80 FR 32657 - Minimum Requirements for Appraisal Management Companies
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION
BUREAU OF CONSUMER FINANCIAL PROTECTION
FEDERAL HOUSING FINANCE AGENCY Federal Register Volume 80, Issue 110 (June 9, 2015)
Office of the Comptroller of the Currency
FEDERAL RESERVE SYSTEM
FEDERAL DEPOSIT INSURANCE CORPORATION
BUREAU OF CONSUMER FINANCIAL PROTECTION
FEDERAL HOUSING FINANCE AGENCY
Federal Register Volume 80, Issue 110 (June 9, 2015)
| Page Range | 32657-32689 | |
| FR Document | 2015-12719 |
[Federal Register Volume 80, Number 110 (Tuesday, June 9, 2015)] [Rules and Regulations] [Pages 32657-32689] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-12719] [[Page 32657]] Vol. 80 Tuesday, No. 110 June 9, 2015 Part II Department of the Treasury ----------------------------------------------------------------------- Office of the Comptroller of the Currency ----------------------------------------------------------------------- 12 CFR Part 34 Federal Reserve System ----------------------------------------------------------------------- 12 CFR Parts 208 and 225 Federal Deposit Insurance Corporation ----------------------------------------------------------------------- 12 CFR Parts 323 and 390 Bureau of Consumer Financial Protection ----------------------------------------------------------------------- 12 CFR Part 1026 Federal Housing Finance Agency ----------------------------------------------------------------------- 12 CFR Part 1222 Minimum Requirements for Appraisal Management Companies; Final Rule Federal Register / Vol. 80 , No. 110 / Tuesday, June 9, 2015 / Rules and Regulations [[Page 32658]] ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12 CFR Part 34 [Docket No. OCC-2014-0002] RIN 1557-AD64 FEDERAL RESERVE SYSTEM 12 CFR Parts 208 and 225 [Docket No. R-1486] RIN 7100-AE15 FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Parts 323 and 390 RIN 3064-AE10 BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1026 RIN 3170-AA44 FEDERAL HOUSING FINANCE AGENCY 12 CFR Part 1222 RIN 2590-AA61 Minimum Requirements for Appraisal Management Companies AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (Board); Federal Deposit Insurance Corporation (FDIC); National Credit Union Administration (NCUA); Bureau of Consumer Financial Protection (Bureau); and Federal Housing Finance Agency (FHFA). ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The OCC, Board, FDIC, NCUA, Bureau, and FHFA (collectively, the Agencies) are adopting a final rule to implement the minimum requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) to be applied by participating States in the registration and supervision of appraisal management companies (AMCs). The final rule also implements the minimum requirements in the Dodd-Frank Act for AMCs that are subsidiaries owned and controlled by an insured depository institution and regulated by a Federal financial institutions regulatory agency (Federally regulated AMCs). Under the final rule, these Federally regulated AMCs do not need to register with a State, but are subject to the same minimum requirements as State-regulated AMCs. The final rule also implements the requirement for States to report to the Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council (FFIEC) the information required by the ASC to administer the new national registry of AMCs (AMC National Registry). In conjunction with this implementation, the FDIC is integrating its appraisal regulations for State nonmember banks and State savings associations. DATES: Effective date. This final rule will become effective on August 10, 2015. Compliance date: Federally regulated AMCs must comply with the minimum requirements for providing appraisal management services under 12 CFR 34.215(a) no later than 12 months from the effective date of this final rule. The participating State or States in which a State- regulated AMC operates will establish the compliance deadline for State-regulated AMCs. FOR FURTHER INFORMATION CONTACT: OCC: Robert L. Parson, Appraisal Policy Specialist, (202) 649-6423, G. Kevin Lawton, Appraiser (Real Estate Specialist), (202) 649-7152, Mitchell E. Plave, Special Counsel, Legislative and Regulatory Activities Division, (202) 649-5490, for persons who are deaf or hard of hearing, TTY, (202) 649-5597, or Christopher Manthey, Special Counsel, Bank Activities and Structure Division, (202) 649-5500. Board: Carmen Holly, Supervisory Financial Analyst, Division of Banking Supervision and Regulation, at (202) 973-6122, or Walter McEwen, Senior Counsel, Legal Division, at (202) 452-3321, Board of Governors of the Federal Reserve System, Washington, DC 20551. FDIC: Beverlea S. Gardner, Senior Examination Specialist, Division of Risk Management and Supervision, at (202) 898-3640, Sandra S. Barker, Senior Policy Analyst, Division of Depository and Consumer Protection, at (202) 898-3915, Mark Mellon, Counsel, Legal Division, at (202) 898-3884, or Benjamin K. Gibbs, Senior Regional Attorney, at (678) 916-2458, Federal Deposit Insurance Corporation, 550 17th Street NW., Washington, DC 20429. NCUA: John Brolin or Pamela Yu, Staff Attorneys, Office of General Counsel, at (703) 518-6540, or Vincent Vieten, Program Officer, Office of Examination and Insurance, at (703) 518-6360, or 1775 Duke Street, Alexandria, Virginia, 22314. Bureau: Owen Bonheimer, Counsel, Office of Regulations, and David Friend, Counsel, Office of Regulations, 1700 G Street NW., Washington, DC 20552, at (202) 435-7000. FHFA: Robert Witt, Senior Policy Analyst, Office of Housing and Regulatory Policy, (202) 649-3128, or Ming-Yuen Meyer-Fong, Assistant General Counsel, Office of General Counsel, (202) 649-3078, Federal Housing Finance Agency, 400 Seventh Street SW., Washington, DC 20024. SUPPLEMENTARY INFORMATION: I. Background AMC Minimum Requirements Section 1473 of the Dodd-Frank Act \1\ added a new section 1124 to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 \2\ (FIRREA) that established minimum requirements to be applied by States in the registration and supervision of AMCs. An AMC is an entity that serves as an intermediary for, and provides certain services to, creditors.\3\ These minimum requirements apply to States that have elected to establish, pursuant to section 1117 of FIRREA,\4\ an appraiser certifying and licensing agency with authority to register and supervise AMCs (participating States). Section 1473 of the Dodd-Frank Act \5\ also requires the ASC to maintain an AMC National Registry, which will include AMCs that are either registered with, and subject to supervision by, a State appraiser certifying and licensing agency or are subsidiaries owned and controlled by a Federally regulated insured depository institution and regulated by a Federal financial institutions regulatory agency.\6\ Section 1124(e) further requires the Agencies to promulgate regulations for the reporting of the activities of AMCs to the ASC in determining the payment of the annual fee for the AMC National Registry.\7\ --------------------------------------------------------------------------- \1\ Public Law 111-203, 124 Stat. 1376. \2\ Public Law 101-73, 103 Stat. 183. \3\ The term ``appraisal management company'' is defined in more detail in section 1121(11) of Title XI of FIRREA, 12 U.S.C. 3350(11), and in Sec. 34.211(c) of this final rule. \4\ 12 U.S.C. 3346. \5\ Hereafter, section references are to Title XI of FIRREA, unless otherwise noted. \6\ 12 U.S.C. 3332(a)(6). \7\ 12 U.S.C. 3353(e). See also FIRREA section 1109(a)(3), 12 U.S.C. 3338(a)(3) (requiring States to submit reports to the ASC concerning supervisory activities involving AMCs). This final rule does not implement section 1109(a)(3); this section of FIRREA is implemented by the ASC. --------------------------------------------------------------------------- Pursuant to FIRREA section 1124, the Agencies must establish, by rule, minimum requirements to be imposed by a participating State appraiser certifying and licensing agency on [[Page 32659]] AMCs doing business in the State.\8\ Specifically, pursuant to section 1124(a), participating States must require that AMCs: (1) Register with, and be subject to supervision by, the State appraiser certifying and licensing agency in the State or States in which the company operates; (2) verify that only State-certified or State-licensed appraisers are used for Federally related transactions; \9\ (3) require that appraisals comply with the Uniform Standards of Professional Appraisal Practice (USPAP); and (4) require that appraisals are conducted in accordance with the statutory valuation independence standards pursuant to the Truth in Lending Act (TILA) (15 U.S.C. 1639e) and its implementing regulations.\10\ An AMC that is a subsidiary owned and controlled by an insured depository institution and regulated by a Federal financial institutions regulatory agency is subject to all of the minimum requirements, except the requirement to register with a State.\11\ --------------------------------------------------------------------------- \8\ 12 U.S.C. 3353(a). \9\ Under FIRREA, a Federally related transaction is a real estate related financial transaction that involves an insured depository institution regulated by the OCC, Board, FDIC, or NCUA and that requires the services of an appraiser under the interagency appraisal rules. See 12 U.S.C. 3350(4), implemented by the OCC: 12 CFR 34.42(f) and 34.43(a); Board: 12 CFR 225.62(f) and 225.63(a); FDIC: 12 CFR 323.2(f) and 323.3(a); and NCUA: 12 CFR 722.2(f) and 722.3(a). \10\ 12 U.S.C. 3353(a). For regulations implementing TILA section 129E, 15 U.S.C. 1639e, see 12 CFR 226.42 (Board) and 12 CFR 1026.42 (Bureau). \11\ 12 U.S.C. 3353(c). --------------------------------------------------------------------------- In participating States, the minimum requirements apply to any AMC that provides appraisal management services, as defined in the final rule, and meets the statutory panel size threshold, which is that the AMC oversees an appraiser panel of more than 15 State-certified or State-licensed appraisers in a State or 25 or more appraisers in two or more States in a calendar year or 12-month period under State law. States may establish requirements for AMC registration and supervision that are in addition to these minimum requirements.\12\ --------------------------------------------------------------------------- \12\ 12 U.S.C. 3353(b). --------------------------------------------------------------------------- Pursuant to section 1124(f), beginning 36 months from the effective date of this final rule, an AMC that meets the statutory size threshold may not provide services for a Federally related transaction in a State unless the AMC is registered with the State or is subject to oversight by a Federal financial institutions regulatory agency.\13\ This provision effectively allows each State up to three years to establish registration and supervision systems that meet the requirements of the final rule before AMCs in the State will be subject to the aforementioned restriction in the absence of such a regime. The ASC, with the approval of the FFIEC, may delay the restriction for an additional year if the ASC makes a written finding that a State has made substantial progress toward implementation of a system that meets the criteria in Title XI of FIRREA.\14\ Even after the three-year implementation period has passed, a State may still elect to establish a regime, at which point AMCs operating in the State would be able to provide appraisal management services for Federally related transactions. --------------------------------------------------------------------------- \13\ 12 U.S.C. 3353(f)(1). \14\ 12 U.S.C. 3353(f)(2). --------------------------------------------------------------------------- Section 1124 does not compel a State to establish an AMC registration and supervision program, nor is a penalty imposed on a State that does not establish a regulatory structure for AMCs within 36 months of issuance of this final rule.\15\ However, in a State that has not adopted the AMC minimum requirements established by this rule, AMCs are barred by section 1124 from providing appraisal management services for Federally related transactions, unless they are owned and controlled by a Federally regulated depository institution.\16\ Thus, appraisal management services may still be provided for Federally related transactions in non-participating States by individual appraisers, by AMCs that are below the minimum statutory panel size threshold, and as noted previously, by Federally regulated AMCs.