The appraisal management industry has been subject to hefty regulation in years past, and the 2015 requirements follow suit in implementing even tighter standards. With such strong regulatory pressures fundamentally impacting the way financial institutions manage the appraisal function, it’s important to have a strong grasp on what these new AMC requirements entail. The final rule effective date was on August 10, 2015 and federally regulated AMC’s must comply with the minimum requirements for providing appraisal management services under 12 CFR 34.215 (a) no later than 12 months from the effective date of this final rule. The participating state or states in which a state-regulated AMC operates should have established the compliance deadline for state-regulated AMCs.
Six different agencies took active part in crafting these new requirements. The Office of the Comptroller (OCC), Board of Governors of the Federal Reserve System (Board), FDIC, NCUA, Bureau of Consumer Financial Protection (Bureau), and the Federal Housing Finance Agency (FHFA), collectively, the Agencies, have adopted a final rule to implement the minimum requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act applied by participating states in the registration and supervision of appraisal management companies (AMCs).
The final rule also implemented the minimum requirements in Dodd-Frank for AMCs that are subsidiaries owned and controlled by an insured depository institution and regulated by a Federal financial institutions regulatory agency. Under the final rule, these federally regulated AMCs do not need to register with a state, but are subject to the same minimum requirements as state-regulated AMCs. The final rule also implemented the requirement for states to report to the Appraisal Subcommittee (ASC) of the FFIEC the information required by the ASC to administer the new national registry of AMCs. In conjunction with this implementation, the FDIC is integrating its appraisal regulations for state nonmember banks and state savings associations.
Federally regulated AMCs, an AMC that is a subsidiary owned and controlled by an insured depository institution and regulated by a Federal financial institutions regulatory agency, is subject to all of the minimum requirements (see below), except the requirement to register with a state.
State AMCs doing business in the state specifically pursuant to section 1124(a) must meet the basic requirements.
The final rule requires institutions do the following:
- Register with and be subject to supervision by the state appraisers certifying and licensing agency in the state or states in which the company operates
- Verify that only state-certified or state-licensed appraisers are used for federally related transactions
- Require that appraisals comply with the Uniform Standards of Professional Appraisal Practice (USPAP)
- Require that appraisals are conducted in accordance with the statutory valuation independence standards pursuant to the Truth in Lending Act (TILA) and its implementing regulations
While August 2016 may seem like a long way off now, it is worthwhile to make sure the new AMC requirements are on your financial institution’s agenda to make sure your appraisal management company is ready to go when the time comes.
Jane Pannier is senior vice president and in-house counsel for AffirmX LLC, a developer of an innovative remote compliance review solution.