Recently, the National Association of REALTORS® (NAR) responded to the Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council’s request for comments on a proposed rule on “ASC Enforcement Authority Regarding the Effectiveness of State Appraiser and Appraisal Management Company (AMC) Regulatory Programs.” This rule would implement a framework to govern the ASC’s enforcement authority regarding the effectiveness of Appraiser and Appraisal Management Company (AMC) Programs overseen by State Regulatory Agencies.
NAR policy supports independent valuations of real property performed by state-credentialed appraisers, as access to credit is key to homeownership, and most credit decisions depend on an appraisal. Many, if not most, appraisals obtained for home loan transactions currently involve AMCs, which are responsible for vetting and selecting appraisers for assignments in a manner that should allow appraisers to be independent from lender influence. Therefore, it is crucial that effective oversight of both appraisers and AMCs is in place and exercised in order to protect both consumers and lenders. While the proposed rule codifies ways the states should oversee appraisers, it omits specific language on AMC monitoring and ways to report AMC violations.
Although the ASC’s proposed rule includes adherence to the AMC Rule, it omits language about what that compliance would look like. Section 34.213 of the AMC Rule requires each state to “examine the books and records of an AMC operating in the State and require the AMC to submit reports, information and documents,” “conduct investigations of AMCs to assess potential violations of applicable appraisal-related laws, regulations or orders” and “discipline, suspend, terminate or deny renewal of the registration of an AMC that violates applicable appraisal-related laws, regulations or orders.” Thus, Section 34.213 implies an ongoing obligation to monitor AMCs.
The proposed rule also specifies requirements for receiving and tracking complaints against appraisers and AMCs. Historically, the number of complaints against AMCs has been very low. However, AMCs that act inappropriately may not be reported to state boards by the appraiser victims due to fear of negative repercussions, including loss of work from the reported AMC.
NAR is concerned that the lack of enforcement and governance of AMCs may have led to impacts on the quality and independence of appraisals, and that appraisers should have a mechanism to voice violations with adequate whistleblower protections. NAR urges the ASC to clarify and strengthen the language of the proposed rule to require the ongoing monitoring of AMCs, as required by the AMC Rule, and modify complaint requirements to include whistleblower protections to allow states a clearer understanding of ongoing AMC practices and compliance with existing laws.
NAR’s comment letter also suggests that the ASC rule be modified to promote consistency in regulation and investigation, monitor the adequacy of jurisdictions’ funding and measure how effectively new rules and oversight affect compliance.
For more information, visit https://www.nar.realtor/.