\17\ --------------------------------------------------------------------------- \15\ 12 U.S.C. 3353. \16\ See FIRREA section 1124(f)(1), 12 U.S.C. 3353(f)(1). Under section 1124(c), this restriction will not apply to AMCs that are subsidiaries owned and controlled by an insured depository institution and regulated by a Federal financial institutions regulatory agency. 12 U.S.C. 3353(c). Such AMCs are subject to all the requirements of section 1124, with the exception of the requirement to register with a State. See id. \17\ See FIRREA section 1121(11), 12 U.S.C. 3350(11). --------------------------------------------------------------------------- On April 9, 2014, the Agencies published a proposed rule to implement the minimum requirements under FIRREA section 1124 for registration and supervision of AMCs, with a 60-day public comment period.\18\ With certain changes to the proposed rule, this final rule implements the statutory requirements discussed above, as well as section 1124's requirements for the reporting of the activities of AMCs in determining the payment of the annual registry fee.\19\ The final rule is being published in the Code of Federal Regulations separately by the OCC, the Board, the FDIC, and the FHFA. The Bureau is publishing a cross-reference to the OCC rule text in the valuation independence provisions of Regulation Z, 12 CFR 1026.42, to highlight that the final rule specifically reinforces the valuation independence standards. The rules are not different substantively. The implementation of the AMC minimum requirements does not affect the responsibility of banks, Federal savings associations, State savings associations, bank holding companies, and credit unions to ensure that appraisals for their institutions comply with applicable laws and regulations and are consistent with supervisory guidance. If these regulated financial institutions use an AMC to engage appraisers on their behalf, the AMC must be acting as an agent for these institutions.\20\ --------------------------------------------------------------------------- \18\ 79 FR 19521 (Apr. 9, 2014). \19\ 12 U.S.C. 3353(e). See also 12 U.S.C. 3338(a)(4) (setting out the fee structure for the AMC National Registry). \20\ See OCC: 12 CFR 34.45(b)(1); Board: 12 CFR 225.65(b)(1); FDIC: 12 CFR 323.5(b)(1); and NCUA: 12 CFR 722.5(b)(1). --------------------------------------------------------------------------- Consolidation of FDIC and OTS Rules on Appraisals Title III of the Dodd-Frank Act transferred the powers, duties, and functions formerly performed by the Office of Thrift Supervision (OTS), the Federal entity formerly responsible for the supervision of Federally insured savings associations and their holding companies, to the FDIC for State savings associations and authorized the FDIC to consolidate OTS and FDIC rules.\21\ The final rule implements this authority by rescinding the OTS regulatory provisions on appraisals pertaining to State savings associations, as these entities are now covered by the FDIC's appraisal rules.\22\ --------------------------------------------------------------------------- \21\ The OTS was abolished on October 19, 2011, pursuant to the Dodd-Frank Act. \22\ Title III of the Dodd-Frank Act transferred supervision of Federal savings associations to the OCC. The OCC recently integrated the OTS and OCC rules on appraisals. See 79 FR 28393 (May 16, 2014) (integrating certain interagency rules for national banks and Federal savings associations). --------------------------------------------------------------------------- II. The Final Rule The final rule: (1) Establishes the minimum requirements in section 1124 of FIRREA for State registration and supervision of AMCs in participating States; (2) requires Federally regulated AMCs to meet the minimum requirements of section 1124 (other than registering with the State); and (3) requires States to report certain AMC information to the ASC.\23\ The final rule also integrates FDIC appraisal regulations for State nonmember banks and State savings associations. --------------------------------------------------------------------------- \23\ See 12 U.S.C. 3353(a), (c), and (e). --------------------------------------------------------------------------- For the reasons discussed in section III of this SUPPLEMENTARY INFORMATION, [[Page 32660]] the final rule adopts the rule substantially as proposed, with modifications to: (1) Provide that the standard for determining whether an appraiser is an independent contractor will be based on how the appraiser is treated for Federal income taxes, as determined under Internal Revenue Service (IRS) guidance; (2) clarify that an AMC credit union service organization (CUSO) is not considered to be a Federally regulated AMC, and therefore would be regulated by the State or States in which the AMC CUSO operates; (3) clarify that the rule does not bar the use of trainee appraisers; (4) provide that the registration limitations on individuals who have had their licenses refused, denied, cancelled, surrendered in lieu of revocation, or revoked, should not be construed to apply to appraisers whose licenses have been revoked for nonsubstantive reasons, as determined by the appropriate State appraiser certifying and licensing agency and whose licenses have been subsequently reinstated; (5) revise the provision on reporting of information by Federally regulated AMCs to clarify that Federally regulated AMCs will report information required for the AMC National Registry directly to the States; and (6) remove cross-references to provisions of Regulation Z, 12 CFR part 1026 (Truth in Lending), in the proposed definitions. The Agencies are generally adopting the relevant text of the cross-referenced Regulation Z provisions, in lieu of the cross-references. The final rule also contains technical, nonsubstantive changes. III. The Final Rule and Public Comments on the Proposed Rule The following is a section-by-section review of the proposed rule and a discussion of the public comments received by the Agencies concerning the proposal. The Agencies received 256 comment letters containing 89 unique comments in response to the published proposal. These comment letters were received from State appraiser certifying and licensing agencies, AMCs, appraiser trade and professional associations, appraisal firms, appraisers, financial institutions, consumer/community groups and individual commenters. For ease of reference, unless otherwise noted, the SUPPLEMENTARY INFORMATION refers to section numbers in the proposed and final rule texts for the OCC, 12 CFR 34.210 et seq. Rule text for the other Agencies is published separately in this Federal Register notice at 12 CFR 208.50 and 225.190 et seq. (Board); 12 CFR 323.8 et seq. (FDIC); and 12 CFR 1222.20 et seq. (FHFA). A. Section 34.211. Definitions The Agencies requested comment on the key definitions in the proposed rule. The following is a discussion of these key definitions, related public comments, and issues relating to those definitions. Definitions on which the Agencies did not receive comment are not discussed below and are adopted without change in the final rule. 1. Cross-References to Other Regulations The Agencies are adopting changes to definitions for which cross- references to Regulation Z, 12 CFR part 1026, were used in the proposed rule. Specifically, the Agencies are removing most cross-references and adopting the relevant text of the cross-referenced provisions directly (see Sec. 34.211(g) (defining ``consumer credit''), Sec. 34.211(i) (defining ``creditor''), and Sec. 34.211(m) (defining ``person''). In addition, the Agencies are defining the term ``dwelling'' in Sec. 34.211(j) by adopting the text of the definition of ``dwelling'' in 12 CFR 1026.2(a)(19), which was included in the proposed definition of ``principal dwelling'' (see proposed Sec. 34.211(m)). In new Sec. 34.211(j)(2), the Agencies are retaining the explanation of ``principal dwelling'' that was provided in the proposed rule.\24\ (See proposed Sec. 34.211(m)). This explanation is based on Official Interpretation 12 CFR 1026.2(a)(24)-3. The Agencies are adopting these changes in the final rule to simplify the rule and relieve regulatory burden on States. Substituting the text of these definitions for cross-references mitigates the potential obligations of States to update, clarify, or amend State law or its interpretations as Regulation Z is amended over time, or if the numbering of definitions in Regulation Z changes.\25\ --------------------------------------------------------------------------- \24\ See proposed Sec. Sec. 34.211(m) and 34.211(j)(2). \25\ These changes also should avoid any inadvertent confusion created by referring to Regulation Z, which includes additional exemptions that are not included in these regulations, such as for transactions meeting the Regulation Z definition of consumer credit transaction secured by a principal dwelling, but used to purchase a 3-4 unit owner-occupied rental property. --------------------------------------------------------------------------- 2. Section 34.211(c): Appraisal Management Company; Section 34.211(d): Appraisal Management Services Proposed Sec. 34.211(c) defined an AMC as a person that: (1) Provides appraisal management services to creditors or secondary mortgage market participants; (2) provides these services in connection with valuing the consumer's principal dwelling as security for a consumer credit transaction (including consumer credit transactions incorporated into securitizations); and (3) within a given year, 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. The proposed definition cross-referenced proposed Sec. 34.212 for the rules on how to calculate the numeric threshold for the appraiser panel. Proposed Sec. 34.211(d) defined ``appraisal management services,'' which is a key component of the definition of ``appraisal management company,'' to mean one or more of the following: (1) Recruiting, selecting, and retaining appraisers; (2) contracting with State- certified or State-licensed appraisers to perform appraisal assignments; (3) managing the process of having an appraisal performed, including providing administrative duties such as receiving appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and secondary mortgage market participants, collecting fees from creditors and secondary mortgage market participants for services provided, and paying appraisers for services performed; and (4) reviewing and verifying the work of appraisers. This definition is consistent with the appraisal management services outlined in the definition of AMC in section 1121.\26\ As in section 1121, the proposed definition of appraisal management services did not include performing appraisals, nor does the definition of appraisal management services adopted in this final rule.\27\ --------------------------------------------------------------------------- \26\ See 12 U.S.C. 3350(11). \27\ See id. --------------------------------------------------------------------------- a. Commercial Transactions and the Definition of AMC Consistent with the statutory definition of AMC, the proposed definition of AMC applied to appraisal management services provided in connection with residential mortgage transactions secured by the consumer's principal dwelling and securitizations involving those mortgages. The proposed rule did not extend to appraisal management services provided in connection with commercial real estate transactions or securitizations involving commercial real estate mortgages.\28\ --------------------------------------------------------------------------- \28\ 12 U.S.C. 3350(11). --------------------------------------------------------------------------- In drafting the definition of AMC for the proposal, the Agencies considered whether the statutory definition of AMC in section 1121 should be construed to [[Page 32661]] encompass not only appraisal management services provided for securitizations of consumer purpose residential mortgages, but also appraisal services in connection with securitizations of commercial mortgages.\29\ The Agencies proposed the former. The Agencies' reading of the statute--that it extends only to consumer purpose residential mortgage transactions and securitizations of those mortgages--is consistent with the text of section 1124 and with the Dodd-Frank Act as a whole.