Sen. Paul Sarbanes, D-Md., ranking member of the Senate Committee on Banking, Housing and Urban Affairs, opened a hearing by the Committee's Housing and Transportation Subcomittee on Capitol Hill Wednesday by citing Assistant U.S. Attorney Joe Evans' contention that bad appraisers are the "enablers" of predatory lending such as has plagued Sarbanes' constituents in Baltimore in recent years.

"I have spoken to a number of very reputable appraisers in Maryland who abhor this process, and who are working hard to eliminate these bad actors from their midst," Sarbanes said. "But they need help."

The hearing featured testimony from Dave Wood from the U.S. General Accounting Office, which conducted a year-plus investigation of FIRREA's appraiser regulatory structure and released a comprehensive report last May; Steve Fritts, chair of the Appraisal Subcommittee; Dave Bunton, executive vice president of the Appraisal Foundation; Alan Hummel, immediate past president of the Appraisal Institute; Eugene Kaczkowski, president of the ASA; and Charles Clark, Georgia real estate commissioner.

“The system FIRREA envisioned is broken and needs to be fixed if we are to avoid a financial crisis on the scale of the Savings and Loan disaster of the 1980s,” Hummel told the panel, alluding to the impetus for the Financial Institutions Reform, Recovery and Enforcement Act in the first place. "We are concerned with the quality of appraisals being used in our nation's mortgage financing system today. A fundamental goal of FIRREA was to raise the professionalism of appraisers involved in federally related real estate transactions; yet we have concluded that this goal has not been met," Hummel testified. "In fact, the result has been to promote a system that lessens the professionalism of appraisers rather than strengthens it."

Bunton defended Title XI of FIRREA as "working as intended." He pointed out that the Committee had responded to the recent corporate accounting scandals by establishing the Public Company Accounting Oversight Board (PCAOB). In light of recent financial reporting issues at Freddie Mac, he said, the Committee likewise was considering greater federal oversight of the GSEs. He said "To dilute or remove federal oversight [of the appraisal profession] at this time would be sending the wrong message at the wrong time."

The most robust testimony was from Clark, whose state Real Estate Appraisers Board favors the elimination of the Appraisal Subcommittee and returning to state control over appraiser qualifications. "Enacted with good intentions, Title XI today unnecessarily imposes on appraisers an unwieldy federal regulatory superstructure not imposed on other trades or professions. We urge Congress to replace that superstructure with a traditional, less costly framework," he said.

"Congress should not yield to the sirens’ song that 'continuing federal regulation will lead to increased quality in real estate appraisals,'" Clark said. "Quality of work product only improves significantly through the individual practitioner’s effort under the stimulus of the marketplace. State regulation can effectively establish minimum entry requirements and is removing dishonest and incompetent practitioners."

As he has been in the past, Clark was hard on the Appraisal Foundation. "The Appraisal Subcommittee and the Appraisal Foundation have chosen to make policy decisions in closed-door meetings as they strive directly or indirectly to impose 'one size fits all' policies on 55 regulatory jurisdictions and approximately 90,000 appraisers," he told the Subcommittee. "Such secrecy is not only inappropriate, but counterproductive because it causes a loss of public confidence in both the decision makers and the regulatory process."

Clark also charged that the Foundation engages in "profiteering" in its role as qualifications-setter. "Georgia’s appraisal schools tell us that they must pay the Appraisal Foundation at least $38.00 each time an appraiser takes a course on appraisal standards," he charged. "Under its putative Title XI authority, the AQB, a Foundation subsidiary, forces all appraisers to take that course as a condition for becoming or remaining classified. By using its regulatory authority to enhance its financial position, the Appraisal Foundation has misused and abused its regulatory role to reap nearly two million dollars a year from appraisers."

State insurance commissions, consumer groups and professional organizations offer advice on how to avoid being taken to the cleaners on your E&O insurance. Some of the most often cited tips:

• Check and see if the agent you're dealing with, and the insurance company, are licensed to do business in your state. Your state's department of insurance or related department will have contact information on the state's website and also in the blue pages.
• Never pay the agent, only the insurance company itself. When you write a check for a down payment or a premium, always make it out to your insurer. Beware agents who want you to make the check out to them personally. And never pay in cash!
• Relatedly, get a receipt for everything. Always get a written receipt following the payment of your premium that includes the name of the insurance company and the agent and/or agency.
• Never sign a form that includes blank spaces, even if the agent assures you they are just a formality.
• Ask for a copy of all documents. Especially, but not exclusively, anything you sign! Save every piece of paper explaining your coverage and your policy. Keep them on file with your policy. If the agent uses a laptop computer, insist on a hard copy version of what you were shown.
• If you do not receive a policy within two weeks of applying for insurance, contact the insurance company, and if necessary, your state's department of insurance.
• If a new policy replaces an old policy, make sure the old coverage is not terminated until the new policy has been issued.