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 amcs because fees are so low. amcs will charge and customary for the va to publish that fees for appraisers are approximately $450. 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 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 residential and commercial real estate, appraisers are trying to decide whether or not to use replacement costs. 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 compulsory. 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 system for mortgage origin nors, which is mandated by the safe act. and is overseen by the 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 accusations are unfounded 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 direct result in the way in which lenders which are under the oversight of bank regulatory

agencies 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 regulators. we have raised concerns to the 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 serving seven months ago. they are new. they are higher level policy people. for the first time you have a chair who is an appraiser. i attend every one of their public meetings. the difference between then and now is night and day. >> thank you. >> 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 operation of the appraisal subcommittee are actual licensed and certified appraisers and as mr. park testified, that number of folks is diminishing. >> thank you. mr. kelly? >> thank you. we would like to see the asc move quicker. as i testified, states are already proceeding with registration and other standard development and so i believe that the asc could be helpful with moving along with their agenda. >> ms. mann.

>> thank you, there's a pressing need for speed ty implementatio. >> i think your mike again. >> i'm sorry. there is a pressing need for speedy implementation by rule making of many of the dodd-frank appraisal provisions that have yet to be addressed. they include important issues including supervision, registration of amc, development of quality control standards for avm, automated valuation models, establishment of appraisal complaint hotline and consideration of whether the banking's existing threshold is adequate. we look forward to this. >> thank you. ms. stevens. >> i think one of the biggest problems we see is that the current structure really assumes the states are not capable of

administering this entire process of certification and entire process of overview. we would like to see that change. that's one of the reasons that we make the suggestion that a good look be taken at the way that our whole entire system is set up. >> thank you. now, i've got two questions that are just a yes or no answer. the first one is -- we'll start with you, ms. stevens and go the other way. is the appraisal subcommittee effective? >> in my opinion, no. >> ms. mann? >> i believe it is and it will get better. >> mr. kelly? >> yes. >> needs improvement. >> okay. now, another question, yes or no. should congress consider a complete overhaul of appraisal regulations and improve it for consumers and businesses alike. >> i think there's a serious need to look at -- >> yes or no.

>> there's a need to look at it. [ inaudible ] >> we should continue to look at it. >> improve the existing system. >> yes. >> thank you. all right. my time has expired. mr. sherman from california is recognized for five minutes. >> thank you, madame chair. mr. gregory. the gses created this new uniform appraisal data base, the uad, which is used on all gse appraisals and also for fha. how is it all working out? >> fortunately because of the work that i do, i've not had to complete one of those reports. however, i have heard from

dozens if not hundreds of appraisers. >> could you be closer to the microphone? >> i've heard from dozens if not hundreds of appraisers about their experience also from consumers. the uad method of reporting was not implemented to enhance the quality or credibility of an appraisal report. what it does enhance is data gathering. it does not improve an appraiser's performance or ability to accurately or credibly estimate an opinion of value. in fact, i believe it makes the appraisal report more confusing and less useful to the consumer. granted, the consumer is not an intended user of an appraisal completed for mortgage finance transaction. however, the wording in the form clearly anticipates that the borrower will be placing some credence in that and the report according to federal law is required to be provided to the borrower prior to closing of the transaction. that uad does not improve the usefulness of that report to the

consumer. >> so at a very minimum we need to change how it's presented so the consumer can understand it? >> i believe that the reporting format that is instituted by the gses is not designed to result in a more accurate estimate of value. it's designed for the convenience of the gse. and things that make things more useful to consumers are very often excluded from the report due to the manner in which the report is delivered to the gse. there's also privacy concerns. the gses are now insisting on a whole slew of interior photographs and the borrower and the seller and the lender don't control the distribution of that appraisal report. a lot of our members are very concerned about privacy concerns. >> the only thing i've been told about real estate is that it has something to do with location, location and location.

what can we do to make sure the appraisers actually understand the neighborhoods that they are appraising? >> well, that's -- thank you again. unlike some of the discussion here concerning geographic competency, i don't believe that geographic competency is determined solely by the appraiser's proximity to the property that's being appraised. geographic competency is determined by the appraiser's knowledge of a particular market or knowledge of a particular neighborhood or particular location. it's also determined by the appraiser's knowledge of a particular property type. and competency can be -- it's

not absolutely positively necessary at the time the appraiser accepts the assignment as long as the appraiser takes the steps necessary to acquire the competency. you don't acquire competency in a manner of minutes or hours. and i believe that appraisers are fully capable of gaining necessary competence if given the necessary time to spend in a market, interview the folks necessary to gather market information, and given the time necessary to appropriately complete the appraisal report. >> but even a very competent appraiser who is given just one job in some community he doesn't know -- he's only paid a few hundred dollars, so he can't spend hours and hours studying everything that a competent

appraiser -- if he's only going to do one appraisal in the neighborhood, he's probably going to miss some things. >> i agree. i think the uniform standard of professional standards practice provides the appraiser guidance with what to do in that circumstance and that is to decline the assignment. i believe that we have to hold appraisers to that standard. they have to know when it is appropriate for them to accept an assignment and when it is appropriate for them to decline the assignment. >> if i can squeeze in one more question. how are appraisals and valuations affecting the housing recovery or what we hope to be a housing recovery. >> that's a pretty broad question. but i believe what -- the concern of the national association of realtors is, is that there is interference in an appraiser's independence to call things the way they see it. i have plenty of antidotal

