The federal banking agencies along with the CFPB, NCUA and Federal Housing Finance Agency jointly have issued a proposed rule that would implement minimum requirements for state registration and supervision of appraisal management companies (“AMCs”). Under the joint proposed rule released on March 24, each state that has elected to establish an appraiser certifying and licensing agency with authority to register and supervise AMCs (“participating states”) would require AMCs to register in the state, use only state-certified or licensed appraisers for federally related transactions and require that appraisals comply with the Uniform Standards of Professional Appraisal Practice (“USPAP”). The proposed rule would also require AMCs to establish and comply with processes and controls reasonably designed to ensure the selection of an independent appraiser with the requisite education, expertise and experience to competently complete the appraisal assignment and 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 also would require that the state certifying and licensing agency have certain authorities, including the authority to approve or deny AMC registration applications, examine AMCs, and verify that the appraisers on each AMC’s appraiser network or panel hold valid state certifications or licenses. Comments on the proposed rule will be due within 60 days after the proposed rule is published in the Federal Register, which is expected shortly.
Nutter Notes: The proposed joint rule would not compel a state to establish an AMC registration and supervision program. However, beginning 36 months from the time the agencies issue a final AMC rule, AMCs will be prohibited from providing services for any federally related transaction in a state unless the AMC is registered with that state or is subject to oversight by a federal financial institution regulatory agency. The proposed rule would implement the requirements of Section 1473 of the Dodd-Frank Act, which added Section 1124 to the Financial Institution Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”). Under Section 1124 of FIRREA, states that elect to establish an appraiser certifying and licensing agency with authority to register and supervise AMCs must require that AMCs register with and be subject to supervision by the state agency, verify that only state-certified or state-licensed appraisers are used for federally related transactions, require that appraisals comply with USPAP, and require that appraisals are conducted in accordance with the statutory appraisal independence standards under the Truth in Lending Act. FIRREA defines a federally related transaction to include a credit transaction involving a federally regulated depository institution that requires the services of an appraiser. Consistent with Section 1124 of FIRREA, an AMC that is a subsidiary of a financial institution and regulated by a federal financial institution regulatory agency would be required to meet the same minimum requirements as other AMCs, but would not be required to register with a state.