Minimum Requirements for Appraisal Management Companies

Last week, the Office of the Comptroller of Currency (OCC) along with several agencies (including the Federal Reserve System, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, and the Federal Housing Finance Agency) proposed a new rulemaking document titled “Minimum Requirements for Appraisal Management Companies”. The proposed rules aim to set minimum standards for Appraisal Management Companies (AMC’s) and each State and make clear and consistent definitions, requirements, and oversight for AMCs.

Proposed Definitions

1. Appraisal Management Company: is defined as a person or business providing appraisal management services to creditors or secondary mortgage market participants and oversees a panel of 15 or more State Certified or Licensed Appraisers in one state or 25 appraisers in several States in a given year, in connection with residential mortgage transactions and securitizations involving residential mortgages on a primary residence. This umbrella now extends beyond federally related transactions.
2. Appraisal Management Services: means recruiting, selecting, and retaining state certified or licensed appraisers to perform appraisal assignments, and for the AMC to manage the process of having the appraisals performed, administration, and reviewing appraisals for quality control.
3. Appraisal firms: are comprised of groups of appraisers that perform appraisals as part of a single firm or partnership. Appraisal firms are different from AMCs as AMCs provide appraisal management services to third parties, including retaining appraisers to perform appraisals, but do not perform appraisals themselves. Under the new rules, AMC law would NOT apply to appraisal firms.
4. Hybrid AMCs: firms that have both a fee panel (contracting assignments), and employees (salaried under one business firm).  These firms will be considered as an AMC if the company oversaw more the 15 and 25 contract appraisers (excluding salaried employees) as noted above.

Proposed Requirements for Appraisal Management Companies

Under the proposed rules, participating appraisal management companies must fulfill the following requirements:

1. An AMC must register with, and be subject to supervision by, a State appraiser certifying and licensing agency in each State in which the AMC operates.
2. An AMC must verify that only State-certified or State-licensed appraisers are used when a creditor or secondary mortgage market participant engages in a transaction that requires the services of a State-certified or State-licensed appraiser.
3. An AMC must ensure that it selects an appraiser who has the requisite education, expertise, and experience necessary to complete competently the assignment for the particular market and property type.
4. 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.

Note: AMCs that are owned and controlled subsidiaries of an insured depository institution or an insured credit union and regulated by a Federal financial institutions regulatory agency, are not required to register with a State. These Federally regulated AMCs are, however, subject to the same minimum requirements as AMCs that are not regulated by a Federal financial institutions agency.

Proposed Requirements for States

Under the proposed rule, participating States must have in place within the State appraiser certifying and licensing agency a licensing program that has authority to:

1. Review and approve or deny an AMC’s application for initial registration;
2. Review and renew or refuse to renew an AMC’s registration periodically;
3. Examine the books and records of an AMC operating in the State and require the AMC to submit reports, information, and documents to the State;
4. Verify that the appraisers on the AMC’s appraiser list, network, panel, or roster hold valid State certifications or licenses, as applicable;
5. Conduct investigations of AMCs to assess potential violations of applicable appraisal-related laws, regulations, or orders;
6. Discipline, suspend, terminate, and refuse to renew the registration of an AMC that violates applicable appraisal-related laws, regulations, or orders
7. Report an AMC’s violation of applicable appraisal-related laws, regulations, or orders, to the ASC.

The new rules are a step in the right direction and clarify the grey areas of the Dodd-Frank bill pertaining to Appraisal Management Companies. These six agencies are seeking public comments on all aspects of the new rule and have granted a 60-day window for industry participants to submit their opinions, suggestions, and/or concerns. To submit your comment, visit:

https://www.federalregister.gov/articles/2014/04/09/2014-06860/minimum-requirements-for-appraisal-management-companies#footnote-14