Six federal agencies jointly issued a proposed rule March 24 that would implement minimum requirements for state registration and supervision of appraisal management companies.
The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, the Federal Housing Finance Agency and the National Credit Union Administration collaborated on the rule, which was proposed in accordance with section 1124 of Title XI of the Financial Institution Reform, Recovery, and Enforcement Act of 1989, as added by section 1473 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The proposed minimum requirements would only apply to states that establish an appraiser certifying and licensing agency with the authority to register and supervise AMCs. The proposed rule does not compel states to establish an AMC registration and supervision program or penalize them for not doing so. However, AMCs would be barred from providing appraisal management services for federally related transactions in states without such a program.
Under the proposed rule, participating states would require that an AMC:
• Register in the state and be subject to its supervision;
• Use only state-certified or licensed appraisers for federally related transactions, such as real estate-related financial transactions overseen by a federal financial institution regulatory agency that require appraiser services;
• Require that appraisals comply with the Uniform Standards of Professional Appraisal Practice;
• Ensure selection of a competent and independent appraiser; and
• Establish and comply with processes and controls reasonably designed to ensure that appraisals comply with the appraisal independence standards established under the Truth in Lending Act.
The proposed rule also would require that a state’s certifying and licensing agency have certain authorities, including the authority to:
• Approve or deny initial AMC registration applications and applications for renewals;
• Examine the AMC and require it to submit relevant information to the state;
• Verify that appraisers on the AMC’s appraiser network or panel hold valid state certifications or licenses;
• Conduct investigations of AMCs to assess potential violations of appraisal-related laws;
• Discipline an AMC that violates appraisal-related laws; and
• Report an AMC’s violation of appraisal-related laws, as well as disciplinary and enforcement actions, and other pertinent information about an AMC’s operations to the Appraisal Subcommittee of the Federal Financial Institutions Examination Council.
The proposed rule would allow participating states 36 months to implement the minimum requirements after the rule takes effect. An AMC that is a subsidiary of a financial institution and regulated by a federal financial institution regulatory agency is required to meet the same minimum requirements as other AMCs but it would not have to register with the state.
The Appraisal Institute’s Government Relations Committee is reviewing the proposed rule and will respond to the agencies’ request for comment. An initial review indicates the proposing agencies did a good job in identifying a strong definition of appraisal management companies that clearly differentiates them from appraisal firms. Other issues under review relate to specific authorities granted to state appraiser regulatory agencies, including the extent that boards can enforce appraisal independence requirements, including issues relating to customary and reasonable fees.
Read a copy of the proposed AMC rule.