Final Rules On Appraisal Management Companies
The MBA reports that an interagency group consisting of the Federal Reserve Board, FDIC, FHFA, CFPB, NCUA and OCC has issued a final rule proposal establishing minimum requirements for Appraisal Management Companies. This rule creates standards for federally regulated and non-federally regulated AMCs. are jointly proposing a rule to implement the minimum requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act or Act) to be applied by States
These agencies are jointly proposing a rule to implement the minimum requirements in the Dodd-Frank and Consumer Protection Act to be applied by States during the registration and ongoing supervision of appraisal management companies. The proposed rule also implements the requirement in the Dodd-Frank Act for States to report to the Appraisal Subcommittee of the Federal Financial Institutions Examination Council (FFIEC) the information required by the Appraisal Subcommittee (ASC) to administer the new national registry of appraisal management companies (AMC National Registry or Registry). In conjunction with this implementation, the FDIC is proposing to integrate its appraisal regulations for State nonmember banks and State savings associations.
36 months after the effective date of the new rule, any AMC (appraisal management companies) that has 15 or more state certified or state licensed appraisers on their panel in a state ( or 25 or more appraisers in 2 or more states) may not provide appraisal services for a federally-related transaction in a state UNLESS the AMC is registered within the state or is subject to oversight by a federal financial institution’s regulatory agency through its ownership and control by a federally regulated insured depository institution. If a state is making a good faith effort to establish an AMC registry, the ASC may provide an additional 12 months for that state to comply with the new rule
It’s important to recognize that this rule does not require states to establish standards for non-federally regulated AMCs. Thus, non-federally regulated AMCs would be prevented from providing appraisal management services for a lot of transactions in states where regulatory structures are not implemented.
Highlights of the rule include:
Independent Contractor Definition: The rule revises the standard used to determine if an appraiser is an independent contractor based on whether or not the appraiser is treated as an independent contractor by the AMC for federal income tax purposes.
AMC/Appraisal Firm Distinction: The rule distinguishes between AMCs and appraisal firms based on their respective use of fee appraisers and employees. Each employee appraiser must pay a registration fee to the state or states where they practice. An AMC will only be subject to a registration fee once state registration and supervision regulations become effective pursuant to Dodd-Frank. The rule also provides coverage for “hybrid” firms, meaning entities that both hire appraisers as employees to perform appraisals and engage independent contractors to perform appraisals.
AMC Panel Threshold Size: The rule clarifies that when the number of appraisers is counted for the purpose of determining the size of an AMC’s panel threshold, that the count be based on the number of appraisers listed on the roster who potentially are available to perform appraisals and not on the number of appraisers actually engaged to perform appraisals.
Trainee Appraisers Not Barred: The rule clarifies that AMCs may engage appraisers who use trainee appraisers to assist on assignments.
John Brenan, Director of Appraisal Issues at The Appraisal Foundation, states “It is our belief that the terms “reviewing” and “verifying” lack specificity that could result in confusion in the
marketplace. In addition, without further specificity there may be a risk of protection to the public”.
Currently, the MBA is analyzing the rule and all state laws to determine which states have already implemented AMC rules that meet the new minimum requirements.
View a copy of the final rule for Minimum Requirements for Appraisal Management Companies.