On Friday morning, I was one of five expert witnesses (and the only as an appraiser) to testify on the topic of appraisal bias in front of the Appraisal Subcommittee (ASC). The witnesses waited together in the green room, plus additional The Appraisal Foundation (TAF) staff. We had a delightful conversation – everyone was very friendly and a pleasure to be with, given the adversarial nature of our looming testimony.

I’ve spoken many hundreds of times on national television but never on C-SPAN, so participating in this event was a bucket list check-off for me. The FHFA auditorium and facilities were impressive – the organization of the event was first class and ran very smoothly (way to go, Julie!).

During the first hour of testimony, our fourth grandchild was born. My wife was in the audience and stepped out of the hearing (the nerve!) to take the call from my oldest son on the news of our new granddaughter.

The Appraisal Subcommittee (ASC) held a second hearing on challenges facing the appraisal industry, including barriers to entering the profession and racial bias in home appraisals. The panel’s first hearing on such topics occurred in January. The ASC is an interagency committee under the Federal Financial Institutions Examination Council and oversees real estate appraisal regulations. The Federal Housing Finance Agency hosted the event at its headquarters in Washington, DC.

It’s a three-hour hearing, but if you are connected to the appraisal industry in any way, I encourage you to listen. You can hear my opening statement at about the 26-minute mark. The text on the C-SPAN website was generated from unedited closed captions. Here was my formal statement, but since the timing was strictly limited to 5 minutes, I read this abbreviated version, which in hindsight, was better and more to the point.

Federal Housing Finance Agency (@FHFA) hearing on Appraisal Industry Issues – LIVE at 10 am ET on C-SPAN https://t.co/uyAqNgs1tk

— CSPAN (@cspan) May 19, 2023,

Afterwards…

Three regulators from the ASC came to me from the stage immediately afterward and said I was the best dressed in the room, and they loved my tie. I wasn’t expecting that. Ha. All were very nice. My wife and I immediately shared pictures of our new granddaughter.

Thoughts…

Morgan Williams, General Counsel, National Fair Housing Alliance – He was a compelling witness – he drove home that he wanted access to anonymized loan-level data to determine the potential valuation bias.

Angela G. Jemmott, Bureau Chief, California Bureau of Real Estate Appraisers, Member of the Association of Appraiser Regulatory Officials. She was a powerhouse of testimony, advocating practicum solutions in addition to PAREA.

Michelle Czekalski Bradley, Certified General Appraiser, Chair of the Appraisal Standards Board (ASB) of TAF, was earnest and towed the Dave Bunton narrative. When the CFPB head went after her for the conflict of interest of her position, she named me by name (an unforced error) and said there was no conflict. She may believe that with all her heart, but most of her peers in the industry think otherwise. Her husband is a senior official at McKissock, the largest provider of online appraisal courses, and they have a financial arrangement with TAF on USPAP courses – and Michelle heads the board that makes changes to USPAP. This is another example of the stunning lack of oversight for this not-for-profit (TAF) that modifies USPAP that becomes embedded into laws in the 50 states and five territories. I’m sure she means well and, in her mind, is giving back to the industry, but she is remarkably oblivious to the optics of her position. I believe Dave Bunton hand-selected her for her ability to follow orders. TAF is a monarchy, nothing less.

Brad Swinney, Chief Appraiser, Farm Credit Bank of Texas, Chair of the Appraiser Qualifications Board (AQB), had a hard time presenting and defending PAREA. He, like Michelle, was hand selected by Dave Bunton after the prior AQB chair was removed immediately because he wanted to explore the stunning lack of diversity in the appraisal profession. (We’re 98% white and dead last (400 of 400) as tracked by the BLS). So it follows that if the prior chair was removed immediately after trying to dig into the appraisal industry’s lack of diversity, then it’s just a hop, skip, and jump to assume that Brad was brought in to follow Dave Bunton’s position of staying away from the topic. Brad mentioned several times that “someone” (me) was saying 1,500 hours of experience were required, yet he stated only 1,000 hours were required for residential certification experience. As the AQB chair, he was uninformed. I was referring to the New York State requirement for 1,500 hours as a New York City appraiser, as noted on the New York State website.

I’m glad we’ve cleared that up.

TAF’s representatives (Michelle & Brad) were under siege by the ASC board and did not do well under fire. They found themselves wiggling to defend the indefensible even though they were hand-picked by Dave Bunton for their ability to toe the party line. Both tried hard to frame themselves in a silo – Michelle – when it came to how board members were selected and Brad – how they had no responsibility for how much PAREA would cost appraisers. To be clear, TAF had always pushed back hard on PAREA until Dave realized that it could be used to divert attention from, and possibly have a positive influence, on our industry’s stunning lack of diversity.

