Some See Crucial Flaw in Foreclosure Relief Plan

Red flag photoThe nation’s professional real estate appraisers are crying foul over Obama’s plans to modify loans for homeowners facing foreclosure.

The group, which represents four of the largest associations of real estate appraisers, objects to potentially soft language in the plan that allows alternative methods of valuations– valuations they say could be unreliable.

Inaccurate values place homeowners at risk that they won’t qualify for cheaper mortgages, and may increase the need for more taxpayer bailouts when those modified mortgages fail.

Rather than using a licensed real estate appraiser, the Homeowner Stability Program may allow for less stringent valuations, including computer generated valuations. The group warns that these computer models do not properly evaluate the current condition of a specific property.

The use of national housing indices present a similar risk in that these numbers are typically outdated and do not factor foreclosures and short sales.

The third alternative, the use of real estate brokers, carries significant risks, according to the group. They say brokers are not skilled in valuations, may have conflicts of interest, and often do not have accountability for an inaccurate valuation. Additionally, many states have laws that prohibit such valuations.

The group contacted Secretary Geitner and assured him that there are licensed real estate appraisers available in virtually every community, and that the latest innovations of technology and methodology allow them to offer valuations that are both cost effective and highly reliable.

In the letter, Bill Garber, Appraisal Institute Director of Government Affairs and External Relations, said, Individuals who become state licensed or certified appraisers must meet meaningful requirements involving valuation-specific training, education and experience; and, their conduct is regulated by appraiser licensing agencies in the 50 states and territories. Real estate appraisers can provide a range of services in a loan modification or refinance situations, including streamlined appraisals, under existing standards. For a stable economy and secure mortgage finance system, valuations must be reliable and those performing the appraisals must be accountable and professional.

The chairman of the American Society of Appraisers’ Government Relations Committee, Jay Fishman, added, We believe a foreclosure relief program which relies on valuation professionals to establish the market values of properties collateralizing mortgages will benefit homeowners and protect America’s taxpayers who are on the hook for losses resulting from the inevitable defaults on some modified mortgages. The safety and soundness of taxpayer guaranteed loans in today’s tumultuous mortgage markets require reliance on professional appraisers, not on part time salespeople and unreliable computer-generated values.

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