On March 24, 2014, the CFPB along with five other federal agencies issued a joint proposed rule (“Proposed Rule”) regarding Appraisal Management Companies (“AMC”) as required by section 1473 of the Dodd-Frank Act (“Dodd-Frank”).  Under Dodd-Frank, Congress tasked federal regulators with establishing minimum requirements regarding AMC registration and supervision.  The other regulators are the federal banking agencies, the National Credit Union Administration and the Federal Housing Finance Agency.  Comments on the Proposed Rule are due 60 days after the proposal is published in the Federal Register.

Although the Proposed Rule does not require states to adopt a regulatory structure for AMC registration and supervision, AMCs would be prohibited from providing appraisal management services for federally related mortgage transactions in a state where such a regulatory structure has not been adopted.

An AMC would be subject to the requirements if, in a given year, it oversees an appraiser panel of more than 15 state-certified or state-licensed appraisers in a state or 25 or more state-certified or state-licensed appraisers in two or more states.  Federally regulated AMCs would be exempt from state registration.  A “federally regulated AMC” is an AMC that is owned and controlled by an insured depository institution or an insured credit union, and is regulated by the OCC, the Federal Reserve System, the NCUA, or the FDIC. Federally regulated AMCs must still register with the FFIEC Appraisal Subcommittee (“ASC”).

States will have 36 months following the issuance of the joint final rule to adopt a regulatory scheme implementing the minimum requirements found in the Proposed Rule, although there could be a 12 month extension in certain cases.  As we have addressed previously, most states have passed or proposed model legislation regarding AMC registration and regulation.

Under the Proposed Rule states would need to require that an AMC:

  • Register with or obtain a license from the state and be subject to regulatory supervision
  • Contract with or employ only state-certified or licensed appraisers for federally related transactions
  • Require that appraisals comply with the USPAP
  • Establish policies and procedures to ensure compliance with the appraisal independence standards established under TILA.

Additionally, the state regulator for AMCs would need to have the power to:

  • Approve or deny AMC registration applications
  • Examine AMC books and records
  • Verify that AMC appraisers hold valid state certifications or licenses
  • Conduct investigations, discipline AMCs for noncompliance with related laws, and report violations to the ASC.

Notably, the Proposed Rule does not provide for additional federal registration fees to be paid to the ASC in connection with registration on the ASC’s National Registry.  States already impose fees and under the Proposed Rule, and an AMC would be responsible for determining the National Registry fee based on the number of appraisers with which it contracts or employs and applicable state fee requirements.  Moreover, the ASC retains the ability to impose registration fees at a later date.