Donald Kelly, executive director, Real Estate Valuation Advocacy Association (REVAA), appeared before the House Financial Services Committee, Subcommittee on Insurance, Housing and Community Opportunity in July to testify on behalf of REVAA and the Coalition to Facilitate Appraisal Integrity Reform (FAIR) on Mortgage Origination: The Impact of Recent Changes on Homeowners and Businesses.

The testimony comes just prior to the Federal Reserve Board transitioning its rulemaking authority to the Consumer Financial Protection Bureau (CFPB). Members of REVAA and FAIR advocate that the Federal Reserve Board, the CFPB and Congress should continue to allow the marketplace to dictate appropriate appraisal fees.

“In the lead up to the current financial crisis, inflated appraisal fees were the norm for many appraisers who, in partnership with overzealous mortgage brokers and lenders, produced appraisal reports that were impacted by inappropriate influence and coercion,”  Kelly stated in his testimony. “The resulting appraisals often reflected inflated values, which certainly did not constitute ‘high quality’ appraisals.”

Kelly cites the Dodd-Frank Act requiring that lenders and their agents compensate appraisers at a “customary and reasonable” rate for appraisal services in the market area of the property being appraised. REVAA and FAIR believe that the appraiser compensation standards promulgated by the Federal Reserve Board are in compliance with the Dodd-Frank Act and they reflect the variations in actual services and other factors that exist in the marketplace.

“Appraisal services are not one-size-fits-all, and we believe the Federal Reserve Board created a compliance structure for the payment of 'customary and reasonable' appraisal fees that reflects market realities and ensures that prices paid by consumers will remain competitive,”. Kelly stated.

A copy of the transcript is available here.