November, 2012
From the ASHI President.
Inspection News and Views from the American Society of Home Inspectors



Update on Proposed Appraiser Inspections

MARVIN GOLDSTEIN

It is with great pride in our organization that I again report on high-profile ASHI activity in Washington, D.C., on behalf of the membership and the profession.

Members of our association — and non-ASHI home inspectors — need to be aware, unequivocally, that none of our latest arguments regarding a proposed regulation with respect to appraisals for higher-risk mortgage loans would be given serious consideration by federal policymakers were it not for the past and present direct action and intervention by ASHI inside the Washington beltway.

This is robust, full-throated advocacy for our interests, the interests of the profession, and the interests of the consumer where it counts. In terms of advocacy for preventing confusion between appraisals and home inspections, ASHI is, literally, the only game in town, the only voice standing up for the profession. We find ourselves commenting on yet another proposed regulation with respect to appraisals. This one pertains to higher-risk mortgage loans.

While the regulation is proposed jointly by several agencies as set forth in the Dodd-Frank Act, the federal Consumer Financial Protection Bureau (CFPB) is the lead agency, and it is to that agency ASHI has commented for the docket/public record.

ASHI has been successful in the past offering many documents adopted by HUD encouraging all U.S. homebuyers to obtain a home inspection, and be able to distinguish between an inspection and an appraisal.

This time, the principal issue is the scope and meaning of  physical inspections to be performed by appraisers. ASHI has ongoing concerns that the following reference in the proposed regulations will promote homebuyer confusion, blur the distinction between appraisals and home inspections, and deter homebuyers from obtaining home inspections:

"During informal outreach conducted by the Agencies, outreach participants indicated that many creditors require appraisers to perform a physical inspection of the mortgaged property. This requirement is documented in the Uniform Residential Appraisal Report form used as a matter of practice in the industry, which includes a certification that the appraiser performed a complete visual inspection of the interior and exterior areas of the subject property. Outreach participants indicated that requiring a physical visit of the interior of the mortgaged property added on average an additional cost of about $50 to the appraisal fee, which is paid by the applicant."

ASHI strongly prefers polices that not only maintain bright-line distinctions between appraisals and home inspections, declaring inspections to be the territory of the trained professional home inspector, but also encourage appraisers to retain home inspectors for this purpose.

In addition, we recommended that any existing home inspections be given to the appraiser to use as a tool to improve the quality and depth of the appraisal.

ASHI's comments tell CFPB "It is worthwhile to note that, while many home purchasers obtain property inspections prior to applying for a mortgage loan or certainly prior to making the loan, there is nothing in the current regulated lending process that requires the prospective borrower to disclose that inspection to the lender or to the lender's appraiser.

"If one were designing the home financing process from inception to assure that all parties to the financing transaction were transparently informed about all aspects of the property posted as collateral and fully recognizing the roles, responsibilities and capabilities of the parties to the transaction, a home inspection would be the first required step toward determining value. ...

"This revised process could begin immediately with the requirement that any home inspection report made on the subject property within six months prior to making the loan be provided to the lender and the appraiser. We suggest that it is in the interest of the prospective borrower, the lender, the banking and housing agencies, the mortgage insurers and all other direct and indirect parties to the home financing transaction to make their individual decisions on a complete and thorough report on property condition.

"ASHI would be pleased to work with the regulatory community to evolve appropriate data and report standards for a mortgage financing inspection report, including a scoring methodology."

More to come. Stay tuned for developments.