This letter responds to a requirement in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that we report within 90 days on the status of a GAO study mandated by the act on real estate appraisal issues. Enacted on July 21, 2010, the act requires us to study the effectiveness and impact of options for selecting appraisers, different valuation methods, and the Home Valuation Code of Conduct (HVCC), which was designed to enhance appraiser independence. The act requires us to report to Congress on the results of our study within 12 months. For this engagement, we are focusing on appraisals of one-to-four unit residential properties. We have grouped the study objectives listed in the act under four broad questions: (1) How often are different options for selecting appraisers and valuation methods used? (2) What are the potential advantages and disadvantages of these options and methods, and how do policies, including HVCC, affect their use? (3) To what extent do valuation costs and disclosures to consumers vary by appraiser selection option and valuation method, and how has HVCC affected these costs and disclosures? (4) How do federal and lender policies, including HVCC, address conflicts of interest in the valuation process, and how have these policies affected industry stakeholders?

We are continuing our efforts to develop methodologies to answer these questions. These efforts include evaluating potential data sources, analyzing federal policies and academic and industry research, and interviewing federal agency officials and appraisal industry stakeholders. Our preliminary work suggests that comprehensive data may not be available for all aspects of our study. To the extent that we encounter data limitations, our final report will discuss their impact on our analysis and findings.