New lending bill would modify appraisal laws

A new bill introduced in the House of Representatives would update the federal appraisal regulatory scheme to "enhance appraiser education and licensing, to improve Federal oversight of State appraisal programs, and to augment appraiser independence," according to a press release issued by Rep. Bob Ney (R-OH), Chairman of the Subcommittee on Housing and Community Development, and Rep. Paul E. Kanjorski (D-PA), senior Democrat on the House Financial Services Capital Markets Subcommittee.

Ney and Kanjorski introduced the Responsible Lending Act this month. The bill would require appraisals – with a physical inspection – on certain higher risk, subprime loans.

The bill would also beef up appraiser independence laws by prohibiting improper "influence, through coercion, extortion, or bribery, [of] the development, reporting, result, or review of a real estate appraisal sought in connection with a mortgage loan." The bill would make exceptions to this for asking for consideration of additional comparable sales, requests for further detail, or requests for correction of errors.

State-to-state reciprocity would be greatly streamlined. In continuing education, states would be required to accept courses and seminars approved by the Appraiser Qualifications Board (AQB).

Under the bill, the Comptroller General would be required to perform a comprehensive study of possible improvements to the appraisal process.

"We believe that the bill we have introduced provides the most comprehensive, balanced, and effective set of legislative solutions that any Federal or State bill has ever offered for protecting mortgage borrowers from abusive, deceptive, and unfair lending practices," Kanjorski said.

The Appraisal Institute endorses the bill, H.R. 1295. "For the appraisal community, this bill addresses the toughest issues we have raised over the last several years," Don Kelly, Vice President for Public Affairs for the Appraisal Institute, said. "We have been calling upon Congress to take up the serious problem of client pressure on appraisers and enhancement [of] state regulatory bodies; this bill goes right to the heart of the problem. This is a good bill for consumers and a good bill for appraisers."