Banking Agencies Issue Proposed Rules for Appraisal Management Companies, as Required under Dodd-Frank

by Williams Mullen

On Wednesday, April 9, 2014, the Office of the Comptroller of the Currency, the Federal Reserve System, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau and the Federal Housing Finance Agency issued proposed rules to implement the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Act”) described below.  Comments on the proposed rules must be received by June 9, 2014.
Section 1473 of the Act establishes minimum requirements to be applied by States in the registration and supervision of “appraisal management companies” (“AMCs”).  The definition of an AMC is an individual, business entity, trust, or governmental unit that (i) provides “appraisal management services” to creditors or secondary mortgage market participants in connection with valuing a consumer’s principal dwelling as security for a consumer credit transaction (including those that are securitized), and (ii) within a given year, oversees an “appraiser panel” of more than 15 State-certified or State-licensed appraisers in two or more States.  “Appraisal management services” means (i) recruiting, selecting and retaining appraisers, (ii) contracting with licensed or certified appraisers to perform appraisals, (iii) managing the process of performing an appraisal, or (iv) reviewing or verifying the appraiser’s work.  The above terms themselves (as well as other defined terms) are proposed, and comment from the public is requested on all aspects of the proposed definitions.
The proposed rules address the following main areas:

  1. Membership in Appraiser Panels.  These rules address the point at which an appraiser is considered to be on the panel, as well as no longer on the panel, and the procedures for removing an appraiser.
  2. Minimum Requirements for Registration and Supervision.  Participating States must have in place, within the State, an appraiser certifying, licensing, enforcement and disciplinary program with appropriate authority to carry out these functions. 
  3. Minimum Requirements for State-registered AMCs.  A Participating State must ensure that AMCs follow certain enumerated minimum requirements listed in the proposed regulation, including registration with the State agency that supervises appraisers in each State in which the AMC operates, verification that only State-certified or State-licensed appraisers are used in a transaction in which such appraisers are required, and maintenance of controls and procedures designed to ensure that only competent appraisers are retained. 
  4. Minimum Requirements for Federally Regulated AMCs.  AMCs that are owned and controlled by a federally regulated depository institution or credit union are not required to be licensed with a State.  These AMCs are nonetheless subject to the same requirements as those regulated by a State.  In addition, these federally regulated AMCs must provide, to the appropriate regulator in each State in which the AMC operates, the information required by the Appraisal Subcommittee of the FFIEC for administration of the AMC National Registry. 

Affected companies and other interested persons may comment, and should do so if they think that these guidelines, or the specifics of the implementation of these guidelines as published in the notice, will have an adverse effect on their businesses.  According to the notice of proposed rulemaking, there are various methods for the submission of comments, and each of the above agencies has its own contact information and procedures.  Those commenting should review pages 19521 and 19522 of the Federal Register dated April 9, 2014 (Volume 79, Number 68) for instructions.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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