Pub. 6 2016-2017 Issue 5

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S March • April 2017 5 Where Have All the Appraisers Gone? ` I n 2007, Colorado had 3,431 licensed and certified apprais - ers, but in 2016 that number dwindled close to 2,500, according to the Colorado Division of Real Estate. Na- tionally, the percentage of appraisers has fallen by 22 percent since 2007, according to the Appraisal Institute. Last year, the state of Colorado issued just 52 new licenses or approved an upgrade of a licensed appraiser to certified. In the fall of 2016, the number of new entrants or upgrades was running around 37, the bulk of which were upgrades rather than new licensees. Our communities are feeling the impact of the declining trend in this important profession. The appraiser shortage is leading to lengthier and more expensive closing processes. Research conducted in the fall by the Denver Metro Associ- ation of Realtors showed that the cost to appraise a standard home in metro Denver, which ran around $350 a few years back, has now started to reach the $1,000 mark. At the same time, closing deadlines are being pushed back because of the shortage of appraisers, particularly in rural areas. Some have reported it taking up to seven weeks to get an appraisal done. Homes purchased with conventional loans saw closing times rise to 43.2 days in September 2016 from 39.3 days a year earlier. Factor in that the population of Colorado’s appraisers has an average age of 64 (nationally the average age is 53), with fewer people entering into the profession, and it is evident that these challenges may get worse before improving. There are a number of factors influencing the declining population of appraisers. Like many professions tied to the economy, the appraisal profession is cyclical. Swings in volume can impact the entrants to the profession. In addition, in order to receive a license, trainees need towork under the supervision of a licensed appraiser. While this provides valuable learning for the trainee, licensed professionals often viewed this as training for future competitors, which lessens the appetite for mentoring that occurs during this important phase. This results in less pay being offered for trainee services and lesser transfer of knowledge for those seeking to enter the profession. The fallout from the 2007 economic crash had a significant impact on the population of appraisers. When the housing market collapsed, many appraisers deserted the profession to find other work. In an effort to address the problems that arose leading up to the crisis, the pendulum swung too far. Dodd- Frank, the regulatory agencies and government sponsored entities all brought forward their own additional restrictions and requirements relative to appraisals. Appraisers were subject to more severe regulatory oversight and enforcement actions. In addition, the criteria for becoming licensed or certified became more stringent in an effort to strengthen the profession. The layering of all of these corrective measures raised the barriers to entry relative to the risks and set the course for the challenge being faced today. While there isn’t much that can be done at the state level to address the problem, efforts are underway at the federal level to reevaluate the policies that have negatively impacted the profession. The Appraiser Qualifications Board (AQB) of The Appraisal Foundation, the leading body responsible for establishing credentials in the industry, is proposing changes to its Real Property Appraiser Qualification Criteria that include eliminating the requirement for graduation from a four-year college and reducing the length of time a new appraiser must spend being mentored by a certified appraiser. The federal banking regulatory agencies are considering raising the trans- action threshold for which an appraisal must be obtained in order to provide more flexibility for valuing real property on smaller dollar transactions. Even if both of these reasonable proposals are approved, it will still take time to impact the availability of appraisers. Similar to our efforts on other areas of regulatory reform, our industry needs to actively participate in this important segment to ensure that regulations are reasonable and pro- vide the appropriate balance. That way, we can ensure that the needs of our communities can be met at a fair price, in a reasonable time, while still protecting the safety and soundness of the lenders. n David Kelly FirstBank 2016-2017 CBA Chairman Chairman’s Message