Federal financial regulators have announced that they hare taking steps to impose minimum requirements on appraisal management companies.
Section 1124 of the Financial Institution Reform, Recovery, and Enforcement Act of 1989, as updated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, prohibits the use of AMCs on federally related transactions in states with no AMC regulation in place.
That would include “real estate-related financial transactions overseen by a federal financial institution regulatory agency that require appraiser services.”
For those states that do have a regulatory structure in place, a rule is being proposed that would implement minimum requirements for state registration and supervision of AMCs.
The regulators proposing the rule are the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corp., Federal Housing Finance Agency, National Credit Union Administration and Office of the Comptroller of the Currency.
The proposed rule would require AMCs to only utilize competent, independent, state-certified or -licensed appraisers.
AMC appraisals would have to be in compliance with the Uniform Standards of Professional Appraisal Practice.
AMCs would be required to establish and comply with processes and controls that would ensure appraisal reports meet the appraisal independence standards established under the Truth in Lending Act.
Qualified state AMC regulators would be required to approve or deny initial and renewal AMC registration applications. They would need to examine AMCs and require that the AMCs submit relevant information to the state.
They would also have to investigate AMCs to o assess potential violations of appraisal-related laws and discipline AMCs that violate such laws. Reports would have to be made to the Appraisal Subcommittee of the Federal Financial Institutions Examination Council.
In addition, state regulators would have to verify that AMC panel and network appraisers hold valid state certifications or licenses.
Under the proposed rule, state regulators will have 36 months from the effective date to implement minimum requirements.
Although AMCs that are owned by a financial institution and regulated by federal financial institution regulatory agency wouldn’t have to register with a state, they would need to meet the same minimum requirements as other AMCs.
In conjunction with the proposal, the FDIC and the OCC propose to rescind appraisal regulations promulgated by the former Office of Thrift Supervision.
