New FHA Program

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A bipartisan amendment that would ensure an independent and competently performed appraisal process has been added to pending foreclosure prevention legislation. On April 24, the House Financial Services Committee agreed by voice vote to add the amendment to H.R. 5830, the Federal Housing Administration Housing Stabilization and Homeowner Retention Act. The amendment, backed by the Appraisal Institute, prohibits all parties involved in a real estate transaction from improperly influencing an appraiser and requires all appraisals in connection with this legislation to be performed by qualified appraisers who have demonstrated a high level of valuation competency, according to the Uniform Standards of Professional Appraisal Practice.



H.R. 5830 authorizes the FHA to guarantee billions of dollars worth of refinanced loans if lenders reduce loan amounts to reflect reduced home values. The measure would require banks to make less money on the loans but it would also reduce their credit exposure, while helping families stay in their homes.



The amendment, offered by Reps. Paul Kanjorski, D-Pa., and Judy Biggert, R-Ill., was also sponsored by Reps. Gwen Moore, D-Wisc., and Andre Carson, D-Ind.



“We applaud the leadership of the amendment sponsors for recognizing the importance of accurate appraisals in the pending foreclosure prevention legislation,” said Bill Garber, Appraisal Institute director of government and external relations. “This legislation has real potential to help both homeowners and financial institutions facing distress, and much of the proposal hinges on competent and reliable appraisals. When many local areas find themselves in declining markets, it is absolutely essential that Congress require the use of competent appraisers.”



The bill was expected to be on the House floor for final vote on Wednesday, April 30. Results were not available by press time. Discussions are underway in the Senate on companion legislation to H.R. 5830, where several other questions will likely be addressed at the committee level, including what property standards (FHA or conventional) will be applied to the appraisals and who will actually order the appraisal. Given the uniqueness of the program, whereby lenders are encouraged to write down the balance of loans to current appraised values, some have questioned the viability of allowing lenders to order the appraisal, or whether that function would best be performed by the FHA