Our Official Response To The New Federal Reserve Regulations

Last November, there was a significant announcement of a new set of interagency guidelines for various banking entities operating under the supervision of any of the gaggle of federal banking oversight agencies — namely, the Office of the Comptroller of the Currency, Treasury (OCC), the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision, the Treasury’s Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA).

Much like the first round of the HVCC, the new Fed regulations included a commentary period which ended in late January. We have made our response available for you to download. Click here to download a PDF copy.

We’re not sure if other software vendors responded, but we haven’t seen anything. (Last year, Zaio was the only other technology vendor to craft a response — pro-HVCC, tellingly — and they’re of course now gone, as we predicted in a previous article, “Lessons from Prior Downturns”.) As you’ll see from the analysis which follows here, the skewed playing field for AVMs and BPOs still exists. And, of course, as is the case  with the “new” HVCC, there are sweeping exemptions granted to lending institutions and GSEs, allowing them in essence to pick and choose when the rules do or don’t apply. The exemptions are so far-ranging, in fact, that it’s not an exaggeration to suggest that the rules really don’t apply at all. (pq)

The bottom line is that the new federal regulations aren’t necessarily worse than the HVCC, but they aren’t better either. The huge built-in loopholes prevent them from actually having any beneficial effect in reducing lender pressure, but they also make them somewhat irrelevant since they can be so arbitrarily applied. The real damage was done by the first set of HVCC notices sent by Fannie, Freddie, and the former OFHEO (now FHFA), which sent lenders scurrying for cover with AMCs handling most of their work. Independent appraisers will likely suffer from that for decades to come.

The actual announcement and the regulations themselves are available at these locations on the web:

www.federalreserve.gov/newsevents/press/bcreg/20081113a.htm

www.federalreserve.gov/newsevents/press/bcreg/bcreg20081113a1.pdf

If you’re wondering why we didn’t “rally the troops” for response to the agencies like we did before on the HVCC, the reason was simple: Time was short and we didn’t want to overload you over the holidays with what history would suggest would be a futile effort at change. Nevertheless, we felt it was our responsibility to respond officially on behalf of appraisers, defending the same principles that you endorsed previously.