\30\ Non-residential or commercial mortgages are not mentioned in any AMC provisions in section 1473 of the Dodd Frank Act (or elsewhere in Title XIV of the Dodd-Frank Act). The lack of a reference to commercial mortgage lending in the relevant Dodd-Frank Act provisions suggests that AMCs were not intended to be covered by the AMC minimum requirements when they are providing appraisal management services for underwriters or other principals in commercial mortgage securitizations. Moreover, the Agencies understand that individual appraisers, as opposed to AMCs, are more typically retained to provide an appraisal of properties securing commercial mortgage loans (and securitizations of such loans) because of the size and complexity of those properties. This understanding is based on the supervisory experience of the Agencies as well as outreach during the proposed rule process to a trade association for AMCs and an individual AMC, which confirmed that, under the current business model, AMCs do not generally provide services in connection with commercial mortgages. --------------------------------------------------------------------------- \29\ While it is clear that the definition of AMC encompasses only residential mortgage loans, there is some question as to whether the definition includes securitizations of commercial mortgages. \30\ 12 U.S.C. 3353. --------------------------------------------------------------------------- The Agencies received a small number of comments concerning whether an AMC's services for commercial mortgage transactions should be covered by the final rule. Several commenters supported the proposal to exclude commercial real estate transactions from the definition of AMC. One commenter disagreed, stating that both commercial and consumer transactions should be covered by the rule, but did not elaborate. The Agencies continue to believe that commercial real estate transactions should be excluded from the definition of AMC based on the reasons outlined above. As such, the definition of AMC in the final rule includes entities only when they are providing appraisal management services for consumer mortgage transactions secured by the consumer's principal dwelling and securitizations of those loans. b. ``External Third Party'' Within the Definition of AMC Section 1121 defines an AMC as any ``external third party'' authorized to take certain actions by a creditor of a consumer credit transaction secured by the consumer's principal dwelling or by an underwriter of or other principal in the secondary mortgage markets.\31\ Consistent with the statutory definition, the proposal defined the term ``appraisal management company'' to exclude a department or division of an entity if the department or division provides appraisal management services only to that entity. This reflects the Agencies' interpretation that a department or a division of an entity is not an ``external third party'' as required by the statute. Under the proposed rule, an AMC that is an affiliate (rather than a department or division) of a creditor or secondary market principal would, however, be treated as an AMC, even if the AMC provides appraisal management services only to the entity with which it is affiliated, because the affiliate is a separate legal entity. --------------------------------------------------------------------------- \31\ 12 U.S.C. 3350(11). --------------------------------------------------------------------------- The Agencies believe that this interpretation of the term ``external third party'' is consistent with the plain meaning of ``external'' and ``third party,'' as well as with section 1124(c), which provides that the requirements of section 1124 would apply to AMCs that are owned and controlled by financial institutions.\32\ In the Agencies' view, this interpretation is also consistent with section 1124 as a whole, which is directed at regulating parties that provide appraisal management services on behalf of creditors and secondary market principals, but does not regulate creditors or secondary market principals directly.\33\ --------------------------------------------------------------------------- \32\ 12 U.S.C. 3353(c). \33\ 12 U.S.C. 3353. --------------------------------------------------------------------------- The Agencies received one comment on this topic, which supported the exclusion of departments and divisions from the definition of AMC. The Agencies are adopting in the final rule the proposed approach to ``external third party.'' c. Uniformity and the Definition of AMC The Agencies received a number of comments suggesting that the Agencies require all participating States to adopt the definition of AMC in the proposed rule. Several commenters also stated that reducing burden for AMCs would reduce costs for consumers. As a legal basis for this position, one commenter noted that the definition of AMC is statutory, and therefore should be binding on all the participating States. The Agencies agree that the definition of AMC in section 1121 sets the uniform minimum standards for assessing whether an entity is an AMC under this rule.\34\ Under the proposed rule, a participating State would be required to treat an entity as an AMC if the entity provides services described in the definition and meets the statutory panel size threshold. As such, pursuant to section 1121 and the proposed rule, a participating State could not revise the definition of AMC to eliminate or limit the range of services that would classify an entity as an AMC with respect to the minimum requirements in the rule. Similarly, a State could not void the statutory panel size threshold that triggers the minimum requirements by, for example, adopting an AMC law that provides that an entity is an AMC only if it has 50 or more appraisers on its nationwide panel.\35\ Thus, all States electing to establish an AMC regulatory program under the rule would have a uniform minimum scope as to coverage of their program. --------------------------------------------------------------------------- \34\ 12 U.S.C. 3350(11). This rule establishes ``minimum'' requirements for a State to apply in registering AMCs. Thus, the Agencies interpret the rule of construction in FIRREA section 1124(b) to recognize that States may adopt requirements that exceed those in the rule, for example, defining AMC to cover more entities than would be covered under the minimum requirements of this rule. 15 U.S.C. 3353(b). \35\ 12 U.S.C. 3350(11). --------------------------------------------------------------------------- While the Agencies understand the commenters' desire for uniformity, FIRREA section 1124(b) recognizes expressly the authority of States to adopt requirements in addition to those in the final rule: ``Nothing in this section [1124] shall be construed to prevent States from establishing requirements in addition to any rules promulgated under subsection(a)[by the Agencies].'' \36\ Therefore, the Agencies decline to require all participating States to adopt a uniform definition of AMC. --------------------------------------------------------------------------- \36\ 12 U.S.C. 3353(b). --------------------------------------------------------------------------- d. ``Portals'' Within the Definition of AMC The Agencies received one comment from an entity that provides appraisal related services through electronic mechanisms, described as a ``portal'' business model. The commenter requested that the Agencies address the question of whether a portal is an AMC. The Agencies do not support a categorical rule in this regard. The business model an entity uses to provide services should not be [[Page 32662]] determinative of whether the entity is an AMC; rather, if a portal is providing appraisal management services, and meets the other elements of the definition, then it should be considered an AMC under the final rule. Thus, the final rule does not limit or affect the discretion of States to treat a portal as an AMC if a State finds that a portal provides appraisal management services. e. Distinction Between AMCs and Appraisal Firms In the proposal, the Agencies addressed whether appraisal firms should be considered AMCs pursuant to sections 1124 and 1121(11) \37\ and requested comment on whether the distinction between employees and independent contractors served as a basis for excluding appraisal firms from the definition of an AMC. (See Question 3 in the proposal.) The technical distinction between independent contractors and employees, for purposes of determining whether an entity meets the statutory panel size thresholds, is addressed in the section-by-section analysis of Sec. 34.212 (Appraiser Panel), which discusses how to calculate the number of appraisers on a panel. The following is a discussion of the comments on the broader issue of whether the proposal appropriately excluded appraisal firms from the scope of the rule. --------------------------------------------------------------------------- \37\ 12 U.S.C. 3353 and 3350(11). --------------------------------------------------------------------------- A number of commenters supported the proposal to construe section 1124 as applying only to AMCs or hybrid entities (discussed in detail below) and not to appraisal firms. These commenters stated that the business models of AMCs and appraisal firms are different. Under the different business models, according to these commenters, employees of appraisal firms perform appraisals, while AMCs contract for appraisal services, but do not perform appraisals. Another set of commenters argued that appraisal firms should be covered by the rule. The basis for this argument was the commenters' assertion that there is no substantive distinction between AMCs, which hire others to perform appraisals, and appraisal firms, which generally hire appraisers as employees. As discussed in the preamble to the proposed rule, the Agencies interpret section 1124 to distinguish between AMCs and appraisal firms for three key reasons.\38\ First, the distinction between appraisal firms and AMCs is reflected in section 1472 of the Dodd-Frank Act, which added provisions concerning valuation independence to TILA.\39\ These provisions contemplate expressly that certain entities would not be covered by the AMC minimum requirements in FIRREA section 1124 and describe this type of entity, in pertinent part, as one that ``utilizes the services of State licensed or certified appraisers and receives a fee for performing appraisals in accordance with the Uniform Standards of Professional Appraisal Practice.'' \40\ The Agencies understand that the type of entity described here as excluded from the AMC minimum requirements is an appraisal firm, which receives fees for directly performing appraisals. Second, FIRREA section 1124 uses the term ``appraisal management company,'' and not appraisal firm.\41\ Third, section 1121(11) describes the activities of AMCs as including ``contracting with State-certified or State-licensed appraisers to perform appraisal assignments,'' but not directly performing appraisals.