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Inside Washington (05/18/2011)
* WASHINGTON (5/19/11)--Mortgage lenders and appraisers are clashing over a provision of the Dodd-Frank Act that requires lenders to pay “customary and reasonable” fees to appraisers. The measure was written to address a long-held appraiser complaint that lenders drive down fees at the expense of quality through ownership of appraisal management companies (AMCs). The law seeks to ensure lenders hire the most competent, rather than the cheapest, appraisers (American Banker May 17). But appraisers and independent AMCs have complained to regulators that some lenders have lowered their fees since the provision took effect April 1. Other lenders have virtually done the same by demanding more work for the same pay as before. Interim federal guidance advises banks to look at the fees they have paid in the past year to determine what is “customary and reasonable.” Thomas J. Kirchmeyer, president of Kirchmeyer & Associates Inc., an AMC in Buffalo, N.Y., said lenders bear more risk and want more support for the value they get from the appraiser. For example, some lenders are asking for two current or pending listings in the area, as well as the usual three comparable sales. Bill Garber, director of government and external relations at the Appraisal Institute, an appraiser trade group, said instead of monitoring fees, regulators are primarily concerned with the competency of appraisers and whether AMCs’ appraisal ordering systems always accept the lowest bid … * WASHINGTON (5/19/11)--Federal Housing Finance Agency (FHFA) officials fear Federal Home Loan Banks have drifted too far from their original purpose. Four of the 12 FHLBs now hold more in investments than advances (American Banker May 17). Two others are near that threshold. In a speech to Home Loan bank officials last week, FHFA Acting Director Edward DeMarco emphasized that the role of the banks is to promote liquidity through advances, not to grow investments. “First, the Federal Home Loan Banks’ various financial problems of the past 20 years have not come from the traditional advances business,” DeMarco said. “Instead, investments and mortgage purchase programs have been the source of deterioration in the financial condition of some Federal Home Loan Banks. Second, a large investment portfolio intended to generate added earnings is inconsistent with the purposes of the Federal Home Loan Bank system and is a misuse of the system’s preferential access to capital markets.” A decade ago, banks’ assets were primarily composed of advances, which equaled roughly 80% to 90% of their assets. However, by March 31, advances accounted for just 52.4% of assets. Investments had grown to a combined 38.7% of total assets by the end of the first quarter …


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