on point
By Appraisal Institute President
R. Wayne Pugh, MAI
Weathering the
Storm, Righting
the Ship
It’s hard to know what’s been worse:
watching the fluctuating stock market
every day or trying to predict how
long it will take to correct our housing
and credit markets. What I do know,
though, is that it’s been a difficult time
for all of us and for our profession. But
appraisers are a hardy lot. We adapt and
we carve out new paths wherever we
can. And the Appraisal Institute is here
to help with that process.
The Appraisal Institute’s leadership,
particularly our Government Relations
Committee, ensures that Washington,
D.C., decision-makers understand the
role that America’s reputable and pro-
fessional real estate appraisers should
play in stemming the current housing
and financial crises. With the coming
transfer of power in January, we anticipate being highly visible on Capitol Hill
and with the new administration.
While banking and housing regulators iron out the details of the subprime
rescue and address mounting foreclosures, we have urged regulators—
through letters and visits—that they
apply sound collateral valuation policies
that include the use of qualified,
professional appraisers. The “Three
Cs” —Capacity to repay, Credit and
Collateral—have served as the founda-
tion of mortgage lending for generations, and they are more relevant today
than ever.
With regard to collateral, even
though appraisals were used by investment banks and rating agencies on
Wall Street as part of the securitization
process little was understood about the
appraisal process by those reviewing
the appraisals. The same can be said of
many mortgage lenders on Main Street
who, in the rush to close a deal, give
little regard to risk management. In the
years leading up to today’s crisis, many
lenders were not so much concerned
about ensuring the value of the collateral through quality appraisal as they
were about paying rock-bottom prices
with quick turn-around times.
Recently, I responded to a
Washington Post opinion piece by Susan
Woodward, a former chief economist
for both the U.S. Department of Housing and Urban Development and the
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