On May 31, 2017, the federal bank regulatory agencies (collectively, the “Agencies”) issued an Interagency Advisory (the “Advisory”) that is intended to alert lending institutions to existing potential solutions to problems with real estate appraiser shortages, particularly in rural areas.
Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) generally requires the institutions regulated by the Agencies to use a state certified or licensed appraiser for most federally related transactions unless an exemption applies. A shortage in certified and licensed appraisers may lead to delays in the timeliness of appraisals which may consequently lead to delays in the mortgage loan origination or loss mitigation review process. In response to industry commentators who raised these availability concerns, the Agencies released the Advisory to discuss two existing approaches that may assist covered institutions in the event a certified or licensed appraiser is not available: (1) temporary practice permits; and (2) temporary waivers.
The Agencies note that FIRREA allows a state appraiser certifying or licensing agency to recognize an appraiser certified or licensed within another state to perform appraisals across state lines on a temporary basis, subject to state law. Appraisers must apply to the relevant state appraiser regulatory agency to obtain a temporary practice permit.
In addition, the Advisory highlights that pursuant to Title XI of FIRREA, the Appraisal Subcommittee of the Federal Financial Institutions Examination Council may waive any certification or licensing requirement if a written determination is made that appraisals are being significantly delayed because of a shortage of state certified or licensed appraisers.
Waiver requests may be submitted by any of the following parties: (1) a state appraiser certifying or licensing agency; (2) a federal bank regulatory agency; (3) a regulated financial institution or credit union; and (4) other persons or institutions with demonstrable interest in appraiser regulation. Regardless of the party that initially requests a waiver, if such a waiver is granted, then the requirement to use a certified appraiser would be waived for all regulated institutions in the entire affected geographic area. However, all other requirements under FIRREA would still be applicable, including the requirement that appraisals must meet all FIRREA quality standards.
The Advisory is available here: https://www.occ.gov/news-issuances/news-releases/2017/nr-ia-2017-60a.pdf.