TheMReport — News and strategies for the evolving mortgage marketplace.
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16 | TH E M R EP O RT FEATURE T he mortgage industry continues to face many new challenges and uncertainties, as well as opportunities as it tackles new regulations, the enforcement of TRID with fines, looming dead - lines to implementing the GSEs' new Uniform Collateral Dataset (UCD), HMDA changes, rate hikes, a rush to digital mortgages, and so much more. The appraisal space, too, is certainly no stranger to dealing with the adversity that mortgage compliance mandates can create in a short period of time. This ar - ticle addresses the challenges that the appraisal side of the mortgage business is facing with a focus on the shortage of appraisers and remedies to this growing problem. Impact on Appraisals A ppraisals were traditionally a less concerning part of the ba- sic foundation in assessing the risk associated with mortgage lend- ing—the three Cs of underwriting: credit, capacity and collateral. But, since the mortgage crash, the valu- ation aspect of the third C—collat- eral—has experienced a dwindling number of active appraisers. Fall- out from the mortgage meltdown and the regulatory intensity of Dodd-Frank legislation has played a huge role in leaving the appraisal field in disarray. According to the Appraisal Institute Research Department, as of December 31, 2016, the number of actual real estate appraisers in the U.S. was 73,731. In contrast, the 2012 number was at 83,400. The data for 2017 could show another decline. Much of this decline is due to an aging population of apprais - ers facing retirement, signifi- cant decreases in income, and fewer entrants into the profession. Compounding matters is the lack of training for new appraisers as experienced appraisers have exited the space and existing ones are not motivated to mentor, largely due to a lack of compensation for their time and efforts. A survey released by the National Association of Realtors (NAR) in March 2017 highlighted the current state of the appraisal market. More than 2,000 appraisers were polled and the results con- firmed that there is a significant issue with getting new appraiser trainees into the field while exist- ing appraisers are leaving the profession or planning to leave. The report noted that the average tenure of an appraiser was ap- proximately 22 years, but roughly 10 percent of respondents said they may leave the field within five years. Frustrations with regulatory burdens and insufficient compen- sation are the top two reasons cited for a desire to leave. As for growing the pool of appraisers moving forward? We certainly don't see millenni- als who are advancing in their careers or recent Gen Z college graduates having an appetite to enter the appraisal space in some capacity, let alone becoming indi- vidual appraisers. Appraisal Requirements T he Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIR- REA), requires lenders to use an appraiser on any federal transac- tion above $250,000. This means there isn't any getting away from using an actual appraiser for any transactions above $250,000, at least for the time being. So where does that leave the mortgage industry with this worsening problem? What solutions are available today? Public Solutions T here are several solutions that have been or are in the process of being made available by various agencies in an effort to help with the shortage of apprais- ers. They include: Temporary Practice Permits and Temporary Waivers: In response to growing concerns made by federal bank regulatory agen - cies, who jointly issued an Interagency Advisory Notice on the Availability of Appraisers on May 31, 2017, this notice provided two existing options—Temporary Practice Permits and Temporary Waivers—that may address ap - praiser shortages, particularly in rural areas. Both options provide relief when Collateral Damage As the pool of appraisers continues to shrink, the mortgage industry is searching for solutions and technology is helping the cause. By Vladimir Bien-Amie Appraiser Population Trends Actual Number of Appraisers Active Licenses/Certifications Data provided by the Appraisal Institute Research Department