ALEXANDRIA, Va.—NCUA, along with five other federal agencies, Monday released a proposed rule around implementing minimum requirements for state registration and supervision of appraisal management companies (AMCs) that serve as intermediaries between appraisers and lenders.
According to a provision in the Dodd-Frank Act and part of the 1989 Financial Institution Reform, Recovery and Enforcement Act, the minimum requirements in the proposed rule would apply to states which elect to establish appraiser certifying and licensing agencies with the authority to register and supervise AMCs.
The proposed rule would not force states to establish AMC registration and supervision programs, and no penalties are imposed on states that do not establish regulatory structures for AMCs.
But AMCs are barred (by a section 1124 of Title XI of the 1989 Financial Institution Reform Act) from providing appraisal management services for federally related transactions in states that have not established those regulatory bodies.
NCUA joined with the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corp., the Consumer Financial Protection Bureau, and the Federal Housing Finance Agency in issuing the rule.
During last week's NCUA Board meeting, Chairman Debbie Matz said the Dodd-Frank-mandated rulemaking focuses on the need uncovered by the financial crisis to prevent conflicts of interest and fraud in real estate appraisals, but lamented NCUA's lack of power to oversee them.
"We have made it quite clear to Congress it would be good for us to have vendor authority," NCUA spokesman John Fairbanks told Credit Union Journal following the board meeting
Specifically, under the rule as it has been proposed, participating states would require that AMCs:
- Register in the state and be subject to supervision;
- Use only state-certified or licensed appraisers for federally related transactions, such as real estate-related financial transactions overseen by a federal financial institution regulatory agency that require appraiser services; and
- Require that appraisals comply with the Uniform Standards of Professional Appraisal Practice;
- Ensure selection of a competent and independent appraiser; 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.
Certifying and licensing agencies of participating states would also have certain authorities, including:
- Approve or deny AMC registration applications and applications for renewals;
- Examine and require AMCs to submit relevant information to the state;
- Verify that AMC's appraiser network or panel hold valid state certifications and licensure;
- Investigate AMCs when necessary to assess potential violations of appraisal-related laws; and
- Discipline AMCs found to have violated the law.
If adopted in its current version, the rule would allow participating states 36 months from the date it goes into effect to implement minimum requirements.
With the release of the proposed rule, all six agencies are seeking comment during a 60-day public review period.
—Ted Knutson contributed to this article
