The final rules pertaining to minimum requirements of appraisal management companies were released last week. These rules do not specifically require states to create registration and supervision programs. However, if a state fails to do so, the AMC cannot provide services in that state pertaining to any federally related transaction.
The minimum requirements states need to follow include registering in the state and submitting to its supervision; using only state-licensed appraisers for federally related transactions; requiring that appraisals comply with the Uniform Standards of Professional Appraisal Practice; ensuring selection of a competent and independent appraiser; and establishing processes and controls reasonably designed to comply with the appraisal independence standards under the Truth in Lending Act. At a minimum, states will need to have sufficient power to approve or deny AMC applications and renewals; audit, investigate, examine or discipline the AMC; verify licensing; and report violations to the Appraisal Subcommittee of the Federal Financial Institutions Examination Council.
Clearly, states are vested with a broad amount of discretion in implementing these minimum requirements and the opportunities for varied and potentially inconsistent requirements abound. This could impact the very ownership of AMCs since one of the independence standards prohibits conflicts of interest including having any interest in a transaction in which the AMC has provided services.
States have three years to implement the minimum requirements. AMCs will need to pay close attention to the states in which they provide services to ascertain the specific standards they will need to maintain, as will the lenders hiring AMCs.