NASCUS Comments to Appraisal Subcommittee on Appraiser Regulation and Temporary Waiver Requests
March 14, 2022
Appraisal Subcommittee
Attn: Lori Schuster
Management and Program Analyst
1325 G Street NW, Suite 500
Washington, DC 20005
Re: NASCUS Comments on Docket No. AS22-01, Appraisal Subcommittee; Appraiser Regulation; Temporary Waiver Requests
Dear Management and Program Analyst Schuster,
The National Association of State Credit Union Supervisors (“NASCUS”)[1] submits this letter in response to the Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council (FFIEC) proposal to amend existing rules of practice and procedure governing temporary waiver proceedings.[2] The ASC’s proposed amendments are intended to provide greater transparency and clarity to temporary waiver proceedings pursuant to Section 1119(b) of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.[3] A properly calibrated and equitable appraisal waiver process is essential to mitigate the dire effects that a regional scarcity of qualified appraisers can have on the provision of credit to consumers related to real estate transactions.
NASCUS welcomes efforts to enhance the waiver process and we commend the ASC for undertaking this important initiative. However, as discussed in our comments that follow, the changes as proposed would likely diminish the practical effectiveness of the Section 1119(b) appraisal waiver process rather than strengthen it.
When considering the appraisal waiver process, it is worth noting that neither abuse of the waiver process to circumvent appraisal requirements, nor a too low bar for approval of a waiver, are issues in need of redress. As the ASC acknowledges in the Supplemental Material of the proposed rulemaking, since the inception of the waiver process in 1992, only two waivers have been granted.[4] Furthermore, while beyond the scope of this proposed rulemaking, there are systemic issues disrupting the appraisal industry in general suggesting that holistic reform of the industry is long overdue.[5] Given the preceding, changes to the waiver process should be focused on ensuring the process is properly calibrated to mitigate disruptions resulting from fragility in the appraisal industry.
Definitions
The ASC proposal would establish several definitions for terms in the waiver process. Several of the proposed definitions, such as those for federally related transactions, performance of appraisals, and request for temporary waiver, make sense. Others however, such as petition, scarcity of certified or licensed appraisers, and significant delays in the performance of an appraisal, are either incomplete or vague.
The proposed definition of petition identifies federal financial institution regulators as well as other stakeholders. One of the two petitions submitted in the past 30-years came from the State of North Dakota, and it will likely be a state financial institution regulator, with an intimate understanding of the unique factors contributing to a local scarcity of licensed appraisers and the corresponding effect on the availability of consumer and commercial credit, that recognizes a waiver petition is appropriate. Therefore, the definition should specifically identify state financial regulators in addition to federal regulators, institutions, and other stakeholders.
The proposed definition for scarcity of certified or licensed appraisers lacks the specificity to allow for a measurable determination as was recommended by the Government Accountability Office’s November 2021 report on Real Estate Appraisals.[6] The proposed definition of significant delays in the performance of an appraisal is also flawed. In both cases, the ASC should consider more definitive metrics with a sensitivity to the harm appraisal delays cause borrowers and the corresponding detrimental impact on the local economies.
Proposed § 1102.4(f) referral of a Petition to the State Appraisal Agency
Section 1102.4(f) of ASC’s proposal would provide an option to the ASC to initially refer a Petition to the State Appraisal Agency where temporary waiver relief is sought for evaluation and further study. The Supplemental Material fails to expound on why a referral would be a productive step in the process. Given the near uniform opposition from the appraisal industry to the last request for a temporary waiver, it is not unreasonable to conclude that such a referral serves only to further delay relief and render the process serpentine.[7]
There is no statutory requirement that constrains the discretion of ASC to determine a waiver is warranted to the concurrence of the State Appraisal Authority. Self-imposing such a constraint diminishes the process, marginalizes the need for expeditious evaluation of a request, and ignores the real-world harm on borrowers of delayed appraisals. This proposed provision should be stricken from a final rule.
NASCUS thanks the Appraisal Subcommittee for the opportunity to submit comments on this important rulemaking. We would be happy to discuss our comments further at your convenience.
Sincerely,
Brian Knight
President & CEO
[1] NASCUS is the professional association of the nation’s 45 state credit union regulatory agencies that charter and supervise 1,975 state credit unions. NASCUS membership includes state regulatory agencies, state chartered and federally chartered credit unions, and other important stakeholders in the state system. State chartered credit unions hold over half of the $2.01 trillion assets in the credit union system and are proud to represent nearly half of the 129 million credit union members.
[2] “Appraisal Subcommittee; Appraiser Regulation; Temporary Waiver Requests” 87 Fed. Reg. 2079 (January 13, 2022).
[3] 12 U.S.C. 3348(b).
[4] The first was for the Commonwealth of the Northern Mariana Islands in 1993 and the second for the State of North Dakota in 2019. See 87 Fed. Reg. 2080 (January 13, 2022).
[5] ““I don’t want to say we’re archaic”: Appraisal Institute president vows reform,” HousingWire, Mathew Blake, January 20, 2022. Available at https://www.housingwire.com/articles/i-dont-want-to-say-were-archaic-appraisal-institute-president-vows-reform/.
[6] See https://www.gao.gov/assets/gao-22-104472.pdf.
[7] “Appraisal Subcommittee; Final Order Granting in Part Temporary Waiver Relief,” 84 Fed. Reg. 38630 (November 7, 2019).