\42\ Section 1121(11) also defines an AMC as an entity that ``oversees a network or panel of more than 15 certified or licensed appraisers in a State or 25 or more nationally (meaning two or more States) within a given year . . .'' \43\ By contrast, the Agencies understand that appraisal firms perform appraisals as a primary function directly through employees and do not oversee a ``network or panel'' of non-employee appraisers. --------------------------------------------------------------------------- \38\ 12 U.S.C. 3353. \39\ See TILA section 129F, 15 U.S.C. 1639e. \40\ 15 U.S.C. 1639e(i)(2) (emphasis added); see also 12 U.S.C. 3353. A ``fee appraiser'' is defined in TILA section 129E, 15 U.S.C. 1639(e)(i), as a person who: (1) Is not an employee of a loan originator or AMC engaging the appraiser; (2) performs an appraisal in compliance with USPAP; and (3) is a company [an appraisal firm] not subject to the requirements of section 1124 (minimum requirements for AMCs, 12 U.S.C. 3353) and that receives a fee for performing appraisals. \41\ Id. \42\ 12 U.S.C. 3350(11). \43\ 12 U.S.C. 3350(11). --------------------------------------------------------------------------- As stated in the proposal, the Agencies believe that the fundamental reasons to distinguish between AMCs and appraisal firms are that the business models of AMCs and appraisal firms are different and that Congress expressed an intention to exclude entities operating on an appraisal firm model from coverage by the AMC minimum requirements. This conclusion is consistent with the fact that AMCs provide appraisal management services to third parties, including retaining appraisers to perform appraisals, but AMCs do not perform appraisals. By contrast, appraisal firms perform appraisals using one or more of the firm's employees or partners. In addition, appraisal firms typically hire a limited number of appraisers, based on identified need, and hire inexperienced trainees and train them to become qualified appraisers. AMCs, on the other hand, generally have a large number of pre-approved appraisers in their network or panel who are available, as independent contractors, for potential assignments and do not conduct training for inexperienced appraisers. f. Hybrid Entities In the proposal, the Agencies discussed the possibility that there are, or may be in the future, ``hybrid'' entities, meaning entities that both hire appraisers as employees to perform appraisals and engage independent contractors to perform appraisals. In this situation, the entity could be considered both an AMC and an appraisal firm. As such, under the proposed rule, the hybrid entity would be treated as an AMC for purposes of State registration if it meets the statutory panel size threshold (of overseeing 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 within a given year). Under the proposal, the numerical calculation of panel size for hybrid entities would only include appraisers engaged as independent contractors. Some commenters supported the proposed treatment of firms that have both employee appraisers and independent contractor appraisers. One commenter suggested that the Agencies should not recognize a hybrid firm as a valid business model, but did not elaborate. The Agencies adopt in the final rule the proposed definition of AMC and the proposed treatment of hybrid firms. The Agencies continue to believe that sections 1124 and 1121(11) are best interpreted to apply only to AMCs, as defined in the proposed and final rules, and not to appraisal firms (with the exception of hybrid firms). In addition to the statutory distinction between appraisal firms and AMCs, the Agencies believe this interpretation is consistent with, and supported by, the key distinction between AMCs and appraisal firms--that the former contracts with appraisers to perform appraisals, while the latter performs appraisals directly through employees. Even if some services provided by AMCs and appraisal firms overlap, which some commenters assert, this key difference between the two entities (that AMCs contract with appraisers to perform appraisals and appraisal firms perform appraisals directly through their own employees) remains. The final rule also reflects the definition of ``appraisal management company'' in [[Page 32663]] section 1121(11), which provides that an AMC is an entity that ``oversees a network or panel'' of appraisers.\44\ Appraisal firms do not oversee networks or panels of non-employee appraisers. --------------------------------------------------------------------------- \44\ 12 U.S.C. 3350(11). --------------------------------------------------------------------------- The Agencies also continue to believe that recognition of hybrid firms as AMCs is appropriate when the entity maintains a panel of appraisers that includes independent contractors meeting the threshold minimum numbers pursuant to Sec. 34.212. The Agencies believe that this interpretation of the definition of AMC is consistent with the statutory language and purpose, appropriately reflects the business models of AMCs, and accommodates the possibility that appraisal firms may evolve over time. For these reasons, the Agencies adopt in the final rule the proposed definition of AMC and the proposed treatment of hybrid firms. 3. Section 34.211(e) Appraiser Panel The Agencies are adopting the proposed definition of ``appraiser panel'' with minor clarifications. Specifically, proposed Sec. 34.211(e) defined an appraiser network or panel as a network of State- licensed or State-certified appraisers who are independent contractors to an AMC. In the final rule, ``appraiser panel'' is defined as a network, list or roster of licensed or certified appraisers approved by the AMC to perform appraisals as independent contractors for the AMC. Appraisers on an AMC's ``appraiser panel'' under this part include both appraisers accepted by the AMC for consideration for future appraisal assignments and appraisers engaged by the AMC to perform one or more appraisals. The final rule also clarifies in the definition of ``appraiser panel'' that an appraiser is an independent contractor for purposes of this rule if the appraiser is treated as an independent contractor by the AMC for purposes of Federal income taxation. a. Distinction Between Employees and Independent Contractors in Determining Panel Membership The definition of ``appraisal management company'' in section 1121(11) provides that an entity will be treated as an AMC subject to State registration if it has an ``appraiser network or panel'' of more than 15 State-certified or State-licensed appraisers in a State or 25 or more appraisers nationally (meaning two or more States) within a given year.\45\ Section 1121(11) does not specify whether a ``network or panel'' consists of employees of an AMC or independent contractors retained by the AMC (or both). However, by including only independent contractors with the AMC, the proposed and adopted definition of ``appraiser panel'' reflects the approach taken by the majority of States that have adopted AMC registration laws or have proposed AMC laws \46\ and reflects the Agencies' understanding that AMCs typically engage appraisers as independent contractors under the current AMC business model.\47\ Section 34.211(e) also reflects the definition of AMC in section 1121(11), which outlines typical tasks carried out by AMCs, including as ``contract[ing] with licensed and certified appraisers.'' \48\ As discussed above in the section-by-section analysis of Sec. 34.211(c), the definition of AMC and its description of appraisal management services does not include directly performing appraisals through the AMC's own employees--rather, AMCs contract with external third parties to perform appraisals.\49\ --------------------------------------------------------------------------- \45\ 12 U.S.C. 3350(11). \46\ A majority of States with AMC laws define ``appraiser panel'' as being comprised of independent contractors. See, e.g., N.C. Gen. Stat. section 93E-2-2 (defining an appraiser panel as a network or panel of appraisers who are independent contractors to the AMC); Vernon's Tex. Code Ann. Occupations Code section 1104.003(b)(3) (same); Louisiana La. Rev. Stat. Ann. section 37:3415.2(a) (same); see also Ohio (draft code) (same). A minority of States use a broader definition for ``appraiser panel'' that encompasses a combination of independent contractors and employees. See, e.g., Cal. Bus. & Prof. Code section 11302 (defining AMC to include both independent contractors and employees); Ark. Code Ann. section 17-14-402(2) (same); Ky. Rev. Stat. section 324A.150(2)(same). The majority approach is consistent with the model AMC code offered by a trade association for appraisers and the minority approach is consistent with a model code offered by a trade association for AMCs. \47\ As discussed in the proposal, this understanding is based on outreach conducted by the Agencies with associations that represent AMCs and appraisers, as well as outreach with State appraiser certifying and licensing agencies. \48\ 12 U.S.C. 3350(11). \49\ The Agencies will monitor AMCs to assess whether they are hiring appraisers as part-time employees to avoid State registration requirements. Outreach with State officials before the issuance of the proposed rule did not indicate this is currently occurring or at significant risk of occurring. --------------------------------------------------------------------------- The method for calculating whether an entity has an ``appraiser network or panel'' of more than 15 State-certified or State-licensed appraisers in a State or 25 or more appraisers nationally (meaning two or more States) within a calendar year or 12-month period under State law is discussed further under the section-by-section analysis of Sec. 34.212, below. The Agencies requested comment on the proposed definition of ``appraiser panel'' and on the alternative of defining this term to include employees as well as independent contractors. (See Question 2 in the proposal.) Some commenters argued that employees as well as independent contractor appraisers should be counted as part of an appraiser network or panel. These commenters did not disagree with the Agencies' understanding that AMCs generally use independent contractors rather than employee appraisers. Nor did the commenters address the key distinction between AMCs and appraisal firms, which is that AMCs primarily engage third parties to perform appraisals, whereas appraisal firms perform appraisals directly through employees. As discussed above in the section-by-section analysis of Sec. 34.211(c), the commenters argued that appraisal firms should be regulated as AMCs as a matter of policy. As such, these commenters suggested that the distinction between employee and independent contractor appraisers be removed from the rule. In support of this position, the commenters stated that appraisal firms and AMCs provide substantially the same services, and therefore should both be covered by the AMC registration and supervision programs. Other commenters agreed with the employee-independent contractor distinction, stating that defining ``appraiser panel'' to be comprised only of independent contractor appraisers reflects the difference between the AMC and appraisal firm business models. Specifically, these commenters stated that appraisal firms' employees perform appraisals directly, while AMCs provide appraisal management services and engage third-party appraisers to perform appraisals. The Agencies adopt in the final rule the proposed definition of ``appraiser panel,'' which includes only appraisers who are independent contractors to an AMC. The Agencies note the predominance of comments in favor of retaining the employee-independent contractor distinction. The final rule also reflects that the commenters who opposed the proposed employee-independent contractor distinction effectively conceded that the distinction is accurate, arguing instead that AMCs and appraisal firms should both be regulated as AMCs under section 1124 and implementing State laws, regardless of the way these entities structure their operations.\50\ This larger policy question is addressed above in the discussion of the distinction between employees and independent contractors as a basis for exclusion of an appraisal firm from the definition of an AMC. See the section-by-section analysis of Sec. 34.211(c) [[Page 32664]] (definition of AMC), above. Moreover, the treatment of hybrid firms will help address the potential that a firm may try to avoid the requirements of the rule by using a combination of appraisers who are employees and appraisers who are independent contractors. --------------------------------------------------------------------------- \50\ 12 U.S.C. 3353. --------------------------------------------------------------------------- b. Definition of Independent Contractor The Agencies requested comment on whether the term ``independent contractor'' should be defined, and if so why and how, including whether it should be defined based on Federal law by using the standards or guidance issued by the IRS or standards adopted in other Federal regulations, such as those issued under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act),\51\ or left to State law. (See Question 2 in the proposal.) A number of commenters requested that the final rule include a definition of independent contractor, or that the rule incorporate an external definition, for example, IRS guidance on the employee-independent contractor distinction or the definition of independent contractor in the SAFE Act. In addition, these commenters stated that it would be desirable to have a standard for independent contractor that applies in all participating States. The commenters stated a preference for using IRS guidance for this purpose. One commenter disagreed, suggesting that a single definition of the term independent contractor is not needed. --------------------------------------------------------------------------- \51\ 12 CFR 1008.23 (``Independent contractor means an individual who performs his or her duties other than at the direction of and subject to the supervision and instruction of an individual . . .'') (emphasis added). The SAFE Act was enacted as part of the Housing and Economic Recovery Act of 2008, Pub. L. 110- 289, Division A, Title V, sections 1501-1517, 122 Stat. 2654, 2810- 2824 (July 30, 2008), codified at 12 U.S.C. 5101-5116. --------------------------------------------------------------------------- The Agencies believe that additional guidance on the meaning of ``independent contractor'' under the final rule facilitates compliance and, therefore, are amending the proposed definition of appraiser panel accordingly. As noted, the definition of appraiser panel in Sec. 34.211(e) provides that that an appraiser is deemed an ``independent contractor'' for purposes of this rule if the appraiser is treated as such by the AMC for purposes of Federal income taxation.