The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA) were concerned enough on several appraisal issues that they released a joint statements in 2003 and 2005.
The October 28, 2003 statement addressed concerns over the independence of appraisers. [note: pdf].
The agencies’ appraisal regulations address appraiser independence and require that an institution, or its agent, directly engage the appraiser. The only exception to this requirement is that an institution may use an appraisal prepared for another financial services institution, provided that the institution determines that the appraisal conforms to the agencies’ appraisal regulations and is otherwise acceptable. Independence is compromised when an institution uses an appraiser who is recommended by the borrower or allows the borrower to select the appraiser from the institution’s list of approved appraisers.
The March 22, 2005 statement addressed concerns over the transferring re-assigning appraisals [note: pdf].
Highlights (Q & A Format)…
- May an appraisal be routed from one lender to a regulated institution via the >borrower?
Answer: A regulated institution cannot accept an appraisal from the borrower unless the regulated institution can confirm that the appraisal was in fact ordered by another regulated institution or financial services institution. In accepting the appraisal, the regulated institution must also confirm that the appraiser is independent of the transaction and that the appraisal conforms to the agencies’ >appraisal regulations and is otherwise acceptable.
- Can a borrower pay the appraiser directly for an appraisal that is ordered by the lender?
Answer: Since the regulated institution has engaged the appraiser for its services, the regulated institution should be the party to remit payment to the appraiser. The regulated institution may seek reimbursement from the borrower for the cost of the appraisal. However, the borrower may not recommend an appraiser to the institution or select the appraiser.
Tags: Soapbox Blog, Appraisal Pressure, Mortgage Fraud