In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which established an independent consumer bureau within the Federal Reserve to help protect borrowers against abuses in mortgage, credit card and other types of lending.
Part of this new legislation required the Appraisal Subcommittee (ASC) to build a complaint hotline. This hotline is to be used for complaints about appraisals from homebuyers and lenders, as well as appraisers themselves who want to report being pressured to bring in a valuation at a certain figure.
The federal government is trying to figure out the best way to build this hotline, but they’re running into several implementation and funding problems according to the Government Accountability Office (GAO). Money, and where it will come from, is the biggest concern of the GAO. Once the hotline is implemented, the complaints will be sent to individual state regulators that the ASC will monitor. The problem is that many states lack the necessary funding and resources to properly follow up the complaints they receive, which eliminates any value or progress the hotline could bring.
The GAO reports that the ASC only employs 10-staffers, but is funded by mandatory appraisal registration fees in each state. This brings in over $2.8 million annually, and the GAO is beginning to track where more resources are needed to help implement the new Dodd-Frank provisions.
The ASC will inevitably need to make more investments in information technology and creating a larger staff. This will help them effectively screen, track and refer the large amounts of complaints that are sure to come once the hotline is up and running.
Even if these problems get solved, not all state agencies that regulate appraisers feel that the hotline will have any great effects. Of the 50-state agencies that the GAO surveyed, only 13 said it would improve their abilities to regulate the industry. Another 13 states said it would have little or no effect on their ability to regulate, and 9 states actually claimed that the new hotline would be a hindrance on their regulation. The final 12-states in the survey said they simply didn’t know how the new hotline would work for them.
The major concern of these agencies, is how the hotline will be used once it’s up and running. They are worried that frivolous complaints, which are usually unavoidable, will waste time, money and unjustly hurt an appraiser’s ability to get future assignments. Agencies want to avoid consumers using the hotline to just report on a disagreement with an appraiser’s valuation, instead of reporting on actual violations which the hotline is truly being created for.
Only time will tell once this new complaint hotline finally gets up and running. How do you feel about this new complaint hotline? Do you feel it will have a positive or negative effect on regulation?