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On March 13, the President’s office ordered actions “Promoting Access to Mortgage Credit.”

An Executive Order. Read the full document here.

This President’s order sets goals of “reducing lending costs” and to “remove regulatory distortions” to “the structure of the mortgage market…”

Section 6, Appraisal Modernization, states:

  • Modernize appraisal regulations and guidance;
  • Expand the use of alternative valuation models, desktop and hybrid appraisals, and artificial intelligence valuation tools;
  • Simplify appraiser qualification requirements; and
  • Reduce appraisal requirements for low-risk transactions.

Other sections are directed at other areas of mortgage loan business — but may have suggested policies which can parallel valuation and collateral risk issues.  This includes where rulemakings:

  • “Have increased compliance costs of mortgage origination and servicing;” (Section 1)
  • “[Have] distorted the structure of the mortgage market.” (Section 1)

“The [required FHFA] report shall identify recommendations for regulatory or legislative changes necessary to address any regulatory or oversight gaps.”

Of particular interest to appraisal licensing and appraisal schools is a statement in Section 10:  The Federal Reserve, CFPB, NCUA, FDIC, and Controller of the Currency shall consider “eliminating duplicative or unnecessary requirements regarding licensing or registration for mortgage loan officers…”

Hopefully the incessant duplication of fees and forms – for appraiser licensing and for appraiser education — in more than one state may be addressed.

Of particular interest to me and the Valuemetrics.info appraisal “school” – is the incredible overburden of separate, differing, repetitive forms, fee$, timed outlines, presentation materials, and handout literature required for approval of a class in each of the 50 states plus 3 territories, and Washington DC.  It is also required by the quasi-governmental Appraisal Foundation, an organization which sets appraiser qualifying education, as well as appraisal standards, (but just for “federally related transactions.”)

Such forms, fees, and approvals generally require not only approval of a particular class – they also require separate approval of the school, and approval of the instructor(s).  These approvals are sometimes performed by reviewers who have little or no special knowledge of valuation or education.  The fees and renewal forms are typically required every one to three years.

Generally speaking, the regulatory “approval” fees for education providers gobble up over 50% of gross class tuitions paid by real estate appraisers!

The effect of this inordinate burden quashes innovation and the modernization to which this executive order speaks!  Cookie-cutter required education is profitable.  Technology-innovative education is not profitable.

In prior editions of this Analogue Blog, we noted the “five frictions” of modernization of appraisal to match and exploit modern data-analytic technology.  These are: training process, required education, user expectation (such as the GSEs), administrative regulation, and legacy standards.

The super-complex regulatory burden distorts that which it’s supposed to protect — the public good.