provisions that the changes, the amendments to title 11 that were part of the dodd-frank act and we have already made changes in terms of, for example, the subcommittee did not have the authority other than to comment on, but we had no authority during the compliance review 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 review process. >> my time has ended. the gentle lady -- thank you so much. we'll have more questions for you and i thank you for the testimony today, because maybe it's just my imagination, but i have only met two appraisers. i've had appraisers, more than two homes appraised. i remember meeting one like 25 years ago and you know, it's like if your car, you know, you

tell the mechanic what you think might be wrong with it, right, contractor comes over to fix something, you might tell him, and it was like the last time i had the appraiser come over, it almost felt like i was doing some criminal act by telling her about the beautiful tile, how expensive it was, before i installed it, and trying to tell her what it was about my home that made my home unique so that she could do a better appraisal, i thought. i mean, when i talked to the mechanic, he kind of listens to me, then does whatever he has to do to fix my car. but he doesn't treat me like a criminal in trying to tell him what i think's wrong or good or bad about my car. i hope we don't get to the point where you get into an adversarial relationship between homeowners and their most prized possession, right, and what it is we think it's worth. in the end they're going to make an objective determination, but you know, you can still get good information i think from the american public as you make a decision about what it is

>> thank you. i would like to thank the panel for their expert testimony and for being here. it's been very helpful to us. with that, we'll excuse the panel but first of all 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. without objection the hearing record will remain open for 30 days for members to submit written questions to these witnesses and to place their response in the record. thank you very much. with that we'll have the second panel come forward. >> i would like to recognize the second panel and thank you all for being here.

we have the chief program officer and we have the president of the appraisal foundation, thank you and also the 2011 chair national association of realtors appraisal committee. thank you for being here. mr. don kelly, executive director of real estate valuation advocacy association on behalf of the coalition to facilitate appraisal integrity reform. thank you. ms. karen jane mann on behalf of the american society of appraisers and the president of the appraisal institute. thank you all. we will then begin with the testimony and without objection your written statements will be

made part of the record. you will each be recognized with a five-minute summary of your testimony. >> good morning. i'm the chief program officer for the national reinvestment coalition. i'm honoreto testify before you today from both a consumer protection and a safety and soundness perspective in order to discuss options for improving the regulatory oversight of stake holders in the housing finance industry. we are an association of more than 600 community based organizations that promote access to basic banking services including credit and savings to create and sustain affordable housing, job development and vibrant communities for america's working families. today the u.s. economy is mired in the worst economic crisis in

more than half a century and valuation issues remain front and center in the financial reform debate. our current economy earned its monarch of the great recession and this is not an equal opportunity recession. we call upon policy makers, the appraisal subcommittee and regulators to act swiftly to enforce title 11, embrace the reforms included in the dodd-frank act and imp plemt the following ten recommendations that will help all americans, but particularly assist low to moderate income communities, communities of color, and communities impacted by the foreclosure crisis who are working to realize or sustain the american dream of home oow r homeownership. to accomplish this end, we propose the following. first, to develop a more modern appraisal reporting process and utilize more robust and uniform reporting tailored to today's needs.

the recent changes regarding uniform appraisal data set have only added further confusion to the already inadequate mandated form. second, require full appraisals for mortgages above $50,000. the current limitations associated with the so-called value are out of touch with today's realities. third, the role and impact of appraisal management companies must be reviewed to make sure they are not negatively impacting appraisal quality. fourth, appraisal professionals enhance safety and soundness and protect interest of all parties to a mortgage transaction including and especially consumers. they must be appropriately compensated under any usual and customary fee standard that is developed. fifth, the banking regulators

fannie mae, freddie mac and fha should not escape appraisal subcommittee valuation safety and soundness review and enforcement. sixth, while automated valuation models serve as a useful and cost competitive compliance tool and check against fraud they should never replace use of an appraisal by a licensed appraiser for all mortgages that exceed $50,000. seventh, there is a need for more effective consumer protection, transparency and education including a dedicated consumer complaint hotline in collaboration with not for profit organizations. eighth, responsible appraisal practices ensure and expand housing opportunities in open society.

it is unfortunate that that we still see issues of the age of housing, predominant value and use of comparables with the quality of housing and america's low income or housing communities. ninth, we are seeing widespread undervaluation through the use of broker price opinions and the short sale process or general reluctance to recognize that in some communities the market is beginning to return. and tenth, states must suspend the inappropriate action of redirecting funds intended for appraisal compliance, professional development, licensing and oversight to their general funds. in conclusion, it is imperative for members of congress and the subcommittee to work in conjunction with one another to ensure that consumers and industry stake holders benefit

from a system of regulation that helps ensure the independence and integrity of the appraisal 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're recognized for five minutes. >> thank you very much, madame chair. the appraisal foundation greatly appreciates the opportunity to appear before you today to offer our perspective on real estate appraisers. i've been a senior member for the last 22 years and prior to that served as chief of staff of one of your former colleagues. i'm not an appraiser. there are many misperceptions about the appraisal foundation and let me start off by saying what it is not. it's not a government agency. it's not a regulatory body. it wasn't created by congress. it's not an appraisal trade association. and we have no individual members.

what are with he? we're a 501 c 3 not for profit educational organization. we were founded by eight national appraisal organizations 25 years ago before the enactment. we are an umbrella organization composed of over 100 organizations and government agencies with an interest in valuation. we've attached a list of those organizations to our testimony. we were created primarily to foster professionalism in appraising. what the appraisal foundation is the private sector expertise in the real property appraiser regulatory system under title 11. the foundation does not have 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 sate certified or real estate appraiser. we are the authors of the national uniform exam that all 55 states and territories use. and we are the authors of the generally recognized standards of professional conduct known as uniform standards that all must adhere to. with the work of our boards we understand the very importance of public trust. in fact, the words public trust appear in our mission statement. we learned over the years that one way to build and maintain public trust is to promote transparency whenever and wherever possible. all of our boards conduct public meetings, they issue exposure drafts often numerous times and all comment letters we receive are posted on our website. in fact, the people who serve on our boards we interview them in 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, and it's important to remember without the use of any appropriated funds. the appraisal foundation stands ready to assist in any 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 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 and 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, realtors property resource, nar is able to provide tools to assist in determining credible home value. thank you for holding this hearing to examine an issue which is paramount to restoring confidence in the u.s. housing market. nar is dedicated to the idea that homeownership matters. it contributes to our nation, benefitting individuals, families and communities. 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. >> thank you. >> and despite some of our disagreements, i must say that on behalf of reva and fair coalition, i'll say personally that i love appraisers. i've been working with appraisers for 30 years, and they are composed of tremendous professionalism, and it's been a delight to work with them. my members love 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. member companies require on appraisers to work and 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 have been actively involved with the states since the inception of these laws and have long supported transparency and independence in the appraisal 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. the board has recognized that appraisal services are not one size fits all, and has created a

come compliance structure for fees that reflect market realties 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 work toward greater 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. today i'm here to testify on behalf of the american society of appraisers, asa, and the national association of 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, cma