BUSH ADMINISTRATION ANNOUNCES "APPRAISER WATCH" - NEW
PROTECTIONS FOR HOMEOWNERS
Martinez To Hold Appraisers
Accountable for Their Performance
WASHINGTON - The Department of Housing and Urban Development said
today it intends to expand its protection of homeowners by proposing
standards that will hold appraisers accountable for their
performance. Faulty appraisals too often lead to default and
foreclosure.
The new initiative, called Appraiser Watch, will be published
soon as an Advance Notice of Proposed Rulemaking in the Federal
Register. Once implemented, the standards will cover some 25,000
individuals who conduct appraisals on Federal Housing
Administration-insured single-family homes.
"Faulty appraisals, whether intentional or not, contribute to the
inability of homebuyers to make monthly mortgage payments and to the
instability of neighborhoods," said HUD Secretary Mel Martinez. "The
measure that we will be proposing is part of the Administration's
on-going commitment to protect unsuspecting victims, who are often
first-time homebuyers and minorities, from poor appraisals and
unscrupulous appraisers."
Under the proposal, FHA will monitor appraisers' default and
claim rates and will levy sanctions - including removal from its
list of approved appraisers - against those whose rates are
excessive.
"Excessive default and claim rates represent an unacceptable risk
to taxpayers and to FHA," said Assistant Secretary for Housing -
Federal Housing Commissioner John Weicher. "At the same time, we
recognize that high defaults and claims do not by themselves prove
wrongdoing. Some appraisers may experience them through no fault of
their own, and these appraisers should not be subject to sanctions."
For example, Weicher said that certain geographical areas might have
higher than average default and claim rates because of local
economic conditions, regardless of whether the appraisal is
faulty.
Under the terms of the proposal, FHA will notify appraisers
before removing them from its roster of approved appraisers. Any
appraiser who receives such notice may meet with HUD officials to
present evidence that factors beyond his or her control contributed
to the excessive rates. The proposal will also make provisions for
appraisers to be reinstated to the approved roster.
HUD will accept comments on the proposal from the public and
other interested parties for 60 days after it is published in the
Federal Register. The Department is especially interested in
comments related to threshold levels for evaluating appraiser
performance, age of the appraisals, mitigating circumstances that
should be considered and severity of sanctions levied. Those
comments should be submitted to: Regulations Division, Office of
General Counsel, HUD, Room 10276, 471 7th Street SW, Washington, DC,
20410.
Other recent actions by the Bush Administration to protect
homeowners and promote homeownership include:
- A proposal, currently available for public comment for 90
days, to reform the regulatory requirements of the Real Estate
Settlement Procedures Act (RESPA) that would make the process of
buying and refinancing a home significantly simpler, potentially
less expensive and would protect consumers from unscrupulous
lending practices. In addition, Martinez recently announced five
major settlement agreements with mortgage lenders and service
providers with payments of nearly $2.3 million. HUD will spend
$1.5 million to investigate RESPA violations, a six-fold increase
over current funding, and is more than doubling its investigative
staff to further bolster its RESPA enforcement activities. HUD is
also increasing its efforts to educate homebuyers in ways to avoid
predatory lending practices in the first place.
- A goal to increase the number of minority homeowners by 5.5
million by the year 2010. To reach this goal the Administration
has proposed: the American Dream Downpayment Fund, aimed at
helping 40,000 families each year with down payment cost, the most
common barrier to minority homeownership; and, a tax credit for
builders of single-family homes. The Administration has also
proposed a $15 million increase in the fiscal year 2003 HUD budget
for housing counseling, which would increase funding for consumer
education on many topics, including predatory lending.
- The recently announced "Homebuyer Bill of Rights," which
requires greater disclosure of costs associated with buying a
home, allows consumers more choices in choosing providers of
closing services, limits excessive settlement fees and encourages
innovation and competition in the marketplace.
- Developing a rule to stop "flipping" - quickly reselling
properties at inflated values - of FHA insured loans. The proposal
would make properties that have been sold within a defined period
of time ineligible for FHA insurance, effectively prohibiting
resale of the property.
HUD is the nation's housing agency committed to increasing
homeownership, particularly among minorities, creating affordable
housing opportunities for low-income Americans, supporting the
homeless, elderly, people with disabilities and people living with
AIDS. The Department also promotes economic and community
development as well as enforces the nation's fair housing laws. More
information about HUD and its programs is available on the Internet
at http://www.hud.gov/.
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