\52\ --------------------------------------------------------------------------- \52\ For guidance on how to determine whether an appraiser is an employee or independent contractor, see IRS Publication 1779, ``Independent Contractor or Employee,'' available at http://www.irs.gov/pub/irs-pdf/p1779.pdf and IRS Publication 15-A, ``Employer's Supplemental Tax Guide,'' at p. 7 et seq. (discussing factors for distinguishing employees from independent contractors), available at http://www.irs.gov/pub/irs-pdf/p15a.pdf. --------------------------------------------------------------------------- 4. Section 34.211(h): Covered Transaction Proposed Sec. 34.211(h) defined a covered transaction as any consumer credit transaction secured by the consumer's principal dwelling. The proposed definition did not limit the definition of ``covered transaction'' to Federally related transactions (generally, credit transactions involving a Federally regulated depository institution, see 12 U.S.C. 3350(4)), even though Title XI of FIRREA and its implementing regulations have applied historically only to appraisals for Federally related transactions. As stated in the proposed rule, defining ``covered transaction'' to include all consumer credit transactions secured by the consumer's principal dwelling reflects the statutory text of section 1121(11), which defines the term ``appraisal management company,'' as in pertinent part, ``any external third party authorized either by a creditor of a consumer credit transaction secured by the consumer's principal dwelling or by an underwriter of or other principal in the secondary mortgage markets.'' \53\ --------------------------------------------------------------------------- \53\ 12 U.S.C. 3350(11). --------------------------------------------------------------------------- Applying coverage of the AMC rule beyond Federally related transactions is consistent with the structure and text of other parts of section 1124, most of which address appraisals generally rather than appraisals only for Federally related transactions. For example, section 1124(a)(2) specifies that only licensed or certified appraisers are to be used for ``federally related transactions,'' but sections 1124(a)(3) and (a)(4) apply to ``appraisals'' generally.\54\ In particular, the text of section 1124(a)(4) indicates that one of the chief purposes of the minimum requirements for AMCs is to ensure compliance with the valuation independence standards established pursuant to section 129E of TILA.\55\ Those standards apply to AMCs whenever they engage in a consumer credit transaction secured by the consumer's principal dwelling, regardless of whether the transaction is a Federally related transaction.\56\ --------------------------------------------------------------------------- \54\ See 12 U.S.C. 3353(a)(2) (3) and (4). \55\ 12 U.S.C. 3353(a)(4). \56\ See 15 U.S.C. 1639e(a) (defining scope); 12 CFR 1026.42(b)(1)-(2) (implementing regulations defining scope). --------------------------------------------------------------------------- For these reasons, the proposed rule provided that the minimum requirements in participating States would apply to all entities that meet the definition of AMC in providing appraisal management services related to consumer credit transactions secured by the consumer's principal dwelling for both Federally related transactions and non- Federally related transactions. The Agencies received one comment that supported the proposed definition of ``covered transaction.'' The Agencies are adopting it in the final rule as proposed. As such, a covered transaction is defined to mean any consumer credit transaction secured by the consumer's principal dwelling. For the reasons discussed above in describing the proposed definition, the Agencies have determined the final rule should not limit the definition of ``covered transaction'' to consumer credit transactions secured by the consumer's principal dwelling that are Federally related transactions. 5. Section 34.211(k): Federally Regulated AMCs Section Sec. 34.211(k) defines a ``Federally regulated AMC'' as an AMC that is owned and controlled by an insured depository institution, as defined in 12 U.S.C. 1813, or an insured credit union, as defined in 12 U.S.C. 1752, and regulated by the OCC, the Board, the NCUA, or the FDIC. This definition differs from the proposed definition only in that the reference to the NCUA is removed, for reasons discussed below. Under section 1124(c), an AMC that is a subsidiary owned and controlled by an insured depository institution or an insured credit union and regulated by a Federal financial institutions regulatory agency \57\ is not required to register with a State.\58\ Proposed Sec. 34.211(j) defined an entity of this type as a ``Federally regulated AMC,'' meaning an AMC that is owned and controlled by an insured depository institution, as defined in 12 U.S.C. 1813, or an insured credit union, as defined in 12 U.S.C. 1752, and regulated by the OCC, the Board, the NCUA, or the FDIC. Under section 1124(c), a Federally regulated AMC must follow the minimum requirements that are applicable to a State-registered AMC (other than the requirement to register with a State) and is subject to supervision for compliance with these requirements by the appropriate Federal financial institutions regulatory agency. In addition, under section 1124(e), as [[Page 32665]] implemented by the proposed rule, AMCs, including Federally regulated AMCs, must report to the participating State or States in which they operate the information required to be submitted by the State to the ASC for administration of the AMC National Registry. These requirements are discussed further in the section-by-section analysis of Sec. 34.215, below. --------------------------------------------------------------------------- \57\ The term ``Federal financial institutions regulatory agencies'' means the Board, the FDIC, the OCC, the former OTS, and the NCUA. 12 U.S.C. 3350(6). Title III of the Dodd-Frank Act provides that the OCC is now the Federal financial institutions regulatory agency for Federal savings associations. Title III of the Dodd-Frank Act also provides that the FDIC is the Federal financial institutions regulatory agency for State savings associations. Finally, the Dodd-Frank Act provides that the Board is responsible for regulation of savings and loan holding companies. \58\ 12 U.S.C. 3353(c). --------------------------------------------------------------------------- In the proposal, the Agencies discussed whether an AMC that is a subsidiary owned and controlled by a credit union (credit union service organization or ``CUSO'') would be considered a Federally regulated AMC, and thus exempt from State registration and supervision. The Agencies indicated that an AMC, even if owned and controlled by a credit union, would not be a Federally regulated AMC because the NCUA, unlike the other banking agencies involved in this rulemaking, does not directly oversee or regulate CUSOs. Instead, the authority that the NCUA exercises over CUSOs is through its regulations that permit Federal credit unions to invest in, or lend to, CUSOs.\59\ For these reasons, under the proposed rule, if an AMC were owned and controlled by a credit union (whether owned by a State or Federally chartered credit union) it would not be considered to be regulated by a Federal financial institutions regulatory agency. As such, the AMC CUSO would be required to be registered in accordance with applicable State requirements in participating States.\60\ --------------------------------------------------------------------------- \59\ See 12 CFR part 712 (outlining requirements relating to credit union investments in CUSOs). \60\ As noted in the preamble to the proposed rule, the NCUA has not, historically, asserted that CUSOs or their employees are exempt from applicable State registration and licensing regimes. See 75 FR 44656, 44659 (applying similar reasoning to the licensing of mortgage loan originators who were employees of CUSOs under the SAFE Act. --------------------------------------------------------------------------- The Agencies requested comment on whether references to the NCUA and insured credit unions should be removed from the definition of ``Federally regulated AMC'' and other parts of the final rule to clarify that an AMC CUSO would be subject to State registration and supervision. (See Question 4 in the proposal.) Some commenters expressed concern that the references to the NCUA and credit unions in the proposed regulatory text were confusing and suggested that removing these references in the final rule would clarify that AMC CUSOs are subject to State registration and supervision. To provide clarification in the final rule, the Agencies removed references to NCUA and credit unions from pertinent portions of the regulatory text defining ``Federally regulated AMC.'' An AMC owned and controlled by a credit union (whether owned by a State or Federally chartered credit union) is not considered to be regulated by a Federal financial institutions regulatory agency under the final rule. As such, AMC CUSOs are required to register in accordance with applicable State requirements. 6. Section 34.211(n): Secondary Mortgage Market Participant In the proposed rule, the Agencies defined ``secondary mortgage market participant'' to implement the statutory definition of AMC, which refers to an entity that performs services authorized by ``an underwriter of or other principal in the secondary mortgage markets.'' \61\ Proposed Sec. 34.211(n) defined ``secondary mortgage market participant'' to mean a guarantor or insurer of mortgage-backed securities, or an underwriter or issuer of mortgage-backed securities. The definition included individual investors in a mortgage-backed security only if they also serve in the capacity of a guarantor, insurer, underwriter, or issuer for the mortgage-backed security. --------------------------------------------------------------------------- \61\ 12 U.S.C. 3350(11). --------------------------------------------------------------------------- Most commenters supported the proposed definition of ``secondary mortgage market participant.'' Some commenters indicated that the definition is clear and needs no further additions or clarifications at this time, but could at some future date to reflect evolving conditions. One commenter believed that the definition is sufficiently understandable for States to be able to write statutes and rules to enforce the intent of the rule. Another commenter suggested that the definition of ``secondary market participant'' is too narrow, and that any bank or creditor involved in lending Federally insured funds in a transaction secured by real estate (commercial or residential) should be considered a secondary market participant. Commenters did not provide any specific suggestions for revising the proposed definition of secondary mortgage market participant. As with other aspects of the proposed rule, the Agencies understand that changes in the marketplace may, at some point, require the Agencies to amend the final rule, or may require States to amend or re-interpret State laws. The Agencies continue to believe, however, that the definition of secondary mortgage market participant is accurate at present. Regarding the comment that banks or creditors lending Federally insured funds should be included, the Agencies note that the statutory definition of AMC distinguishes between ``creditors'' and ``secondary mortgage market participants,'' \62\ and therefore believe that including originating banks or creditors in the definition