Final Rules for AMC Supervision Released by Regulators

Six federal regulators recently issued a final rule setting requirements forrnstate registration and supervision of appraisal management companies (AMCs).  AMCs are entities that contract with andrnmanage licensed and certified appraisers to provide appraisal services tornlenders, underwriters, or other principals in the secondary mortgagernmarkets.  </p

AMCs may be independent entities or subsidiaries of federal financialrninstitutions.  If the latter, the AMCrnmust meet the same minimum requirements as state-regulated AMCs but are notrnrequired to register with a state.</p

The new rule, which will go into effect in about 60 days, finalizes regulationsrnproposed for public comment in March 2014. rnThe rule implements changes to the Financial Institution Reform,rnRecovery, and Enforcement Act (FIRREA) by the Dodd-Frank Wall Street Reform andrnConsumer Protection Act. </p

The rule applies to an AMC whichrnoversees a panel of more than 15 licensed or certified appraisers in a single staternor 25 or more in two or more states.  Membersrnof these panels perform appraisals as independent contractors.  Panels are considered to be the number ofrnappraisers available to an AMC to perform appraisals rather than those that arernactually contracted to perform them. </p

States that elect to register and supervisernAMCs must meet minimum requirements set out in the final rule.  These include insuring that AMCs registerrnwith the state subject themselves to supervision; that they contract only withrnstate licensed or certified appraisers for federal transactions and insure thatrnthese appraisers have the qualifications and independence to competentlyrncomplete appraisals within the market area that comply with the UniformrnStandards of Professional Appraisal Practice, and that the AMC ensure andrnensures appraiser independence complies with mandates of the Truth in LendingrnAct.   </p

A state is not required to establish AMCrnregistration but in those states that do not within 36 months of the rule goingrninto effect AMC not affiliated with federal financial institutions may notrnprovide services to those institutions. Federal regulators will also not act asrnregulators for those non-affiliated AMCs in states without AMC regulations.  States are allowed to establish a regulatory structurernat any time, before or after the 36 month deadline.rn</p

The final rule was issued by the Federal Housing Finance Agency, thernConsumer Financial Protection Bureau, Federal Deposit Insurance Corporation,rnOffice of the Comptroller of the Currency, Federal Reserve Board, and thernNational Credit Union Administration.  </p

According to information posted by the law firm of Ballard and Spahr, as of lastrnNovember 2014, 38 states had passed an AMC licensing and registrationrnlaw.  “Thus, with the issuance of the final rule, the federal agencies arernstepping up the pressure on the remaining states to adopt a regulatoryrnstructure for AMCs.”

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