With the Dodd-Frank Act and the Federal Reserve Interim Final Rule, the appraisal/evaluation industry has finally stepped all the way into the professional arena. This is a culmination of what was started in the early 90's with the requirement that mortgage appraisals be completed by licensed appraisers (for federally regulated institutions). Through the intervening years, appraiser licensing requirements have become much more rigorous, with an addition of the Licensed Certified Appraiser to state-licensing. I know my first statement will probably create a firestorm of comments by many appraisers. Many don't like discontinuing their relationships with lenders. Many also don't like that for the first time they have an actual audit/review of their work to ensure USPAP and Appraisal Standard compliance. If pressed, they would all say that having a firewall between the appraiser and the lender does eliminate the pressure that was exerted on them for years. That is what the new federal requirements are accomplishing - placing a wall between the lender and the appraiser. These new regulations are also improving the quality of the appraisal report itself - something not done before.
Should the companies that are the firewall between the lender and the appraiser be regulated? Absolutely! After all, SAMCO's client, the community bank, is heavily regulated. So much so that on December 10, 2010, the 2010 Interagency Appraisal and Evaluation Guidelines made the community bank/credit union responsible for the "quality" of the appraisal itself, even making it a safety and soundness examination issue.
The appraisers that the appraisal management companies enter into agreements with to provide quality appraisals are also regulated. This regulation is accomplished by each individual state. Licensed appraisers have continuing education requirements in addition to USPAP education requirements. So yes, AMCs should also have regulation and oversight. After all, as appraisers and lenders can attest to, it only takes a few bad apples to ruin the whole barrel!
With these new banking regulations come requirements for State Appraiser Licensing and Certification Boards to also license and monitor appraisal management companies. There are now more than 26 states with laws that require the registration and regulation of appraisal management companies. In the next year, the balance of the states have an uphill climb to be able to comply with federal law - registering and regulating the AMCs that work in their state. Just as when the appraisal industry became licensed 20 years ago, there will be some difficulties along the way. However, AMCs do provide the independence from undue influence appraisers not only need, but deserve. In a perfect world, appraisers and their lender clients would not need a firewall between them. As the recent financial crisis proves, though; this isn't a perfect world. The newly created Federal Consumer Financial Protection Bureau will be overseeing the appraisal management companies, lenders, and even appraisers, but in addition, there will also be 50 state-licensing boards to monitor appraisal management companies.
On the following page is listed the Appraiser Licensing and Certification Boards for all states. These appraisal boards provide great information, and most have newsletters. Listed are individual contacts, websites, addresses, and phone numbers. If you, the community banker/credit union need information about your state's current position on licensing AMCs, just call! These boards are always willing to help.