of ``secondary mortgage market participants'' would be inconsistent with this distinction in the statutory definition. The Agencies in the final rule adopt the proposed definition of secondary mortgage market participant. --------------------------------------------------------------------------- \62\ 12 U.S.C. 3350(11). --------------------------------------------------------------------------- B. Section 34.212: Appraiser Panel--Annual Size Calculation 1. Determining Appraiser Panel Section 34.212 finalizes proposed Sec. 34.212 without change, other than revising the title from ``Appraiser Panel'' to ``Appraiser Panel--Annual Size Calculation,'' for clarity. Section 34.212 sets out criteria for determining whether, within a calendar year or 12-month period specified by State law, an AMC 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. Consistent with the proposal, pursuant to Sec. 34.212(a), an appraiser is deemed part of the AMC's appraiser panel as of the earliest date the AMC accepts the appraiser for consideration for future appraisal assignments in covered transactions or engages the appraiser to perform one or more appraisal assignments on behalf of a creditor or secondary mortgage market participant in a covered transaction, including an affiliate of such a creditor or participant. Also consistent with the proposal, pursuant to Sec. 34.212(b), an appraiser who is considered to be part of the AMC's appraiser panel is deemed to remain on the panel until: (1) The date on which the AMC sends written notice to the appraiser removing the appraiser from the appraiser panel; (2) the date the AMC receives written notice from the appraiser asking to be removed from the appraiser panel; or (3) the date the AMC receives notice of the death or incapacity of the appraiser. If an appraiser is removed from an AMC's appraiser panel, but the AMC subsequently accepts the appraiser for consideration for future assignments or engages the appraiser at any time during the twelve months after the appraiser's removal, the removal would be deemed not to have occurred, and the appraiser would be deemed to have been part of the AMC's appraiser panel without interruption. The Agencies included [[Page 32666]] these procedural provisions to give States clarity and prevent circumvention of the registration requirement. The Agencies received a wide variety of comments relating to the calculation of appraiser panel membership under Question 2 of the proposal. Some commenters suggested that the approach in the proposal, which would count appraisers either engaged to perform appraisals or pre-approved to do so, would result in the unintended consequence of limiting the number of appraisers in AMC networks or panels. These commenters argued that pre-approved appraisers who have not yet been engaged by the AMC for an assignment should not be counted. They argued that the proposed method of counting appraisers would provide a strong incentive for AMCs to limit significantly the size of networks or panels, given that the AMC National Registry fee will be determined based on the number of appraisers on an AMC's network or panel of appraisers. The commenters stated that, to reduce costs, AMCs would likely reduce the size of appraiser panels if the proposed method of counting appraisers were adopted as final. As background, the commenters explained that AMCs maintain large panels of pre-approved appraisers in order to offer timely appraisal services in a wide variety of areas, including smaller communities and rural areas where appraisers are engaged less often than in more populated communities. The commenters noted that, if the AMCs reduce panels to actively engaged appraisers, then real estate transactions in small communities and rural areas will take more time because AMCs would not typically have pre-approved appraisers readily available for this type of assignment.\63\ For these reasons, the commenters requested that the Agencies modify the proposed method of counting appraisers in an AMC's network or panel to include only appraisers who are actually engaged to perform an appraisal during a 12-month period. --------------------------------------------------------------------------- \63\ One commenter, a coalition of three AMCs, stated the process of approving an appraiser for a panel typically requires from one week at a minimum to a month. --------------------------------------------------------------------------- The Agencies understand the commenters' concerns relating to the panel membership and the potential for AMCs to reduce their appraiser networks or panels to reduce ASC fees. The Agencies are also cognizant of, and concerned about, the potential adverse effects this may have on small communities and rural areas. However, for several reasons, the Agencies decline to amend the rule such that only appraisers actually given assignments in a particular year will be counted as being on the panel. First, the Agencies interpret sections 1124 and 1121(11) to mean that the counting of appraisers in determining whether an entity is subject to the AMC minimum requirements does not control or affect the counting of appraisers for purposes of payment of the AMC National Registry fee.\64\ Therefore, this final rule does not address or require the collection or calculation of these fees. Section 34.212 of the rule implements FIRREA section 1121(11) and governs how to count the number of appraisers on a panel only for purposes of whether an entity is an AMC subject to the AMC minimum requirements of this final rule, either as an AMC registered with a State that adopts these requirements or as a Federally regulated AMC.\65\ The rule requires AMCs to provide information to the State or States in which they operate, to be used in determining the payment of the annual AMC National Registry fee, but does not address or control how to calculate the number of appraisers on a network or panel for purposes of determining the fee. The AMC National Registry fee provisions pertaining to the calculation, assessment, and collection of the fee are addressed in FIRREA section 1109(a), which is enforced and administered by the ASC, not by the Agencies pursuant to section 1124.\66\ As such, it is the ASC, and not the Agencies in this rulemaking, that will determine how to calculate and pay the AMC National Registry fee. --------------------------------------------------------------------------- \64\ 12 U.S.C. 3350(11) (defining an AMC subject to the minimum requirements as, in pertinent part, an entity with a ``network or panel of more than 15 certified or licensed appraisers in a State or 25 or more nationally (meaning two or more States) within a given year.'' 12 U.S.C. 3350(11). The provision of the statute relevant to determining the registry fee is in section 1109(a)(4)(B), which provides that the fee is based on the number of appraisers ``working for or contracting with [an AMC] in [a] state during the previous year.'' FIRREA section 1109(a)(4)(B), 12 U.S.C. 3338(a)(4)(B). \65\ 12 U.S.C. 3350(11). \66\ 12 U.S.C. 3338(a), 3353. --------------------------------------------------------------------------- Second, the statute that the Agencies are charged with implementing expressly defines an AMC with reference to the number of appraisers that the AMC ``oversees'' on a ``network or panel'' in a given year, not only on the number of appraisers to which it actually gives assignments.\67\ While commenters speculate that this approach to defining the number of appraisers that an AMC oversees on a network or panel may lead to efforts to evade the definition, the alternative approach suggested by commenters of relying only on the number of appraisers actually used during a 12-month period will also encourage evasion attempts. This alternative would allow AMCs to accumulate relationships with large numbers of independent contractors, advertise this breadth of coverage, and evade the rule by managing the actual use of appraisers through the year. --------------------------------------------------------------------------- \67\ FIRREA section 1121(11), 12 U.S.C. 3350(11) (defining AMC). --------------------------------------------------------------------------- The Agencies will monitor the effect of the rule and the definition of AMC for evasion and revisit the rule to the extent appropriate and permitted by statute in light of future developments. 2. Section 34.212(d): Annual Period for Counting Appraisers on AMC Panel Proposed Sec. 34.212(d) provided two options to States for calculating the number of appraisers on an entity's panel for determining whether the entity meets the minimum thresholds for designation as an AMC. The first was the 12-month calendar year and the second was any other 12-month period set by a State. One commenter suggested that, to promote uniformity, all States should be required to use the calendar year for determining whether an entity has the requisite number of appraisers on its panel to qualify as an AMC. Under the proposed rule, States would have the flexibility to align the 12-month period for determining AMC status with their AMC registration calendars, which may, or may not, be based on the calendar year. In this regard, the Agencies are aware that many States already do not use a calendar year for their existing appraiser registration process. The Agencies believe that allowing states to set the 12-month period provides appropriate flexibility and will help States comply with the minimum requirements and reduce regulatory burden for State governments. Thus, the Agencies adopt Sec. 34.212(d) in the final rule without change. C. Section 34.213: Appraisal Management Company Registration 1. Section 34.213(a): Minimum Requirements for Participating States Under proposed Sec. 34.213(a), adopted without change in this final rule, participating States must have a licensing program in place within the State appraiser certifying and licensing agency that has the authority to: (1) Review and approve or deny an AMC's application for initial registration; (2) review and renew or refuse to renew an AMC's registration periodically; (3) examine the books and records of an [[Page 32667]] AMC operating in the State and require the AMC to submit reports, information, and documents to the State; (4) verify that the appraisers on the AMC's appraiser panel hold valid State certifications or licenses, as applicable; (5) conduct investigations of AMCs to assess potential violations of applicable appraisal-related laws, regulations, or orders; (6) discipline, suspend, terminate, and refuse to renew the registration of an AMC that violates applicable appraisal-related laws, regulations, or orders; and (7) report to the ASC an AMC's violation of applicable appraisal-related laws, regulations, or orders, as well as disciplinary and enforcement actions and other relevant information about an AMC's operations. These authorities and mechanisms reflected the Agencies' interpretation of the provisions of section 1124(a), including the minimum requirement in section 1124(a)(1) that AMCs be ``subject to supervision'' by the State appraiser certifying and licensing agency.\68\ The Agencies interpret section 1124(a) as being consistent with the criteria outlined in FIRREA sections 1103, 1109, and 1118(a), which describe the elements of State regulation of AMCs that will be monitored by the ASC.\69\ For example, the ASC is responsible for monitoring whether States have supervision systems in place that would allow a State to process complaints against an AMC and conduct investigations in connection with those complaints.\70\ The ASC is also responsible for monitoring whether a State takes appropriate enforcement actions against an AMC that is found to have violated applicable laws and regulations.