Broken

I have shared these on LinkedIn previously, but for the benefit of this post I’m starting with links to two recent comment letters I authored. One breaks down the need (or lack thereof) for the continued work of the Appraisal Subcommittee; the other unpacks the problems caused by the 1994 interagency appraisal rules that carved out vast swaths of activity from Title XI’s appraisal requirements. Some light reading for context:

Letter to ASC RE Policy Statements

Letter RE EGRPRA Process

Taken together, there’s one inescapable conclusion to be drawn – the appraisal regulatory system as it exists today is irreparably broken.

This isn’t an indictment of the people involved in effectuating the system, as they’re doing the best they can within the constraints of authority afforded them. There are many good folks trying to make chicken…stuff into chicken salad daily, and their professionalism deserves our praise and thanks. If anything, they outperform the functional limits of the system.

Instead, there is basic truth to the idea that a system built in the wake of a crisis in the late 1980’s could never anticipate the evolution of housing finance, or the demands placed upon appraisers.

A system where states and their limited resources must oversee their appraiser population and enforce both USPAP and other state laws. A system where a federal agency oversees the states to ensure compliance with a law whose reach has been mooted through regulation and monitors a standards setter who is non-governmental. A system where intermediaries (barely extant at the time this system was devised) who affect appraiser selection are required to be licensed by these same states, but whose actions are minimally regulated at best.

Do I need to expound further?

The crying need for true reform of the appraiser regulatory system comes at a time not only when deregulation is preferred, but where the very role of government bureaucracy is being disassembled. (I pause here to state this is the reality of the moment, and not a specific commentary on the merits of the current administration’s actions.) Congress is doing the bare minimum on a good day in terms of a legislative agenda, meaning that bills to address this need are, at best, likely for a hearing and a long rest in committee.

I don’t sense that there’s a yearning for the old days of the pre-S&L crisis world where appraisal practice was entirely unregulated either. Lenders, GSEs, and consumers alike benefit from the protections afforded from licensure and enforcement. Appraisers like knowing that entry into the profession requires more than fogging a mirror, though the exact contours of those demands are being reconsidered presently.

What do we do, then, when something is broken and there’s no imminent way to fix it?

I think it starts with everyone who has an interest in the work of appraisers reaching the same conclusion – that a fundamental problem exists with the current system, and it needs real solutions. Rather than wait for Congress to intercede and try to craft solutions, the appraisal profession and those who rely upon its work need to coalesce and develop a plan for the next generation regulatory system now.

We are spoiled for choice when it comes to the committed, smart, and engaged people who work in, rely upon, or support the appraisal profession. I fully believe that if enough of these people come together from across the disparate landscape, we can develop a solution that not only meets the needs of the moment but provides flexibility and foresight to solve tomorrow’s challenges as well.

Change is the only constant in life, and appraisal is not immune to this reality. As the appraisal process evolves to include more reliance on third party data and more behind the desk analyst work (at least, in a mortgage lending context), the means by which we regulate practitioners must also evolve to ensure not only that someone who calls themselves an appraiser possesses certain knowledge and skills, but can be held accountable when they fail to fulfill our expectations when practicing as an appraiser.

Rallying cry, clarion call, whatever this sounds like – it’s not. No one person has the power or persuasion to bring together the whole of a field to solve as existential a challenge as this one. Instead, view this as a spark passed from one person to the next, each understanding the issue and recognizing what the moment requires of us. That status quo is something approaching irrelevance, approaching death of a long-standing profession. That we should – must – feel compelled to DO something.