When I was highly critical of the two-year cycle in my testimony and how TAF goes back and forth on rules that confuse everyone, Michelle brought up the current four-year run of USPAP without changes and how on January 1st, there will not be an expiration date. The problem with framing it that way was that TAF claimed USPAP was frozen for four years because of COVID. Dave saw the pressure coming for change and used COVID as an excuse, yet the reality was that Zoom became ubiquitous, and there was no reason to stop the cycle other than to use COVID to save face. Dave recently realized that because states required USPAP 7-hour update courses every two years, they were still going to benefit from a revenue flow from the classes and could still avoid grant money from the ASC so they wouldn’t have any “strings” attached to their actions. Dave can still fly all over the world on boondoggles to valuation conferences, dining on steak and fine wine without scrutiny. I brought up in my testimony that only about 15 minutes of each 7-hour update class contained new information.

To be clear, only one person of color has been on a technical board (ASB + AQB) in the 3+ decade history of The Appraisal Foundation, which has been led by the same person the entire time. And that one person, despite being highly qualified, was only accepted on the board because of significant outside pressure from myself and a handful of others. Proof of this is that no more persons of color were invited to any of their boards in the ensuing three years.

For many TAF board members, this is just a resume builder. They won’t do anything to forward progress in the industry because Dave Bunton and his sycophants will work hard to prevent it like they just did on the AQB. But some people will work as insiders to make a difference as long as Dave and Kelly don’t know who they are.

This TAF “byzantine and weird” corporate bureaucracy is an unfair burden to everyday working appraisers and is destroying the public trust. I hope last Friday’s testimony helped confirm a few reasons why there is no diversity in the industry, and it will enable the ASC to push for accountability and change at TAF.

Tags: The Appraisal Foundation, FHFA, TAF, ASC, Appraisal Subcommittee, diversity, C-SPAN, Appraisal Bias

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Over the past year, beginning with this NY Times piece: Black Homeowners Face Discrimination in Appraisals that initiated a rising progression of news stories covering discrimination in the appraisal of houses. And most recently, this CNN piece: When a Black homeowner concealed her race, her home’s appraisal value doubled.

So I looked at U.S. labor force data from the U.S. Bureau of Labor Statistics [BLS], which ranked the top 400 occupations by sex, race, and Hispanic or Latino ethnicity. I’ve been an appraiser for 35 years and it’s been very clear that there is nominal diversity in my profession. For users of the industry’s services who have constantly complained about “appraisal shortages” (translated: a shortage of appraisers willing to work for 50% to 75% below the market rate) – here is your opportunity for action to expand our ranks.

The appraisal industry is aging out because it is hard to bring in youth. It is one of the only professions that require new entrants to have a mentor for their first two years and often without making a living, financially. One of the key reasons for this is because most financial institutions won’t accept a “trainee” until they are licensed or certified with two years of experience. A “trainee” is a derogatory term applied to an appraiser that is not licensed yet. While the GSEs like Fannie and Freddie are fine with “trainees” signing reports prior to their two-year experience threshold, most banks are not. Existing appraisers are all for the difficult entry because supply and demand are in their favor. Few other professions have this two-year mentorship period before an entrant can make a living.

Accountants don’t require a two year mentorship program before they can make a living. Free market conditions should let those with more experience make more money, but not zero.

As a result, entry into the appraiser profession via a mentor system essentially requires appraisers to have relatives that will hire and train them. Given the beginnings of the housing industry as explained next, you can see the problem with this approach.

The housing industry we know today was built on a foundation of racism by the federal government

…and racial covenants. No wonder why there is essentially no diversity in the appraisal profession.

[CNN: click on image]

These BLS numbers for 400 occupations show an incredible lack of diversity within the appraisal profession. In fact, U.S. appraisers were ranked dead last for diversity in the list of 400 occupations tracked by BLS with white appraisers comprising 96.5% of the industry. Here are some appraiser ratios from BLS.

And here are the 20 least diverse occupations. The appraisal industry is even less diverse than farmers & ranchers.

While The Appraisal Foundation [TAF] was created and enabled by Congress to maintain appraisal standards (ASB) and minimum qualifications (AQB) for entry into the appraisal profession, it was also created to protect the public trust. The Appraisal Foundation’s attempt to address diversity has largely been in the form of “checking a box” to be able to say they are working on it. Yet the only actions they have taken were the result of recent public pressure by people like myself and others to call them out. The most glaring tone-deaf situations at TAF demonstrate how inappropriate it would be to allow TAF to lead any diversity efforts in the profession:

• An African-American had never held a board seat on the Appraiser Qualifications Board (AQB) until 2021. In other words, for more than thirty years, the organization has existed in a racial bubble.
• There have only been three women who have served on the AQB in the past 30 years.
• The head of the just-formed “diversity commission” is white and male.

Since TAF has not been able to see the problem for more than three decades until outsiders pointed it out and they have continued to make decisions that demonstrate their disconnect, TAF leadership is essentially the starting point to resolve the lack of industry diversity problem. Top-down is how this gets fixed if the stakeholders in the industry actually want it fixed. We have no leadership on this issue within the industry and solving this problem has to be top-down or it won’t ever be resolved.

