On Feb. 13, the Appraisal Subcommittee (ASC) conducted its final hearing on the all-important topic of appraisal bias from the Office of the Comptroller of the Currency (OCC) in Washington, D.C. The ASC panel heard from witnesses comprising the Federal Financial Institutions Examination Council (FFIEC).

Topics discussed were based on the previous three hearings on appraisal bias and included oversight of the appraisal industry, diversity within the appraisal profession, the development and reporting of appraisals, and other challenges that impact appraisals.

OCC CEO Michael Hsu delivered the opening remarks.

“Appraisals are integral to underwriting residential real estate lending: they are the ‘value’ part of the ‘loan-to-value’ measure,” Hsu said. “By rooting out bias in the appraisal system, we can expand homeownership and wealth creation opportunities to all Americans.”

Witnesses providing testimony at this hearing included The Appraisal Foundation (TAF) President David Bunton; Mississippi Appraisal Board Executive Director Ed Neely; Appraisal Insights CEO Jillian White; Real Estate Appraiser, Ltd. President Maureen Sweeney; and Melissa Tran, director of the Texas Appraisal Licensing & Certification Board (TALCB).

Bunton, in his testimony, outlined all that TAF and its boards, the Appraiser Qualifications Board (AQB) and the Appraisal Standards Board (ASB), are doing to combat valuation bias and requested the ASC make sure that the Ethics Rule of USPAP, something TAF spent a great deal of time on drafting that portion of the document, be applied correctly.

Additionally, when Bunton was asked by the panel what he had learned over the years in relationship to barriers into the appraisal profession, he emphasized that having meaningful qualifications for appraisers can help in addressing those barriers.

“TAF’s automation task force helps to advance technology, as well as the foundation’s ASB, and its involvement with technology can impact standards, as well,” Bunton said.

Aloft Appraisal Head of Valuation/Chief Appraiser Hansel Dobbs, who attended the hearing in person, shared his take with Valuation Review.

“I had the privilege of attending the OCC hearing on bias, a pivotal event that brought together industry leaders to address the pressing issue of appraisal bias. It was truly inspiring to see so many familiar faces, united in the goal of advancing our profession and making it more equitable,” Dobbs said. “From the insightful testimony of experts, the discussions spanned a range of topics crucial for our industry's future. These included the need for more diversity within the profession, the exploration of alternative paths to certification, and innovative solutions to overcome the challenges of appraisal bias.

“The hearing underscored the collective effort required to foster change and highlighted the significant strides we are making toward a more inclusive and fairer appraisal industry,” he added.

Dobbs noted from Bunton’s testimony the advocacy for case studies on appraisal bias that could be used for training purposes with suggested property inspections counting towards experience hours as well as other types of experience in the real estate industry.

The chief appraiser also brought up that Bunton mentioned the ongoing review of licensing standards to identify barriers to entry to the profession. The TAF president announced an upcoming report on appraiser demographics that will come out in the spring, with additional studies every 36 months.

Neelly told the panel when testifying that both Mississippi’s MPAT (Mississippi Practical Appraiser Training) program and PAREA will allow more appraisers into the profession. MPAT focuses on the state offering training and education for the betterment and recruitment of appraisers getting a Mississippi license.

Dobbs pointed out that Neely cited an appraiser shortage, especially in rural areas, and the development of the MPAT program, which was built by Melissa Bond. Nelly also emphasized in his testimony the sales comparison approach and the need for supervisor training in rural markets, while calling for additional training on bias in appraising.

Tran, testifying before the panel, identified bias and lack of diversity as major issues in the appraisal profession. She also mentioned Texas has the highest number of PAREA participants at around 36. Tran also called for restructuring of licensing criteria, reported the need for additional funding for new initiatives and agreed that complaint numbers and outcomes could be reported to the ASC.

Sweeney noted in her testimony that the huge problem with the appraisal profession now is the fees. She said the consumer does not know, under the current system, how much of those fees are actually going to the appraiser.

“Put the truth back in truth and lending,” Sweeney testified. “The sales comparison approach in appraising is based on a theory of substitution.”

Dobbs brought up Sweeney’s questioning the future direction of the appraisal industry and suggested changes including fee structure disclosure, allowing trainees to sign appraisals, and addressing the impact of AVMs. She also called for regulation of offshore appraisal data review and highlighted the fee issues caused by AMCs, while calling out that Dodd-Frank failed the public trust, and the system needs to work better for the appraiser on the ground.

White, Dobbs said, proposed eliminating the supervisor-trainee relationship to rebuild public trust and diversify the appraiser population, and suggested standardizing elements of the sales comparison approach with current data availability. More discretion was needed in the sales comparison approach in the past due to lack of data, but with advancements in real estate data and technology the tools are there to reduce that discretion.

White also stressed the need for states to identify bias or incompetence in appraisals and for balanced tooling between appraising and review and noted the difference in analytical tools for lenders and appraisers. She thinks that there needs to be a balancing in tooling between field appraising and the institutional side of valuation.

White was asked by the panel if AMCs could take on the role of assigning mentors.

“I see value in mentorship, but there are some friction points,” she said. “One of those points is appraisers not wanting to take on trainees because they could be training their competition, as well as lender acceptance.”