AI-ABA teleconference: a need for Best Practices statement

Valuation Insights & Perspectives, Spring, 2004

To address problems surrounding appraisal independence and client pressure, lenders and appraisers need to develop Best Practices that would serve as a guideline for both segments of the lending industry. This message was emphasized by Appraisal Institute president Gary Taylor, MAI, SRA, and Jeanne Obedzinski, MAI, who were among five speakers on a telephone briefing held February 24, 2004, cosponsored by the American Bankers Association and the Appraisal Institute. The teleconference, Appraisal Independence: What Appraisers and Bankers Need to Know to Comply with New Regulatory Guidelines and Procedures, was designed to foster dialog between appraisers and lenders on the issues of appraiser independence as well as offer guidance on complying with regulatory guidelines and procedures. Over 4,000 appraisers and lenders participated in the two-hour nationwide teleconference in 528 sites, setting a new attendance record for such events hosted by the ABA.

In addition to Taylor and Obedzinski, who is regional manager for real estate risk assessment for Bank of America, other speakers were Thomas E. Watson Jr., National Bank Examiner from the Office of the Comptroller of the Currency; Virginia Gibbs, of the Federal Reserve's Division of Banking Supervision and Regulation; and Anna M. Rentschler, vice president of First National Bank of Audrain County, Mexico, Mo. The program was moderated by John Rasmus, Senior Counsel of the American Bankers Association.

Watson and Gibbs stressed the importance to lenders of separating the loan production function from the collateral valuation process, pointing out that use of a borrower's appraiser, for example, by a bank was in violation of the law. Speaking from the banking perspective, Obedzinski emphasized the importance to bankers of having appropriate quality control procedures in place. "Go beyond the checklist" when it comes to appraisal reviews, said Rentschler. "Don't go back to the '80s with trumped up values," she commented.

Taylor emphasized the need to reestablish firewalls between appraiser and lender, which have eroded over the past decade. The 2003 interagency Statement on Independent Appraisal and Evaluation Functions is an attempt to recreate that firewall. He also encouraged more specifics on how appraisers can file complaints without fear of lender backlash.

Audiocassettes and CD-ROMs of the briefing, including copies of the handouts, are available, providing a comprehensive update on appraisal independence. For ordering information, visit http://aba.com/conferences and education/tb_022404 or call 800-775-7654.

RELATED ARTICLE: AI and ABA Forge Ties, Joint Efforts

Following the tremendous response to the joint telephone briefing on appraisal independence, the Appraisal Institute and American Bankers Association (ABA) have solidified additional joint efforts in 2004. In March, the Appraisal Institute became a "service member" of the ABA. This form of ABA membership facilitates partnerships between ABA member banks and cutting-edge industry suppliers. As a service member, the Appraisal Institute will be listed in the ABA Service Member Directory, which is sent to thousands of ABA members, in addition to receiving discounts to ABA conferences and exhibit space and gaining access to ABA publications.

Additionally, the ABA invited Gary P. Taylor, MAI, SRA, 2004 President of the Appraisal Institute, and George Sikorski, MAI, Senior Vice President of LaSalle Bank, to participate in the ABA Compliance Conference in Chicago, on June 7. Taylor and Sikorski discussed the issue of appraisal independence with Tom Watson of the Office of the Comptroller of the Currency and Anna Rentschler, CRCM, of First National Bank of Audrain County in Mexico, Mo. The Appraisal Institute also had an exhibit at the conference, which more than 700 bank compliance officers attended.

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Discounted rates were also provided to Appraisal Institute Chicago Chapter members wanting to participate during the afternoon appraisal independence session, a session on predatory lending and an evening reception.

Additionally, the Appraisal Institute and ABA are planning to hold another joint telephone briefing in the fall of 2004. The date and subject are still under development, but the format will be similar to the February telephone briefing on appraisal independence and the issue chosen will benefit members of both organizations.

"We are pleased to have built a tremendous relationship with the American Bankers Association," says John Ross, Executive Vice President of the Appraisal Institute. "Many members of the Appraisal Institute work for ABA member banks, while many appraisers have ABA banks as clients. We hope this relationship continues to grow in the coming months and years."