An appraisal rule that becomes mandatory in less than six months addresses appraisal independence, the compensation of appraisers and a requirement to report bad appraisals.
An interim final rule for appraisal independence was announced Monday.
The release of the interim rule follows Fannie Mae’s release last week of the Appraisal Independence Requirements, which replaces the Home Valuation Code of Conduct. Fannie noted that lenders would still be subject to HVCC until interim final rules were released.
The interim final rule becomes mandatory on April 1, 2011, according to the Federal Reserve Board. It is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The rule amends Section 129E of the Truth in Lending Act.
The Fed said the rule will ensure that appraisers “are free to use their independent professional judgment in assigning home values without influence or pressure from those with interests in the transactions.” It is also designed to ensure that appraiser compensation is “customary and reasonable” if the appraiser is not an employee of the creditor or an employee of an appraisal management company hired by the creditor.
AMCs cannot have any interest in properties appraised, the Fed indicated.
The rule prohibits appraiser coercion. Lenders are required to not to fund a loan if violations of the rule are known, while creditors and settlement service providers are required to report appraiser misconduct to the respective state licensing authority.
Public comments are being accepted for 60 days after the upcoming publication of the rule in the Federal Register.
