The alphabet soup of regulatory agencies (OCC, FRB, FDIC, CFPB, FHFA and NCUA) have issued a set of rule proposals that would apply basic standards for state registration and supervision of appraisal management companies (AMCs). This new criteria would only be applicable to states that decide to create an appraiser certifying and licensing agency to register and supervise AMCs. While the proposed rule doesn’t require such an agency, and there’s no penalty in place for not doing so, we all know that the bureaucracy never met a new revenue stream that it didn’t like. As an “incentive” to the states to be persuaded to create such a supervising structure, Appraisal Management Companies would be essentially prohibited by the Dodd Frank Act ( 1124 of FIRREA) from providing services for federally related transactions (Freddie and Fannie, anyone?) in a state that hasn’t set up such a department. So its fair to say it’s a sure thing coming to a state near you.
Once the ruling goes into effect after commentary and amendment, the states that take up the regulatory banner would oblige that an Appraisal Management Company:
<taken directly from the joint release>
States that elect to set up the new agency/registration process would have 36 months to put their house in order. Any Appraisal Management Company that is a subsidiary of a bank or related financial institution and is regulated by one of the agencies are going to have to adhere to the same requirements as any other company, although (for now) they are not required to register….look for that to change down the road.
On a related note, the FDIC and OCC are looking to eliminate any remaining appraisal regulations that were in use by the now defunct Office of Thrift Supervision (OTS), as they are now unnecessary.
When the joint appraisal guidance came out several years ago, many smaller (and some larger) community banks were hamstrung by the requirements, especially the independence and review criteria. The AMCs came about to fill a much needed void, and in some respects, have performed the service for many admirably. However, since their fingers are now in the collective regulatory pie, it only stands to reason that they play on the same field as the banks who don’t elect to employ their services. The requirements appear reasonable, and most companies already use these practices. However- these companies will have to expect being examined by state and possibly federal regulatory agencies down the road, and had better be prepared for that eventuality.
The Federal Register notice link can be found here:
Manager, Lending and Lending Compliance
Thomas LaChac is Manager of P&G Associatesâ€™ Lending and Lending Compliance team, and brings a wide range of experience in regulatory underwriting, quality assurance, regulatory compliance management and the banking and mortgage industries.