An American Bankers Association survey that showed a need for a substantially higher loan amount threshold for commercial property before state-licensed or certified appraisers must be used was described as an "overreaction" by Donald E. Kelly, vice president in charge of the Washington office of the Appraisal Institute.

"As of today, we have 60,000 licensed or certified appraisers and we'll have 100,000 by the end of the year," Kelly said. "Bankers have been afraid that there won't be enough appraisers available when the requirement goes into effect at the end of this year and that will raise the cost of appraisals. It won't happen."

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 included a requirement that federally regulated lenders have appraisals done by licensed or certified appraisers. That was originally to go into effect last Dec. 31, but the Federal Deposit Insurance Corporation Improvement Act of 1991 extended it to next Dec. 31.

Meanwhile, the four federal bank and thrift regulatory agencies have set $100,000 as the de minimis threshold. The Appraisal Institute announced its intention to sue to reverse the decision and the smaller National Association of Fee Appraisers did file a suit May 13. Both groups contend that FIRREA does not give the regulators authority to set de minimis thresholds. The Senate has adopted an amendment to specify that the regulators do have such authority. That provision is now in legislation that would change the regulatory structure for the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (see The Mortgage Marketplace, May 25, page 1).

The ABA survey of 437 banks indicated that:

* Appraisal costs for commercial borrowers have increased. Seventy-eight percent of the respondents said the costs of real estate appraisals increased by 48% in the past year.

* Delays have risen dramatically. Seventy-one percent of the banks said the average turnaround time has gone up by 18 days, or 72%, in the past year.

* Forty-nine percent said there are not enough appraisers to meet the need.

* Banks are not experiencing significant losses on commercial real estate loans at or below $500,000.

But Kelly was skeptical about the findings. He cited a study by the Consumer Federation of America that found there were few problems with delays and rising costs.

CFA this year surveyed 80 firms in 20 cities and found "no evidence of added costs that should substantially alter the price of appraisals for the consumer. The survey also provides substantial indication that full implementation of the FIRREA regulations will not create shortages in the supply of qualified appraisers.

He also said a flat threshold figure of $500,000 made even less sense than does a lower flat rate for residential real estate.

He said the complexity of commercial projects is such that two projects on which loans of the same amount are being sought could require substantially different levels of expertise.

The ABA sent the results of its survey to the Office of Management and Budget, which is mandated by Congress to study whether a separate threshold is needed for commercial real estate. Kelly said his group also has been in contact with the ABA.

Kelly said many financial institutions are finding that many of their real estate officers need relatively little additional training to become licensed or certified by the states.

To be licensed, he said, a person typically must have 75 hours of training and to be certified about 165. In addition, states usually require that the individual have about 2,000 hours of experience.

Licensed appraisers are allowed to do appraisals for one- to four-family properties where the transaction value is $1 million or less, and on commercial properties where the value is less than $250,000. Certified appraisers face no value limits.

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