evidence of appraisers and i work and appraise in florida. it's a county which is not monolithic. there are areas that are improving, some dramatically, some not so much, and areas that are stable. there are appraisers that have there appraisers that identified, improving areas and as a result of their data and analysis and reaching an opinion that in an area is improving have reported that to their clients and made appropriate adjustments to make sure those sales are adjusted to reflect what they would have sold for on the affected date. the result that has been reported is that you better rethink the data sale time adjustments. that is interference with an appraiser's independence. it results in a misleading appraisal report and a report

that does not reflect a current and approving market in a specific area. >> the gentlemen for from california, you are recognized for five minutes. >> some problems i have and i guess the panel doesn't -- we won't have a mortgage broker and people who deal with the problems, but the data i see, 80% of the appraisals are refinances. let's put those in one category. that's someone refinancing their home or whatever. hvc was so efficient at changing the landscape that even though congress came back and said no, we don't like that, fha lever listened and are implementing the concept that was a disaster. it was when a mortgage broker

called an originator and could do something. they are excluded. many times trying to represent a client or a realtor and comes in with a mortgage broker and tries to figure out what the house will sell for and how the buyer will buy it and they can go out and go to a lender if the appraisal didn't come in the same line. what is the difference in the appraisal. is there an error or different issues we need to consider? those are off the table. in dodd frank, they said appraisal will be portable, but they are not. they are not being done. you go to one lender and they do an inhouse appraisal. now somebody has to go back and pay for two or three appraisals when it could have been done the first time by understanding what the house was worth based on somebody's understanding of what an appraisal should be and who should do an a raisal and

geography, i think appraisals are wonderful. if he is two hours away and that makes it tough. if you are dealing with a market place that is tough, they say well, i think i should forego taking this job when i can go to the computer and come up with something and present an appraisal. there is a conflict in the industry when you put that on the individual to say no, i will turn the work down. it's a bad market. it's been tough. people are trying to grow their businesses back. portability is huge. the problem i have is in the industry today, you are appraising many distressed homes at a value and unless the appraisal is out there looking and making sure he knows it's distressed or not, they don't know. you have to drive up to the door and look and understand what you are dealing with. when it applies to a new market

place, i don't agree it will come back. i don't believe it. until the industry comes back and this economy turns around, builders in communities that are buying lots for less than it costs to do the improvements. you have them praiseing it on values less than it costs to do the improvements and by land, land is supposed to be free, but it's not. even all the requirements are being considered. i don't mean that at all. you have to have somebody local who understands the issue and the market. they can come up with a realistic value based on current market conditions. if that doesn't happen, you are going to continue to distress the market place. the new products can't be built unless you are looking at fair market value for that home in

today's market. when you have a buyer willing to buy and a seller willing to sell and the appraiser comes down here, everybody is looking at each other and scratching their head saying what do we do? that's where the problem is today. you need to be able to say i think you made some mistakes, but you are excluded from that. can't do that. conflict of interest. you have to get back to realistic approach to the concept of value at market rate and putting a lender with that buyer and seller to be able to move forward in the market place. i think we are hurting ourselves and this economy by not realistically looking at that. i guess when you look at the state appraisers expected to be selected based on appraisal and knowledge of the area, type of a product, is that happening?

what steps is are being take tone make sure they understand what they are looking at? i am saying we are restricting it and we not come full circle in creeking it. >> we are hearing for many a raisers and clips that this is not happening. we are not sending people into an area who are familiar and one of the big problems is again that most of the function of today's residential lending market is vested in hiring people based on fee and turn around time. we are not saying that awful them working out there are not doing a good jorks but we are saying that there instances where people are traveling great distances to work on a residential assignment when there qualified professional people in the area who would do that job if the fee were commensurate. >> the problem with traveling that great distance is it's a

cost factor for the appraiser. they are traveling and not doing anything else. it's time lost in a car when they can do two somewhere else. that's the conflict being placed on the industry today. nobody wants to turn the job down and don't blame them. 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 to the process. i know you have been generous and my time is up and i had more questions. i yield back. thank you very much. might i be able to insert the written statement by kid well, the impact of mortgage adviser group? >> without objection and also i am going to ask a few more questions. if you would like.

>> out of the appraisers, one of the most common complaints. what can be done to fix that problem? >> stevens? she gave me the time. go for it. >> i just got an e-mail from a tallahassee appraiser. this appraiser is in tallahassee and wanted to let me know about an assignment that he was given yesterday they are a nationwide company and has a 1004 appraisal for purchase located on a property in caro georgia. it is in georgia, not in florida. if you are willing to work with us, please reply with your estimated turn time and fee. this is certified in florida, not in georgia.

i don't know how many others received the same e-mail. that is the primary driver of a lot of amc's determination as to who gets the assignment. no question whether he is certified in georgia and qualifications and whether or not he is designated. >> the problem with that and i do like appraisers. i am not immuning and don't mischaracterize what i am saying. everybody shopping for business and when a lender receives an estimate and they said that's a good deal, it doesn't matter that they are miles away. >> thank you. as to how it can be corrected, first off, i believe that the consumers should be entitled to an