The Appraisal Institute, one of the nation’s largest professional organizations of real estate appraisers 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.

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

The Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173) is the first overhaul of appraisal regulations since the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) was enacted in 1989. The House passed the bill June 30, and President Obama is expected to sign it into law soon.

In addition to authorizing grant funding for state oversight and enforcement, H.R. 4173 would require that “reasonable and customary” fees be paid to appraisers. Appraisers have complained that with the growth of appraisal management companies since the Home Valuation Code of Conduct’s 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.

“We encourage AMCs to justify the legitimate services they are providing to lenders by charging for those services, rather than penalizing highly-trained and competent appraisers, whom they should be seeking to do business with,” Sellers said

Additionally, the measure would:

• Establish a federal appraisal independence standard, sunsetting the HVCC.
• Require AMCs to register with state agencies.
• Enhance appraiser competency provisions, including clarification regarding consideration of professional appraisal designations.
• Provide financial resources for oversight and enforcement.
• Separate AMC and appraisal fees on the HUD-1 Statement.

“The Appraisal Institute has been in the forefront of promoting these provisions, and we’re pleased to see the bill passed,” Sellers said. “We look forward to celebrating when President Obama signs it into law.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act is aimed at overhauling the U.S. system of financial services regulation with new controls on large and systemically significant institutions. It also would create a new agency to oversee consumer banking transactions and would shine a light into shadow financial markets that thus far have been exempt from the oversight of regulators.