Lawmakers Foil Efforts To Upgrade Appraisal Industry

Washington lawmakers are coming under fire for raiding the revenues of a state agency that collects stiff fees from appraisers to police their industry but is too understaffed to do the job.

As a consequence, the most highly qualified and reputable appraisers lose work to underqualified and incompetent cut-rate competitors.

Consumers go unprotected.

And the soundness of the banking system is put at risk.

So charge appraisers Bruce Jolicoeur and Mike Gentry of Spokane.

“We pay through the nose for regulators to uphold high standards of appraising in this state,” says Jolicoeur. “But the standards aren’t enforced because regulators don’t have the money and the staff to do it adequately.

“And those of us who strive for professional excellence by earning professional designations are tarred with the same brush as state-licensed and certified practitioners who don’t measure up. But nothing gets done about them.”

Jolicoeur and Gentry both hold the MAI (Member of the Appraisal Institute) designation. They are part of a move to form a coalition of professional certification organizations in this state.

Their mission is to require that fee money be spent on reviewing the work of appraisers and enforcing standards of practice.

Until just lately, there were no official standards.

But about five years ago, the American public got stuck with the tab for what has been called the biggest bank robbery in history. Taxpayers and their descendents will be paying off a half-trillion-dollar bailout of the savings and loan industry for generations.

In part to avert another such debacle, the federal government required lenders to use appraisers licensed and certified by the states for federally backed real estate transactions.

“It was a move to make bankers responsible to appraisers, and to make appraisers responsible,” says Gentry. “Before that, you just hung out your shingle, and you were an appraiser - end of story.”

Now, for the first time, appraisers were required to meet a prescribed level of education and expertise. States set up programs and adopted fee schedules.

“In this state,” says Gentry, “the annual fee of $275 is probably sufficient to run the section as designed.

“The problem is, the agency was never given the money it took from us to do the job.

“So basically what we wound up with,” says Jolicoeur, “is just a tax. Period. And billions upon billions of real estate loans get made with totally inadequate safeguards.”

“The short story,” says Gentry, is this: “Society recognized an important need. It set up a bureaucracy to meet the need. It funded the job. But lawmakers skimmed off half the money to spend other places as they please.”

Before the charade of state certification came along, said Gentry, “At least, lenders and others who were serious about getting good appraisals could go to the recognized organizations who had their own designation and policed their own members. They paid more. But they knew they were getting a good product.

“Now they don’t know what they are getting.”

Cleotis Borner, manager of the real estate appraiser section of the Department of Licensing, says he’s estimating revenues of $919,000 for the coming biennium. And he’s “hoping” to keep $505,000. Last biennium he settled for $427,000.

Since cranking up four years ago with a staff of three, his section has licensed 2,653 appraisers, revoked six licenses, suspended five licenses, denied 72 applications, issued nine orders to cease and desist, written two letters of reprimand, and levied “several” fines.

Critics say he’s doing the best he can with what he’s got, but it’s not enough. Borner says he would like nothing better than more money for staff.

But there’s a still more urgent problem for qualified appraisers, consumers, taxpayers and the public.

It is a federal rules change issued last June that permits real estate lenders to hire unlicensed, uncertified persons to conduct so-called “evaluations” at cut-rate prices in place of qualified appraisers.

These “evaluations” are now allowed except for residential transactions exceeding $250,000 and commercial deals above $1 million.

Otherwise, this is now what’s called a “voluntary” state. Translation: So-called appraisers in this state don’t have to be licensed, certified or anything else.

, DataTimes MEMO: Associate Editor Frank Bartel’s column appears on Monday, Wednesday and Sunday.

The following fields overflowed: CREDIT = Frank Bartel The Spokesman-Review