Interagency advisory issued on appraiser availability
AML AND COMPLIANCE NEWS |
On May 31, 2017, the federal bank regulatory agencies, consisting of the Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), in conjunction with the National Credit Union Administration (NCUA), released an Interagency Advisory on the Availability of Appraisers (Advisory) to address concerns regarding a perceived shortage of state certified and licensed appraisers, with heightened concern in rural areas. Concerns were raised by representatives of the financial industry during the Economic Growth and Regulatory Papers Reduction Act (EGRPRA) review process regarding the ability to complete required appraisals in a timely manner due to limited availability.
Federal agencies require financial institutions to obtain real estate appraisals completed by a state certified or licensed appraiser for federally related transactions, with some specific exemptions. In practice, under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Title XI), for most 1-4 unit, single-family homes, a state-licensed appraiser can complete the appraisal, with state certified appraisers required for higher-dollar, more complex or unusual transactions.
The two existing options highlighted in the Advisory that may offer some relief for those areas facing state certified or licensed appraiser shortages are temporary practice permits and temporary waivers.
Under the temporary practice permit option outlined in section 1122(a) of Title XI, a state certified or licensed appraiser may apply to another state’s relevant state appraiser regulatory agency for a temporary practice permit. Once approved, the temporary permit would allow the appraiser to complete appraisals in states where they are not certified or licensed. The Advisory highlights that some states also offer reciprocity options in which a state acknowledges the licensing and certification of another state, allowing state certified and licensed appraisers to complete appraisals in both states.
Under the temporary waiver option outlined in section 1119 of Title XI, the Appraisal Subcommittee is authorized, after deliberation, determination of findings, and with the proper approval of the Federal Financial Institutions Examination Council (FFIEC), to grant temporary waivers of requirements relating to the certification or licensing of individuals to perform appraisals under Title XI for states with a significant shortage of appraisers leading to delays in obtaining appraisals for federally related transactions. Granted waivers would exempt the requirement to obtain an appraisal by a state certified or licensed appraiser and increase the number of appraisers eligible to complete required appraisals subject to the remaining Title XI appraisal criteria for federally related transactions in the designated area for a set time period, with potential for extension of the waiver’s duration as needed. The Advisory outlined the process for applying for and obtaining temporary waivers, including information regarding the submission of a temporary waiver request, issuance of required public notice for comment on proposed waivers, issuance of a decision and approval by the FFIEC, and issuance of an order for waivers to be put into effect.