Appraiser Groups Call Upon FDIC to Abandon BPOs in Loss Sharing Proposal


In a November 19 letter, the Appraisal Institute strongly urged the Federal Deposit Insurance Corporation to require the use of appraisals performed by licensed or certified appraisers as part of its program, Loss Sharing Proposal to Promote Affordable Loan Modifications. Currently, the program permits the use of broker’s price opinions to ascertain loan-to-value ratios as part of the modification of “underwater loans” – loans where the value of the collateral is less than the loan amount – that are in default.

The Appraisal Institute was joined by the American Society of Appraisers, American Society of Farm Managers and Rural Appraisers, and National Association of Independent Fee Appraisers in penning the letter.

While the letter supported the overall intent of the Loss Sharing Proposal – reducing the number of homes in foreclosure – the groups pointed out that use of a BPO for any purpose other than establishing a purchase or selling price of property is illegal in at least 24 states. Further, it was argued that FDIC regulations and guidance require the use of appraisals for loan modifications when there has been any material change in market conditions. Lastly, the groups mentioned that allowing the use of BPOs, which answer the question of price rather than value, was a significant step toward loosening valuation requirements at a time when the federal government should be ensuring that taxpayer “bailout” dollars are not exposed to unnecessary risk.


We recently created a limited restricted appraisal report specifically for this type of assignment. It isn’t right for all applications, but those that need a report that is less expensive, easy to review, but detailed enough to address the concerns of the client, have found it to be valuable.
Mike Dodds

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