Bills
| 3.23.22

Should Requirements for Appraisers of FHA-Insured Mortgages be Loosened? (H.R. 2852)

Do you support or oppose this bill?

What is H.R. 2852?

(Updated December 27, 2019)

This bill — the Homebuyer Assistance Act of 2019 — would address appraisal shortages by modifying the requirements for appraisers of Federal Housing Administration (FHA)-insured mortgages to reduce barriers to becoming an appraiser for FHA-backed mortgages. Currently, an appraiser must be certified by certain state or national entities. This bill removes the national entities from the list of approved certification entities and allows an appraiser to be state-licensed, rather than state-certified, to meet requirements. It also provides specified educational requirements for appraisers.

If enacted, this change would bring the federal standards for FHA appraisers in line with the federal minimum requirements in place for other home mortgages from Fannie Mae and Freddie Mac.

Argument in favor

The current requirements for appraisers of Federal Housing Administration-insured mortgages are too onerous. This has resulted in a shortage of appraisers for such homes, which is burdensome for certain types of prospective home buyers (specifically, first-home buyers, low- and moderate-income households, minorities, and those in rural areas).

Argument opposed

Rather than trying to increase the number of FHA appraisers, mortgage issuers and the federal government should think critically about whether and when human appraisers are necessary. Big data and automation could potentially replace the need for human appraisers. Alternatively, the de minimus threshold could be raised to decrease the number of homes that need appraisal.

Impact

Homebuyers; home appraisals; home appraisers; appraisers of homes receiving FHA-insured mortgages; and federal standards for appraisers of homes receiving FHA-insured mortgages.

Cost of H.R. 2852

The CBO estimates that implementing this bill wouldn’t have any meaningful cost, and that any administrative costs associated with implementing the new appraisal standards would total less than $500,000 over the 2020-2024 period.

Additional Info

In-Depth: Rep. Brad Sherman (D-CA) introduced this bill to make it easier for homebuyers to buy a home: 

“The process of purchasing a home is already difficult enough for first-time, low-income, and minority homebuyers, they do not need the added challenge of finding a certified appraiser. This legislation is a common-sense revision to current appraisal requirements, which will make FHA mortgage accessible to more Americans.” Sherman also thanked House Financial Services Committee Chairwoman Maxine Waters for working closely with him on this issue.”

The Credit Union National Association (CUNA) supports this bill. In a letter to the House Financial Services Committee’s Subcommittee on Housing, Community Development and Insurance Chairman Rep. Lacy Clay (D-MO) and Ranking Member Rep. Sean Duffy (R-WI), CUNA argued that more uniformity and consistency in the federal standards governing appraisers would help reduce the costs associated with issuing mortgage loans to credit union members: 

“Appraisals play a critical role in the home purchase process and a credit union’s assessment of the safety and soundness of providing a consumer with a home loan by helping to ensure that a mortgage does not exceed the value of the home that serves as its collateral. Accordingly, greater uniformity and consistency in the federal standards governing appraisers helps to reduce the costs associated with issuing mortgage loans to credit union members. The ‘Homebuyer Assistance Act of 2019,’... is an important effort in this respect. The bill would increase uniformity in the federally-backed mortgage loan market by ensuring that the Federal Housing Administration’s appraiser requirements are identical to those currently employed by Fannie Mae and Freddie Mac concerning licensed appraisers. As a result, credit unions would be able provide members with more choices for federally-backed loans without having to worry that an appraisal will not satisfy a program’s requirements due to their differing appraiser certification standards. If passed, the Homebuyer Assistance Act of 2019 will be a positive change for both consumers and lenders in the mortgage market.” 

This legislation passed the House Financial Services by voice vote with the support of one cosponsor, Rep. Sean Duffy (R-WI). It’s supported by a range of housing and credit associations, including The Center for Responsible Lending, the Appraisal Foundation, the Appraisal Institute, the Real Estate Valuation Advocacy Association, the National Association of Appraisers, the American Society of Appraisers, the MBREA – Association for Valuation Professionals, the National Association of REALTORS®, the National Association of Home Builders, the American Bankers Association, the Mortgage Bankers Association, the Credit Union National Association, the National Association of Federal Credit Unions, the Community Home Lenders Association, and the Independent Community Bankers of America.


Of Note: In a 2017 survey, nearly 75% of appraisers cited regulatory burdens as a leading reason for leaving the field. The lack of appraisers for FHA-insured mortgages disproportionately affects first-time homebuyers, low- and moderate-income households, and minorities, as they’re more likely to obtain FHA mortgages (in 2018, over 85% of FHA mortgages were made to first-time homebuyers and over 33% of FHA loans were made to minority households). Rep. Sean Duffy (R-WI) notes that the lack of professional appraisers qualified to inspect FHA-insured homes is particularly acute in rural areas.

editor Isaac Peck observes that many appraisers feel positively about the shortage of people in their profession, as the lack of competition has driven fees up in many areas. However, Peck also adds that the overall decline in the number of appraisers “threatens the integrity of lending and undermines the stability of the real estate market” and doesn’t bode well for the appraisal profession with the advent of big data and automated systems, which could eventually replace human appraisers.

As an alternative to trying to boost the number of qualified appraisers, some in the mortgage industry, led by the American Banker’s Association (ABA), argue that it’s time to raise the federal de minimus (the threshold below which an appraisal isn’t required for a federally-related transaction) from its current $250,000 to $500,000. As part of this argument, the ABA and a coalition of smaller regional banks argue that appraisals are unnecessary costs that make it hard for small banks to compete.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / CatLane)