Senator Christopher Dodd (D-CT) released his long-awaited version of financial regulatory reform on March 15, and in doing so broke from the House version by deciding to place the Consumer Financial Protection Agency (CFPA) within the Federal Reserve.  Similar legislation previously passed by the House would have made CFPA an independent agency.  CFPA will be tasked with regulating all aspects of consumer protection in financial services, including appraisal services for real and personal property. 

Another key difference from the House legislation is the absence of the Kanjorski appraisal reform provisions.  However, these provisions – which ASA helped craft – stand a realistic chance of being included in the final Conference version of the legislation if the Senate approves a financial services reform bill.  The bill proposed by Senator Dodd also addresses the valuation of certain types of financial instruments and securities. 

The bill would also call upon the General Accountability Office (GAO) to study “the effectiveness and impact of various appraisal methods,” with results due back to the Senate Banking committee within one year of enactment.  The study is specifically tasked with looking at “the cost approach, the comparative sales approach, the income approach,” and any others GAO deems appropriate.

The study will look into several issues:

• The prevalence of each method in purchase-money and refinance mortgage transactions,
• The accuracy of each approach,
• Whether any approach contributed to price speculation,
• The cost to consumers of each approach,
• Disclosure of fees to consumers in the appraisal process,
• The extent each approach may be influenced by a conflict of interest,
• The mechanism by which the appraiser is selected, and
• The stability of each approach in rural versus urban areas.

 ASA is still analyzing the proposed legislation, and will provide a more detailed analysis of Senator Dodd’s proposal in the coming days.  To read the summary of Senator Dodd’s bill, click here.  To read the full text of the bill, click here.