On May 18, the Subcommittee on Economic Opportunity held a legislative hearing on the Discussion Draft of H.R. 7735, Improving Access to the VA Home Loan Act of 2022. The bill is sponsored by Representative Mike Bost, R-Illinois, the ranking member of the House Veterans Affairs Committee, and Senator Dan Sullivan, R-Alaska, a member of the Senate Veterans Committee. It would require the VA to consider when an appraisal is unnecessary and when a desktop appraisal should be used and, a move from the VA Fee Panel to a lender select program. Mortgage Bankers Association advocated for the proposal while the Appraisal Institute opposed it.

Desktop appraisals are faster and less expensive than in-person appraisals. They allow appraisers to view and assess property virtually rather than in-person, which cuts down on closing costs for homebuyers and accelerates the buying process.

(b) WAIVER OF REQUIREMENT FOR CERTAIN PROPERTIES. — In prescribing updated regulations or program requirements under subsection (a), the Secretary shall consider making changes applicable to —

1. certification requirements for appraisers;
2. minimum property requirements;
3. the process for selecting and reviewing comparable sales;
4. quality control processes;
5. the Assisted Appraisal Processing Program; and
6. the use of waivers or other alternatives to existing appraisal processes.

(c) DESK TOP APPRAISALS. — In prescribing updated regulations or program guidance under subsection (a), the Secretary shall provide guidance for the use of the authority under section 3731(b)(3) of title 38, United States Code, taking into consideration —

1. situations in which the use of such authority would provide for cost savings for the borrower; and
2. situations in which a traditional appraisal requirement could cause a delay substantial enough to jeopardize the ability of a borrower to complete a transaction.

Appraisal Institute letter to Chairman Takano & Ranking Member Bost

Dear Chairman Takano and Ranking Member Bost:

On behalf of nearly 16,000 members of the largest organization of professional real property appraisers, this is to express our concern and opposition to H.R. 7735, the “Improving the VA Home Loan Benefit Act,” which if enacted, could degrade the VA Home Loan Program and home buying process for Veterans. The VA appraisal process is widely regarded as the “gold standard” in credit risk management, and this is illustrated by the fact the VA outperforms other federal loan guarantee programs by large margins. We believe the strong appraisal risk management components unique to the VA program directly contribute to this strong standing and Veteran benefit.

We continue to hear anecdotal concerns about the VA appraisal process compared to the conventional or FHA process. We urge further investigation into these claims before taking extreme action to radically change what is roundly a successful program.

Turnaround Times

We continue to hear whispers of slow turnaround times for VA appraisals. However, we have yet to see credible and quantifiable data that supports this claim.  One thing that may be contributing to the different estimates on paper is that the VA counts their turn time differently than the conventional market. With the VA, once the appraisal assignment commences, the clock starts, and it does not end until the appraisal is completed. With a conventional loan, if there is ever  an issue with scheduling the assignment or something occurs that is out of the hands of the appraiser, the clock stops and does not proceed until the issue is resolved.

Additionally, the VA has the Tidewater Initiative –a notice of value that occurs if the appraisal is below the contract price, which is more robust than anything  available in the conventional market. Tidewater provides consumers and stakeholders opportunities to provide relevant information to the appraiser that maintain appraisal independence. While this benefit adds time to the VA process, it provides great benefit to consumers and stakeholders in providing a direct  path to provide relevant information to the VA appraiser.

These issues alone could explain much of any apparent differences in timeliness between programs.

Special Authorization

This legislation is unnecessary because the VA does not need any special authorization to perform streamlined or “desktop” appraisals, as included in Section 2c. A provision in the “Blue Water Navy Vietnam Veterans Act of 2019” allowed the VA to initiate a hybrid appraisal program to address perceived slower appraisal turnaround times in rural areas. This program has been rolled out as the Assisted Appraisal Processing Program (AAPP). Under AAPP, the appraisal report may be completed based solely on information gathered by a person with whom the VA fee panel appraiser has entered into an agreement for such  services. Other VA appraisers, non-VA fee panel appraisers and appraisal trainee/apprentices are eligible to perform this work with the VA fee panel appraiser.

This program is still in its infancy, and we suggest that greater emphasis be placed on both lender and appraiser education on its availability. A minority of VA lenders currently accept the AAPP process, and this contributes to slow uptake on the part of appraisers.

Other Concerns

VA Fee Panel The Appraisal Institute does not believe that a move to a lender select program, such as those found in the conventional or FHA mortgage markets, would  improve timeliness, nor would it be in the best interests of veterans. The strong loan performance of VA speaks to this point.

The VA recruits appraisers on an ongoing basis to the Fee Panel, and the Appraisal Institute has assisted the agency in marketing the opportunity to the  appraisal community. VA officials report that it actively recruits existing licensed and certified appraisers to the Fee Panel. The agency has undertaken efforts to proactively contact licensed and certified appraisers encouraging application to the Fee Panel, and these efforts have resulted in better coverage by the VA Fee Panel in recent years.

Desktops The VA Home Loan Benefit Act attempts to advance desktop appraisal assignments in the VA process, drawing comparisons to how Fannie Mae and Freddie Mac have released desktop allowance in recent years. It is important to recognize the GSE desktop allowances have a great deal of constraints built around  them, including limitations to existing portfolio loans, credit score requirements, loan-to-value (LTV) constraints, and a massive uniform appraisal data system  supporting it. In contrast, VA has limited resources, guarantees 100 percent LTV, and has a small percentage of loans below 90 percent LTV. If the Benefit Act  were to be enacted as is, it would be introducing high risk into an already high leverage situation.

Reports of Veteran Discrimination Appraisal Institute members have heard concerning reports that some real estate agents may be consulting clients to avoid working with VA contracts, giving  preference to conventional or cash offers. That would result in outright discrimination and a fair housing issue under some state laws, which treat Veterans as protected classes. We believe this issue is serious enough to warrant further investigation by the House and Senate oversight committees in in concert with the  VA.

In sum, we believe the VA appraisal process is sound and deserves broad support by the mortgage and housing sectors. We believe there are ways in which the  program can be enhanced – education and awareness on the AAPP program, being one. We look forward to working with you to see that occurs in a timely and efficient manner.

Please contact Bill Garber, Director of Government and External Relations at 202-298-5586, bgarber@appraisalinstitute.org or Brian Rodgers, Manager of Federal Affairs, at 202-298-5597, brodgers@appraisalinstitute.org if you have any questions or would like additional information.

Sincerely,

Appraisal Institute