An Update on The Appraisal Foundation

1. An Update on The Appraisal Foundation By Paul Bierschwale Member of the Board of Trustees The Appraisal Foundation October 2009

2. Presentation Overview Updates on the following: • Appraiser Qualifications Board • Appraisal Standards Board • The Appraisal Foundation • Legislative & Regulatory An Overview of The Appraisal Foundation

3. AQB Update Update on the Activities of the Appraiser Qualifications Board An Overview of The Appraisal Foundation

4. AQB Update • Increase in number of hours of qualifying (basic) education for all classifications that must follow Required Core Curriculum • College-level education required for Certified Residential and Certified General An Overview of The Appraisal Foundation

5. AQB Update • With the 2008 Required Core Curriculum, each component of Qualifying Education will already have been tested, meaning new exams now focus on a candidate’s ability to apply the knowledge learned • New exams are application-based, including many “scenario” questions where candidates will have to study problems and determine how to apply the correct solutions An Overview of The Appraisal Foundation

6. AQB Update • New exams consist of 165 questions, including 15 “pretest” items not scored. • New exams allow six (6) to eight (8) hours, depending on the classification level. An Overview of The Appraisal Foundation

7. AQB Update • For the first time, all 55 jurisdictions that license and certify real property appraisers are using the same examination. • Examination developers and state appraiser regulatory agencies may also develop exams and apply for equivalency to the AQB. An Overview of The Appraisal Foundation

8. AQB Update Sample Question (2008 Exam) Scenario: An appraiser is asked to appraise an apartment complex consisting of 120 units broken down as follows: • Thirty (30) 1-bedroom units, renting for $500 each • Sixty (60) 2-bedroom units, renting for $750 each • Thirty (30) 3-bedroom units, renting for $1,000 each The complex has historically had a vacancy and collection loss expense of 3% and operating expenses/replacement reserves of 35% of effective gross income. Assuming the vacancy rate and all expenses are forecast to remain constant in the foreseeable future: An Overview of The Appraisal Foundation

9. AQB Update Sample Questions (2008 Exam - continued) 1. What is the Potential Gross Income for the complex? A. $75,000 B. $90,000 C. $87,300 D. $56,745 2. What is the Effective Gross Income for the complex? A. $75,000 B. $90,000 C. $87,300 D. $56,745 An Overview of The Appraisal Foundation

10. AQB Update Review and Approval of College Education Classroom hour based education versus university based credit hour education. College graduates with university valuation education often at a disadvantage regarding state acceptance of courses. An Overview of The Appraisal Foundation 10

11. AQB Update AQB University Graduate Program Review Commencing this year, the AQB is reviewing and approving graduate programs offering a degree in valuation. Programs reviewed and approved by the AQB will be posted on the Foundation’s website. A breakdown of the hours approved will be included. An Overview of The Appraisal Foundation 11

12. AQB Update AQB University Graduate Program Review Approved Programs include: Texas A&M University Masters of Real Estate Program University of Denver, Daniels College of Business Degree in Real Estate & Construction Management An Overview of The Appraisal Foundation 12

13. ASB Update Update on the Activities of the Appraisal Standards Board An Overview of The Appraisal Foundation

14. 2008-2009 USPAP • Single-bound book contains USPAP, Advisory Opinions, and Frequently Asked Questions in separately tabbed sections • Master index reflects where topics can be found in all three sections of the document • Electronic version available from The Appraisal Foundation offers search capability An Overview of The Appraisal Foundation

15. 2010-2011 USPAP Effective January 1, 2010, changes include: • Prior to accepting an assignment, an appraiser must disclose to the client and in the report certification, any services regarding the subject property performed by the appraiser within the prior three years, as an appraiser or in any other capacity. An Overview of The Appraisal Foundation

16. 2010-2011 USPAP Deletion of an appraiser’s obligation to allow the client access to the workfile for a Restricted Use Appraisal Report For clarifications purposes, a re-write of the appraisal review standard, Standard 3 An Overview of The Appraisal Foundation 16

17. Foundation Update Update on the Activities of The Appraisal Foundation An Overview of The Appraisal Foundation

18. Foundation Update New Publications • 7 and 15 Hour On-Line National USPAP Courses • USPAP for Non-Appraisers (Attorneys, Accountants, Lenders) • Consumer Brochure An Overview of The Appraisal Foundation

19. Foundation Update Promoting Greater Consistency Among the State Appraiser Regulatory Agencies Training Classes for State Appraiser Investigators Disciplinary Guidelines for State Appraiser Regulators An Overview of The Appraisal Foundation 19

20. National Registry RecordsIndividual Appraisers 200187,500 75,000 2009120,000 104,000 An Overview of The Appraisal Foundation

21. There was no corresponding increase in the membership of the professional societies. What type of training did these appraisers receive? Who did the training? Appraiser Training An Overview of The Appraisal Foundation

22. FoundationInitiatives • Appointed a Supervising Appraiser Task Force to develop a set of best practices for supervising appraisers. • Task Force work product has been forwarded to the AQB for possible future development of supervising appraiser qualifications. An Overview of The Appraisal Foundation

23. Legislative/Regulatory Update Legislative and Regulatory Update An Overview of The Appraisal Foundation

24. Appraisal Legislation H.R. 1728, The Mortgage Reform & Anti-Predatory Lending Act of 2009 • Passed the U.S. House of Representatives on May 7 by a Vote of 300-114. • Sent to the U.S. Senate for consideration. • Handout Available Outlining Key Provisions. An Overview of The Appraisal Foundation

25. HUD/FHA Legislation enacted on August 1, 2008 requires FHA to use state certified appraisers or appraisers certified by a professional appraisal organization FHA has decided to only use state certified appraisers as of October 1, 2009 An Overview of The Appraisal Foundation 25

26. Homeowners Valuation Code of Conduct • Effective May 1, 2009 • Banks May Use Their Own Staff Appraisers for the Initial Appraisal if the Appraiser Does Not Report to the Loan Production Department • Certain Restrictions on Banks Owning Appraisal Management Companies An Overview of The Appraisal Foundation

27. Homeowners Valuation Code of Conduct • Mortgage Brokers are Prohibited From Ordering Appraisals • Overall, the Code was diluted from its original content An Overview of The Appraisal Foundation

28. Homeowners Valuation Code of Conduct Independent Valuation Protection Institute (IVPI), which has yet to be constituted: • Conduct Research • Establish Consumer and Appraiser Hot Lines • Mediate Complaints Was to be funded by Fannie Mae and Freddie Mac with $24 million over five years. An Overview of The Appraisal Foundation

29. Communications Communicating with the Foundation and its Boards is easy: • Internet: www.appraisalfoundation.org • Phone: 202.347.7722 • Fax: 202.347.7727 • Address: 1155 15th Street NW, Suite 1111 Washington, DC 20005 An Overview of The Appraisal Foundation