WASHINGTON -- The banking industry is mounting a full-court press to block legislation its leaders say would mandate increased use of costly appraisals for small mortgage loans.

"We find the amendment to be ourtrageous, quite frankly," said Edward L. Yingling, chief lobbyist for the American Bankers Association.

"We are launching a major grass roots campaign against it," he added.

However, supporters said the amendment merely would ratify what Congress did in the 1989 Financial Institutions Reform, Recovery and Enforcement Act, the savings and loan bailout law.

"The bill does not attempt to micromanage the banks or regulators," said an aide to Rep. Charles E. Schumer, D-N.Y., a sponsor of the amendment.

"It ought to be up to the lender and their regulator to decide when an appraisal is needed," the aide added. "We're needed," the aide added. "We're just saying that if an appraisal is used, it has to be done by a licensed appraiser."

Mandate Seen

Bank lobbyists, however, said the language of the bill -- which will be offered as an amendment to the Housing Reauthrization Act -- will have the effect of mandating appraisals for loans below the $250,000 minimum proposed by the agencies.

"This is a full-employment act for appraisers," said Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America. "It says a loan officer can't act as appraiser on loans below $250,000."

"It's just not practical to have formal appraisals on every loan that comes down the pike," added Joe Below, president of the Consumer Bankers Association.

The amendment would require the use of state-licensed or certified appraisers whenever an estimate of value is made on a mortgage loan, according to the Schumer aide. The measure also would permit regulators to decide when something less than a full-blown appraisal could be used.

Powerful Backing

The amendment is sponsored by a powerful group of House Banking Committee members, including Rep. Henry B. Gonzalez, D-Tex., the panel's chairman, and Rep. Floyd Flake, D-N.Y., chairman of the oversight and investigations subcommittee. The other two sponsors are Rep. Schumer and Rep. Peter Deutsch, D-Fla.

"There are four very powerful names tied to the amendment," said Mr. Guenther, "We'll just have to fight it every step of the way. If we lose before the full committee we'll fight on the House floor."

The Housing bill was approved by the housing subcommittee last month, and is expected to come before the full House Banking Committee in the next two weeks.

Against President's Plan

ABA's Mr. Yingling said the costs of appraisals likely would be passed on to borrowers, raising the cost of borrowing.

"President Clinton stood in the White House in March to announce a program to beef up lending, and a specific item in that was appraisals, said Mr. Yingling, noting that the White House program called for fewer appraisals.

"This just goes backward."

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