\71\ Consistent with the interpretation stated in the proposal, the Agencies continue to believe that these requirements are consistent with the enforcement and supervision authorities underlying an effective regulatory program and will ensure that State appraiser certifying and licensing agencies have the required structures for the registration and supervision of AMCs. --------------------------------------------------------------------------- \68\ 12 U.S.C. 3353(a). As stated in the proposal, the Agencies view section 1124 as allowing the Agencies to establish more specific requirements for supervision and registration of AMCs that implement the general requirements enumerated in section 1124(a). Id. In addition, by providing that the regulation shall ``include'' the requirements enumerated in section 1124, the statute implies that the Agencies have the discretion to establish additional supervisory standards for State oversight of AMCs consistent with the general requirements specifically enumerated in section 1124(a). Id. \69\ See 12 U.S.C. 3332(a)(1)(B) (requiring the ASC to monitor requirements established by the States for supervision of AMCs); 12 U.S.C. 3338(a) (requiring each participating State to transmit reports to the ASC on supervisory activities involving AMCs and disciplinary actions taken); and 12 U.S.C. 3347(a) (requiring the ASC to monitor States to assess whether a State has an effective regulatory program). \70\ See FIRREA section 1103(a)(1)(B), 12 U.S.C. 3332(a)(1)(B). \71\ See FIRREA sections 1109(a)(3) and 1118(a)(4), 12 U.S.C. 3338(a)(3) and 3347(a)(4). --------------------------------------------------------------------------- 2. Section 34.213(b): Minimum Requirements for State-Registered AMCs The Agencies are adopting proposed Sec. 34.213(b) without change. Section 34.213(b) implements FIRREA sections 1121(11) and 1124 and provides that participating States must require State-registered AMCs to follow certain minimum requirements when AMCs provide appraisal management services for a creditor or ``underwriter of or other principal in the secondary mortgage markets'' that are related to a covered transaction.\72\ Pursuant to the minimum requirements in Sec. 34.213(b), an AMC (other than a Federally regulated AMC) is required to register with, and be subject to supervision by, a State appraiser certifying and licensing agency in each State in which the AMC operates. In addition, States must require AMCs to verify that only State-certified or State-licensed appraisers are used when a creditor or secondary mortgage market participant engages in a transaction that requires the services of a State-certified or State-licensed appraiser under the Federally related transaction regulations. A State also must require registered AMCs to have processes and controls reasonably designed to ensure that the AMC, in engaging an appraiser, selects an appraiser who has the requisite education, expertise, and experience to complete competently the assignment for the particular market and property type. This minimum requirement implements the requirement of section 1124(a)(2) \73\ and emphasizes a core principle of the Agencies' FIRREA appraisal regulation and the Interagency Appraisal and Evaluation Guidelines, which is that an appraiser must not only be State credentialed and competent generally, but also have specific competency to perform a particular appraisal assignment.\74\ --------------------------------------------------------------------------- \72\ 12 U.S.C. 3350(11), 3353. \73\ 12 U.S.C. 3353(a)(2). \74\ See 12 CFR 34.46(b) (OCC); see also Interagency Appraisal and Evaluation Guidelines, 75 FR 77450, 77458 (December 10, 2010); Appraisal Standards Board, Uniform Standards of Professional Appraisal Practice, Appraiser Competency Rule (2014-2015), available at The Appraisal Foundation, https://netforum.avectra.com/eWeb/DynamicPage.aspx?Site=TAF&WebCode=USPAP (requiring that an appraiser have specific competency for the appraisal assignment). --------------------------------------------------------------------------- In addition, States must require an AMC to establish and comply with processes and controls reasonably designed to ensure that the AMC conducts its appraisal management services in accordance with: (1) The AMC's obligations as a covered person with respect to mandatory reporting, conflicts of interest, and other acts or practices that would violate valuation independence pursuant to section 129E(a) through (i) of TILA; and (2) the AMC's obligations as a creditor's agent with respect to appraiser compensation pursuant to section 129E(i) of TILA, 15 U.S.C. 1639e(i).\75\ --------------------------------------------------------------------------- \75\ See 12 CFR 226.42 (Board); 12 CFR 1026.42 (Bureau). --------------------------------------------------------------------------- As noted in the proposed rule, the AMC minimum standards do not affect the responsibility of banks, Federal savings associations, State savings associations, bank holding companies, and credit unions for compliance with applicable regulations and guidance concerning appraisals. Under the interagency appraisal rules, for example, if an appraisal is prepared by a fee appraiser (as opposed to in-house, by the institution), the appraiser must be engaged directly by the regulated institution or its agent, and have no direct or indirect interest, financial or otherwise, in the property or the transaction.\76\ As stated in the Interagency Appraisal and Evaluation Guidelines, an institution that engages a third party, such as an AMC, to administer any part of the institution's appraisal program remains responsible for compliance with applicable laws concerning appraisers and appraisals.\77\ --------------------------------------------------------------------------- \76\ 12 CFR 34.45 and 164.5 (OCC); 12 CFR 225.65 (Board); 12 CFR 323.5 (FDIC); 12 CFR 722.5(NCUA). \77\ See Interagency Appraisal and Evaluation Guidelines, 75 FR 77450, 77463 (discussing third-party arrangements). --------------------------------------------------------------------------- The Agencies requested comment on the proposed minimum requirements for State registration and supervision of AMCs. (See Question 6 in the proposal.) The Agencies also asked related questions concerning appraisal review standards and potential challenges States may encounter under the proposed minimum requirements for State registration and supervision of AMCs. (See Questions 7 through 11 in the proposal.) The following is a summary of these comments, followed by the response from the Agencies.\78\ [[Page 32668]] For the reasons explained below, the Agencies adopt proposed Sec. 34.213 on AMC registration without change in the final rule. --------------------------------------------------------------------------- \78\ The Agencies received many comments on Question 6 concerning the proposed minimum requirements for State registration and supervision of AMCs. Commenters were generally supportive of the proposed requirements. However, the commenters made several observations and expressed concerns with the proposed requirements. These comments overlap with comments made concerning other questions in the proposal. As such, Question 6 is not addressed separately. --------------------------------------------------------------------------- a. Appraisal Review The Agencies requested comment on the proposal to defer consideration of appraisal review standards to a separate rulemaking. (See Question 7 in the proposal). Some commenters agreed with the Agencies that appraisal review standards should be addressed in a separate rulemaking. Other commenters suggested that there are many pressing questions concerning appraisal review standards and that this rulemaking should therefore incorporate such standards. In drafting the minimum requirements for State registration and supervision of AMCs, and the definition of appraisal management services discussed previously, the Agencies considered whether to require AMCs to follow minimum standards when performing appraisal reviews. This question was presented by section 1121(11), which includes appraisal review as one of the types of appraisal management services performed by AMCs.\79\ In considering this question, the Agencies noted that FIRREA section 1110 requires a separate rulemaking regarding the requirement that, for Federally related transactions, appraisals shall be subject to ``appropriate'' review for compliance with USPAP.\80\ As stated in the proposal, the Agencies believe that a rulemaking to implement section 1110 provides the appropriate opportunity to address the requirement for appraisal reviews.\81\ For this reason, the proposed minimum standards for AMCs did not include appraisal review standards. --------------------------------------------------------------------------- \79\ 12 U.S.C. 3350(11). \80\ FIRREA section 1110(3), 12 U.S.C. 3339(3). \81\ 12 U.S.C. 3339(3). --------------------------------------------------------------------------- Commenters identified issues that may be appropriate for consideration in a rulemaking pursuant to FIRREA section 1110(3), but did not address why those standards are more appropriately addressed in the context of this rulemaking rather than in a separate rulemaking to implement section 1110(3).\82\ The Agencies continue to believe that addressing appraisal review issues more comprehensively in a separate rulemaking is appropriate, rather than doing so in a limited way as part of the AMC rule. The appraisal review standard of section 1110(3) applies to all regulated financial institutions subject to the appraisal rules of the Federal financial institution regulatory agencies, not just appraisals for which one of those firms uses an AMC to engage an appraiser. In addition, most commenters supported a separate rulemaking on appraisal review standards. For these reasons, consistent with the proposal, the final rule does not contain appraisal review standards. --------------------------------------------------------------------------- \82\ 12 U.S.C. 3339(3). --------------------------------------------------------------------------- b. Barriers to Implementation of AMC Minimum Requirements The Agencies also asked about whether any barriers existed for States in implementing the proposed AMC minimum requirements. (See Question 8 in the proposal). In response, the Agencies received several comments indicating concern that States might not have adequate funding or resources to implement or enforce the proposed rule. Other commenters expressed the view that the requirement to establish authorities and mechanisms to examine the books and records of an AMC could be subject to different interpretations by each State, and that the Agencies' expectations should be clarified. A third set of commenters indicated additional guidance is needed on the expectations for States engaging in examinations of AMCs. One commenter believed that States should be given the option to register AMCs for longer than a period of one year. See proposed Sec. 34.212 (requiring an annual count of appraisers on an entity's panel to determine whether the entity is subject to State registration requirements pursuant to the proposed rule). The commenter indicated that many States allow appraiser registration for longer periods and that doing so for AMCs might facilitate implementation of the rule by States. The Agencies are aware of, and sensitive to, the adequacy of participating States' resources to supervise AMCs in the manner contemplated by FIRREA section 1124. It is the Agencies' understanding, however, that many States that have already established AMC laws and registration programs have collected fees from AMCs, in part to offset the costs of the registration and supervision programs, using authority under State law. Nothing in this rule would prevent these States, or States that choose to become participating States, from continuing to charge fees to AMCs in the future.\83\ The Agencies also note that the registration and supervision of AMCs is voluntary, and that a State may elect not to establish such a program for any reason, including if its resources do not support such a program. --------------------------------------------------------------------------- \83\ This approach is consistent with the States' approach to registering appraisers. The Agencies understand that State appraiser certifying and licensing agencies have collected fees from appraisers for administering national appraiser registration for many years. --------------------------------------------------------------------------- With respect to the request that the Agencies set standards for State supervision of AMCs, the Dodd-Frank Act section 1473 amended FIRREA to confirm clearly the States' ability to exercise registration and supervisory capacities over AMCs, which the State can exercise using its own discretion, based on the individual State's enforcement priorities.