The Appraisal Foundation (TAF) was created after the Savings and Loan’s cratered in the 1980’s. The Reagan administration deregulated banks and S&L’s, which allowed S&L’s to offer commercial real estate loans. Before deregulation, S&L’s were primarily residential mortgage lenders, and they were very good at it, accumulating billions of dollars in residential loans.
When Ronald Reagan deregulated S&L’s, it allowed them to invest in commercial real estate loans, a property type they were unfamiliar with. As a result of commercial real estate loans and other economic factors, they lost billions. They lost so much money they bankrupted their insurance fund, and turned to taxpayers to bail them out.
Congress did bail the S&L’s out through a series of laws know collectively as FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989). Part of FIRREA was Title XI, which created the Appraisal SubCommittee (ASC) to oversee appraisal standards. Also created in Title XI was The Appraisal Foundation (TAF).
The Appraisal Foundation are regulators, (appraisal police). They are bureaucrats created by Tile XI to regulate appraisers. This new bred of regulators has entrenched themselves into the very fabric of appraisal practice.
TAF requires particular standards of facts, descriptions, and scope of work, in addition to the type and definition of value, intended use of the report, intended users of the report, and other demands. To comply with these reporting requirements, TAF along with its sister organization the Appraisal Standards Board, has written Uniform Standards of Professional Appraisal Practice, (USPAP). USPAP is a document originally copyrighted in 1987 and is said to provide quality control to the appraisal industry. However every two years changes are made to USPAP, which effectively moves the goal posts with every new edition.
Every two years TAF regulators require that all licensed appraisers buy the new USPAP document and attend a mandatory class the appraiser must pay for. Each appraiser is then required to sit through a presentation by a certified instructor who will explain in excruciating detail TAF’s latest thought on how to do an appraisal. Amazingly, non of TAF’s 14 employees are appraisers, or have ever completed an actual appraisal assignment. After 30 years of USPAP, there is no evidence that TAF regulations have improved the appraisal industry. On the contrary, appraisers are leaving the industry in mass, and few new appraisers are willing to endure the appraisal licensing process, a process that is regulated by TAF’s sister organization, the Appraiser Qualifications Board.
Title XI changed everything for the real estate appraisal industry by creating bureaucrats at The Appraisal Foundation, which in turn has developed a series of regulations and “guidance” that impacts every facet of the typical appraiser’s work day. In essence, the deregulation of the S&L’s has led to burdensome regulation of appraiser’s – regulation that is slowly strangling the appraisal industry. It is ironic that deregulation of financial institutions during the Reagan administration has led to very tight and restrictive regulations on appraisers, which had comparatively little involvement with the original meltdown. It would make sense that if you want to impose regulations to insure fewer bank failures in the future, you should regulate the banks, not appraisers. Appraisers did not underwrite bad loans – bank staff did.