According to recent reports, the Consumer Financial Protection Bureau (CFPB) could soon finalize an interagency proposed rule that would set minimum requirements for the state registration and supervision of appraisal management companies (AMCs). Proposed last March by the OCC, Board of Governors of the Federal Reserve System, FDIC, CFPB, FHFA, and NCUA, little has been said about the progress of the mandate until recently.
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 Act—the minimum requirements in the proposed legislation would apply to states that elect to establish an appraiser certifying and licensing agency with the authority to register and supervise AMCs.
States will not be required to establish an AMC registration and supervision program, and there will be no penalty imposed on a particular state that doesn’t establish a regulatory structure for AMCs. With that said, and AMC is prohibited by section 1124 from providing appraisal management services for federally related transactions in a state that hasn’t established such a regulatory structure.
Under the proposed rule, participating states would require AMCs to:
- 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 (USPAP).
- Ensure selection of a competent and independent appraiser.
- 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 would also require that the certifying and licensing agency of a participating state have the authority to:
- Approve or deny initial AMC registration applications, as well as applications for renewals.
- Examine the AMC and require the AMC to submit relevant information to the state.
- Verify that the appraisers on the AMC’s appraiser network or panel hold valid state certifications or licenses.
- Conduct investigations on AMCs to assess potential violations of appraiser-related laws.
- Discipline an AMC that violates appraiser-related laws.
- Report an AMC’s violation of appraiser-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.
Participating states would be given 36 months after the official effective date of the new rule to implement the minimum requirements outlined above. An AMC that is a subsidiary of a financial institution and regulated by a federal financial institution agency will also be required to meet the same minimum requirements as independently owned AMCs – although they will not be required to register with a state.