Today, the Federal Reserve issued an interim final rule and request for public comment regarding real estate appraisals, implementing Section 1472 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The interim rule is intended to protect the integrity of the real estate appraisal process when a consumer’s home is securing a loan and ensure that real estate appraisers receive customary and reasonable payments for their services.
The interim final rule contains the following notable provisions:
- Prohibits coercion and other similar actions designed to cause appraisers to base the appraised value of properties on factors other than their independent judgment;
- Prohibits appraisers and appraisal management companies hired by lenders from holding financial or other interests in properties or credit transactions;
- Prohibits creditors from extending credit based on appraisals if the creditors are aware beforehand of violations involving coercion or conflicts of interest, unless the creditors determine that the values of the properties are not materially misstated;
- Requires creditors and settlement service providers that are aware of appraiser misconduct to file reports with the appropriate state licensing authorities; and
- Requires the payment of reasonable and customary compensation to appraisers who are not employees of the creditors or the appraisal management companies hired by the creditors.
Compliance with the interim final rule will become mandatory on April 1, 2011. Public comments to the interim final rule are due 60 days after the interim final rule is published in the Federal Register, which is expected to take place soon.