowner feels deceived wondering what goes on with the process. one other factor that's been a bone of contention for appraisers for years is eliminating and reducing the de minimis. currently it means that properties with a price value

less than $250,000 for residential properties and $1 million for commercial properties do not necessarily need a typical appraisal and other type of valuation products may be used. we firmly believe that compromises the system and it compromises the homeowner, the consumer, of properties worth less than 250,000, which is a considerable amount when you consider the average price of the home in the united states. finally, we have other issues with day-to-day operations but we don't think that your subcommittee should worry about our minor little issues. we will try to endeavor to participate and encourage and to try to develop processes that work and help the committee and each other improve our system so we have a professional appraisal group of profession appraisers

for every single consumer. thank you for allowing me to represent my organizations. >> thank you. ms. stevens, you're recognized for five minutes. >> thank you. madame chairman, ranking member, my name is sarah w. stevens and i'm president of the appraisal institute, the largest association of real estate appraisers in the united states representing 23,000 professionals and more than half of all professionally designated appraisers in the united states. in 2007, chief justice roberts writing for a unanimous united states supreme court stated valuation is not a matter of mathematics but true market value is an applied science, even a craft. most appraisers estimate market value by employing not one methodology but a combination. they generate a range of possible market values which the appraiser uses to arrive at an accurate estimate of market value based on careful scrutiny

of all data available. so true are these words. appraisal methods and techniques require judgment by the appraiser. the choice of methods and techniques are the responsibility of the appraiser. for instance, in valuing a parcel of commercial and residential real estate, they decide whether to use adjustment cost. these decisions by the appraiser are dependent on the actions of the marketplace and should not be mandated. sadly, this tenant is at risk. established under a false premise that timely guidance on appraisal methods and techniques does not exist, the board of the appraisal foundation is attempting to assert itself as the authority over appraisal methodology, a move that flies in the face of the supreme court case that i just quoted. despite having no authorization

from congress in this area, proponents are attempting to dictate appraisal methodology. in fact, even though the appraisal foundation maintains that the guidance documents are voluntary, the appraisal foundation is now encouraging states to adopt them as compulsatory. we believe that congress should exercise oversight over this insidious attempt to confuse the public by subtly abusing existing congressional authority. the appraisal process is not aided by more rules. instead, the appraisal profession is at risk of having innovation curtailed. the institute supports realigning the regulatory structure with those of other industries in the real estate and mortgage sectors. as a model, we believe congress

could turn to national mortgaging licensing and is consumed by the consumer financial protection bureau. this is not a self-regulatory organization but one that is owned and operated by the state bank regulators. we see several benefits to a realignment of the appraiser licensing and certification system including enhanced regulation among regulators and enhanced red tape by consumers. congress saw right to regulate this body and so too for appraisers and regulators. congress should remain engaged on issues involving appraisal companies including payment of customary and reasonable fees and consumer disclosure of fees paid to appraisal management companies. we hear from real estate agents, home builders and others that poorly performed appraisals are

killing deals and/or holding back economic recovery. these ak vaccusations are unfou as appraisers don't make the market, they report the market. the goal is an integral part of risk manage why. any crisis of appraisals is the way in which lenders under the oversight of bank regulatory agencies procure appraisals today. the factor in the appraisal hiring decision are often price and turnaround time of the appraisal and not quality of the appraiser. the dumbing down of appraisals cannot continue and we ask congress for its continued oversight. lastly, we know nothing is perfect. the regulatory system that appraisers operate with today is 20 years old. we believe it is time for a fresh look. appraisers do not need a set of

arbitrary rules. the careful scrutiny of data is essential to maintaining integrity. we ask for your oversight of these matters. i thank you very much for the opportunity to be here and i will be glad to answer your questions. >> thank you, ms. stevens. we'll now proceed to questions from the members of congress and i would start with myself and yield myself five minutes. the appraisal subcommittee is in the process of developing new standards or rules as required by dodd-frank act. and dodd-frank was enacted in 2010, almost two years ago, and this question is for all of you. do you believe that the appraisal subcommittee has been

effective by taking more than two years and still counting to comply with the dodd-frank act. let's just go down the line. >> i think that's a very important question. >> could you turn on your mike, please. >> i'll move it closer. we are anxious for the appraisal subcommittee to move ahead very quickly in this space particularly with regard to monitoring the activities of the other regulateoriorregulators. we have raised concerns to regulators and despite the lessons that should have been learned in this financial crisis it appears to us working with consumers across the country that regulators are not acting quickly enough. the asc will and should play a critical role in that space as well as frankly working with the

fha as well. >> thank you. mr. bunton? be brief. i have some other questions. >> i think they're doing much better. the appraisal subcommittee is a far different organization than it was seven months ago. i believe they have four of the seven members that were not s b serving seven months ago. they are new. you have a chair that's an appraiser. i attend every public meeting and difference between then and now is night and day. >> the national association of realtors does not have a specific policy related to your question. however, unlike a lot of other federal agencies, asc operates without an appropriation. they don't have flexibility or funds to move in the same way that a lot of federal agencies do. and i believe that has to be taken into account. the folks that are funding the oper