And the news is getting worse for the appraisal industry as more and more stories like this are published yet TAF remains rudderless on diversity.

It’s time for Congress to step in.

Tags: race, discrimination, U.S. Bureau of Labor Statistics, BLS, diversity, trainee, TAF, The Appraisal Foundation, AMC, Appraisal Management Companies

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This post previously appeared in the August 14, 2020 edition of Housing Notes. I’ve been writing these weekly summaries on housing topics for more than five years. To subscribe for free, you can sign up here. Then you can look forward to each issue every Friday at 2pm New York Time.

The TAF decline in credibility keeps on coming…

After the recent letter debacle where the Appraisal Foundation (TAF) opined falsely that Title XI did not permit the Appraisal Subcommittee (ASC) to provide oversight on TAF, we now have a letter from TAF essentially saying they are making so much money that they don’t need a grant this year from ASC. Who is writing all these letters? It can’t be Dave.

[click for full pdf]

In other words, because TAF saved so much money from not being able to fly around the country during the pandemic, they don’t need ASC Grant money this year. From this point, it’s only a hop skip and a jump to saying they don’t need the grant money so therefore they don’t need oversight. And grant money comes with “strings attached” – that the money used from a grant had to be accounted for to the ASC. And if TAF doesn’t need oversight this year, what is to stop them from raising USPAP related fees and stop collecting grant money forever? The conspiracy theorist in me is starting to worry about that aspect of this new more forceful tone out of TAF these days against any oversight.

No Grants = TAF + PPP

Why would the TAF turn down the annual grant process but still have the need to request PPP? What is the hardship they are declaring when they are saving hundreds of thousands in travel costs that are already questionable in their scale?

My appraisal firm in Manhattan applied for PPP because our business collapsed more than 90% almost immediately for two months. It enabled us to survive. I would think it would be obvious to TAF that their $626,000 annual travel expense would collapse. What other revenues would be sharply curtailed in the new online world?

That’s why Jeremy Bagott, MAI, AI-GRS, the Cosmic Cobra guy, issued this press release on July 6th:

* * * FOR IMMEDIATE RELEASE * * *

# #

Here is another email from appraiser Jeremy Bagott (The Cosmic Cobra guy). Bold my emphasis.

Dear Colleague,

Jeremy Bagott, MAI, AI-GRS
jbagott@gmail.com

Tags: The Appraisal Foundation, TAF, ASC, Appraisal Subcommittee, Jeremy Bagott, Cosmic Cobra, Title XI, grants, oversight, PPP

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I hope all my readers (and everyone else) are staying safe and healthy during this crisis – now let’s get to business.

With New York State on lockdown, real estate brokers/agents can’t sell real estate right now because they are not considered an essential business (yet they are in nearby Connecticut!) This declaration determines whether you can or cannot remain in business during a crisis like this.

Are real estate appraisers considered an essential business in New York? Yes. They are in New York State and they are stated as such in the federal Gramm-Leach-Bliley Act of 1999. But the fact that real estate appraisers are an “essential business” is not consistent in the federal language, especially now when many states are, or will be going on lockdown.

My good friend and appraiser/regulator Pete Fontana and I wrote a letter nicknamed: Fontana/Miller Essential Letter of March 24, 2020. This letter combines the scattered references to address this issue in very specific terms using key language in the public record that illustrates the fact that appraisers are an “essential business” now and going forward.

This letter is the first to address this important issue. It was just sent to Congress, state officials, trade groups, agencies, and other groups related to our industry today and went viral industrywide. The feedback from these groups has been immediate and overwhelmingly encouraging and positive.

Please share the Fontana/Miller Essential Letter of March 24, 2020 with your colleagues in the industry, trade groups, state governments, on forums, and with anyone or in any place you think is relevant to our industry.

Real estate appraisers are an essential business in our country, always have been.

Stay safe!

Tags: Fontana/Miller Essential Letter of March 24, The Appraisal Foundation, TAF, Andrew Cuomo, Coronavirus, Maxine Waters, Sherrod Brown, Gramm-Leach-Bliley Act, Secretary Mnuchin, Peter J. Fontana, Essential Business, Public Trust, 2020

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The Appraisal Foundation published an appraisal infographic that attempts to clarify common misconceptions by the borrowers about the appraiser’s role in the home buying process. The content is amazingly simplistic, but that’s the point.

I continue to be amazed at how so few people don’t understand what the appraiser’s role is in the home buying process. Perhaps this is why the appraisal industry continues to be marginalized in the lending process (ie appraisal management companies, Appraiser Independence Requirements) and the exodus of competent appraisers into other disciplines outside of residential mortgages continues.

Tags: The Appraisal Foundation, TAF, Appraiser Independence Requirements (AIR)

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