The Appraisal Institute applauded the U.S. Senate for passing a sweeping financial regulatory reform bill that includes the first modernization of real estate appraisal regulations in more than 20 years. The Dodd-Frank Wall Street Reform and Consumer Protection Act (HR 4173) is the first overhaul of appraisal regulations since the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) was enacted in 1989.

President Barack Obama is expected to sign it into law. “This bill will mean good news for consumers because they should see more reliable home appraisals,” said Appraisal Institute President Leslie Sellers, MAI, SRA. “It will encourage the use of highly trained and competent real estate appraisers and will provide much-needed resources for oversight and enforcement.”

Once the bill is signed into law, it will require that “reasonable and customary” fees be paid to appraisers. Appraisers have complained that with the growth of appraisal management companies (AMCs) since the Home Valuation Code of Conduct’s (HVCC) implementation in May 2009, they have experienced sharply reduced fees from AMCs.

“Reasonable and customary” fees will reflect what the appraiser would typically be paid for the assignment absent the involvement of an AMC, with violations subject to severe penalties under the Truth in Lending Act. The final text of the bill contains 61 pages of appraisal regulatory reform, including:

• The Appraisal Subcommittee will establish a national complaint hotline for appraisal-related complaints;

• Automated valuation models (AVMs) must adhere to quality control standards, including random sample testing and reviews;

The Government Accountability Office has 90 days to conduct a study into the entire appraisal process, including the impact of the HVCC on independent appraisers, brokers and the consumer.