Appraisal Institute testifies in Congress on credit crunch.

More market-efficient and safety conscious ways to help banks ease credit and reduce unnecessary regulatory burdens were brought before the House Subcommittee on Commerce, Consumer and Monetary Affairs by the Appraisal Institute.

The Appraisal Institute's testimony followed credit crunch meetings held last week with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of Thrift Supervision, and banking officials.

Appraisal Institute President Bernard J. Fountain, MAI, SRA, applauded the Clinton Administration's initiative in trying to eliminate those arduous regulatory hurdles that create unnecessary paperwork, add costs, and hinder credit to small businesses. "There are a number of steps that can be taken to streamline and improve the appraisal process while keeping the safety and soundness of lending institutions and the lending process intact," Fountain said.

Some of the recommendations made by the Appraisal Institute include:

* Reducing administrative burdens by eliminating compliance with dupl icative appraisal standards established by regulatory agencies in 1990

* Reducing costs and time by utilizing the departure provision of USPAP, which in specific circumstances allows for limited appraisal

* Helping to facilitate credit-related and regulatory decisions by eliminating the accounting term "fair value" and utilizing valuation definitions which more accurately reflect value in depressed real estate markets

* Avoiding duplication of effort, administrative paperwork, and unnecessary costs by establishing state licensing and certification reciprocity agreements

* Avoiding delays, increased costs, and faulty appraisals by supporting full disclosure of real estate sales data uniformly across the country

Fountain notes that a considerable portion of President Clinton's package will have a positive impact on the entire lending process. "But the risk of winning the battle and losing the war is extremely high if the administration does not act cautiously," Fountain warned. "One case in point is the proposal to raise the appraisal thresh old level from $100,000 to $250,000 It is a shortsighted solution that could result in disastrous consequences for everybody including lending institutions, depositors," stockholders, home buyers, and taxpayers."

"Raising-or even maintaining the current appraisal threshold of $100,000, below which a licensed certified appraiser is not required endangers the health of our nation's financial institutions and eliminates a important consumer protection, particularly for those individuals who may be subject to improper discriminator lending practices," Fountain explained. "The current $100,000 threshold effectively allows lenders to avoid state enforcement provisions and appraisal industry standards for over 50 percent of home sales and 45 percent of com mercial transactions."