\84\ As such, the Agencies leave supervisory standards to the discretion of the States and to the ASC, which is charged under Title XI of FIRREA with evaluating the efficacy of State registration and supervision of AMCs. --------------------------------------------------------------------------- \84\ 12 U.S.C. 3346. --------------------------------------------------------------------------- Regarding the request that States be able to register AMCs for longer than a year, the Agencies defer to individual States, but note that the requirement for an annual count of appraisers on an entity's panel is statutory. Specifically, the definition of AMC in FIRREA section 1121(11) bases whether an entity is an AMC on the number of appraisers on an entity's panel ``within a given year.'' \85\ Regarding whether a two-year AMC National Registry fee collection program is permissible or feasible, the Agencies defer to the ASC, which administers the relevant portion of FIRREA.\86\ Specifically, FIRREA section 1109(a)(4) requires States to submit AMC fees for the AMC National Registry to the ASC annually.\87\ --------------------------------------------------------------------------- \85\ 12 U.S.C. 3350(11). \86\ FIRREA section 1109(a)(4), 12 U.S.C. 3338(a)(4) (requiring States to submit AMC fees for the National Registry to the ASC annually). \87\ 12 U.S.C. 3338(a)(4). --------------------------------------------------------------------------- While the registration fee cycle is dictated by section 1109(a)(4), any additional licensing fees or any other associated fees charged by the State can be charged based on the State's determination of an appropriate cycle.\88\ The Agencies do not see a need to make any changes from the proposed version of the rule to clarify the annual registration cycle requirement in the final rule. --------------------------------------------------------------------------- \88\ 12 U.S.C. 3338(a)(4). --------------------------------------------------------------------------- c. Trainee Appraisers The Agencies received one comment on the requirement that States must verify that the appraisers on an AMC's panel hold valid States licenses and certifications (see proposed Sec. 34.213(a)(4)). This commenter expressed concern that the requirement [[Page 32669]] could be interpreted by some States to prohibit appraisers from using trainees to assist with assignments. The Agencies are adopting proposed Sec. 34.213(a)(4) with a minor non-substantive change. New Sec. 34.213(a)(4) requires States to verify that the appraisers on an AMC's appraiser panel--as defined in Sec. 34.211(e)--hold valid State certifications or licenses, as applicable. The Agencies are removing references to a ``list,'' ``network,'' or ``roster'' because these terms are incorporated into the definition of ``appraiser panel'' in Sec. 34.211(e). Regarding the concerns about whether trainee appraisers may be used in light of this requirement, Sec. 34.213(a)(4) is not intended to imply any changes in the current requirements for their use. The requirement in Sec. 34.213(a)(4) complements the requirement in proposed Sec. 34.213(b)(2) (adopted as final without change) that AMCs must use only State- licensed or State-certified appraisers for Federally related transactions. Both are intended to implement FIRREA section 1124(a)(2), under which the Agencies must require States to require AMCs to use only State-licensed or certified appraisers for Federally related transactions.\89\ --------------------------------------------------------------------------- \89\ 12 U.S.C. 3353(a)(2). --------------------------------------------------------------------------- The trainee appraiser designation established by the Appraiser Qualifications Board (AQB) of the Appraisal Foundation requires trainees to work under the supervision of a qualified supervisory appraiser, as authorized by section 1122(e).\90\ The Agencies continue to support the use of trainee appraisers as long as they work under the supervision of a State-certified and or State-licensed appraiser and have met the qualifications established by the appropriate State and the AQB. As such, the requirement in section 1124(a)(2) and the proposed and final rules should not be interpreted to bar trainee appraisers from working with State-certified or State-licensed appraisers who perform appraisals for AMCs, which is authorized by section 1122(e).\91\ The final rule amends proposed Sec. 34.213(b)(2), by substituting the term ``engage'' for the term ``use'' to clarify that an appraiser may work with a trainee appraiser on an appraisal, but only the appraiser may be ``engaged'' by the AMC to perform appraisals. In a Federally related transaction, an AMC may engage only a State-certified or State-licensed appraiser. --------------------------------------------------------------------------- \90\ 12 U.S.C. 3351(e). \91\ 12 U.S.C. 3351(e), 3353(a)(2). --------------------------------------------------------------------------- d. Valuation Independence The Agencies received comments on proposed Sec. 34.213(b)(5), which requires participating States to require AMCs to establish and comply with processes and controls reasonably designed to ensure that the AMC conducts its appraisal management services in accordance with the requirements of the valuation independence requirements of TILA section 129E.\92\ These commenters requested that the final rule clarify the extent to which States are expected to investigate and enforce TILA section 129E and its implementing regulations, which includes the requirements to pay appraisers customary and reasonable fees. These commenters also expressed concern that States might interpret these rules differently, potentially in ways that may conflict with Federal interpretations. --------------------------------------------------------------------------- \92\ 15 U.S.C. 1639e. --------------------------------------------------------------------------- In response to the comments, the Agencies note that, pursuant to section 1124(a)(4), States must require AMCs to require that appraisals are conducted in accordance with the valuation independence requirements of section 129E(a) through (i) of TILA.\93\ The Agencies proposed to implement this requirement by mandating that participating States require AMCs to: --------------------------------------------------------------------------- \93\ 12 U.S.C. 3353(a)(4), 15 U.S.C. 1639e. ---------------------------------------------------------------------------Establish and comply with processes and controls reasonably designed to ensure that the AMC, in engaging an appraiser, selects an appraiser who is independent of the transaction and who has the requisite education, expertise, and experience necessary to competently complete the appraisal assignment for the particular market and property type; and Establish and comply with processes and controls reasonably designed to ensure that the AMC conducts its appraisal management services in accordance with the requirements of section 129E(a)-(i) of the Truth in Lending Act, 15 U.S.C. 1639e(a)-(i), and regulations thereunder. See proposed Sec. 34.213(b)(3) and (4). Questions about what mechanisms a State agency may use to assess a party's compliance in connection with any authority the State has to commence a civil action to enforce section 129E of TILA are outside the scope of this rulemaking.\94\ This final rule sets minimum standards for States to adopt in establishing a State program for registering and supervising AMCs. Once adopted by a State, these minimum standards become part of the State's legal framework for licensing and registering AMCs. Questions concerning what authority a State may confer on its own agency to supervise for and enforce compliance with the State's licensing and registration program are also outside the scope of this rulemaking. --------------------------------------------------------------------------- \94\ 15 U.S.C. 1639e. --------------------------------------------------------------------------- 3. Other Issues a. The 36-Month Implementation Period The Agencies asked for comment on whether aspects of the proposed rule would be challenging for States to implement within 36 months. (See Question 9 in the proposal.) The Agencies also asked States to identify alternative approaches that would make implementation easier. Seven commenters stated that 36 months does not give States enough time for implementation and that the 36-month implementation period should begin after the ASC establishes the AMC National Registry and has issued its clarifying regulations. One commenter asserted that States would have difficulty beginning the implementation process until the ASC issued its regulations. Other commenters expressed concerns that the ASC would be unable to set up a functioning AMC National Registry and issue its clarifying regulations within 36 months after this final rule is issued. The Agencies note that Congress specifically provided for a 36- to 48-month implementation period before restrictions are imposed on AMCs in States that have not yet participated. This 36-month implementation period is set pursuant to section 1124(f), which also provides for a potential 12-month extension if the ASC finds that a State has made substantial progress towards implementing an AMC registration and supervision program.\95\ Thus, only the ASC, and not the Agencies, may extend the implementation period beyond 36 months. The Agencies anticipate that concerns about the 36-month period and the need for registry regulations will be addressed by the ASC. In response to the concern expressed by the commenters, however, the Agencies are adopting changes to the proposed definitions that relied on cross-references to Regulation Z, 12 CFR part 1026 rule, by substituting the text of these definitions for the cross references. As noted in the section-by- section analysis of Sec. 34.211, above, the Agencies believe that these changes mitigate the potential obligations of States to update, clarify, or amend State law or its interpretations as Regulation Z is amended over time, or if the [[Page 32670]] numbering of definitions in Regulation Z changes. --------------------------------------------------------------------------- \95\ FIRREA sections 1124(f)(1) and (2), 12 U.S.C. 3353(f)(1) and (2). --------------------------------------------------------------------------- b. Potential Differences Between State Laws and the Proposed AMC Rule The Agencies asked for comment on whether there are questions raised by any differences between State laws and the proposed rule and whether those differences should be addressed in the final rule. (See Question 11 in the proposal.) As noted, one commenter suggested that, to promote uniformity, all States should be required to use the calendar year for determining whether an entity has the requisite number of appraisers on its panel to qualify as an AMC. These comments were addressed in the section-by-section analysis of Sec. 34.212(d), above. c. Voluntary Nature of State Adoption of AMC Registration and Supervision Programs As described earlier in this preamble, the Agencies have interpreted section 1124 to mean that there is no requirement for States to adopt programs for registration and supervision of AMCs.\96\ Rather, if a State chooses not to adopt such a program, AMCs located in that State may not provide appraisal management services for Federally related transactions, unless the AMCs are Federally regulated. To qualify to provide appraisal management services for Federally related transactions, a State program must include the minimum requirements for registration and supervision of AMCs in section 1124 and in the final rule.\97\ --------------------------------------------------------------------------- \96\ 12 U.S.C. 3353. \97\ 12 U.S.C. 3353. --------------------------------------------------------------------------- The Agencies received a number of comments concerning the Agencies' interpretation of the statute and the conclusion that adoption by States of AMC registration and supervision programs is voluntary and optional. These commenters argued that, in non-participating States, non-Federally regulated AMCs will be at a competitive disadvantage, because these AMCs will be barred by statute from providing appraisal management services for Federally related transactions. In addition, the commenters argued that interpreting State adoption of the minimum requirements to be voluntary would burden lenders. These commenters asserted that, in non-participating States, lenders would have to set up in-house appraisal management staff, which would raise the costs of lending. In addition, the commenters argued that, in non-participating States, consumers would be affected adversely by increased costs for appraisals and delays arising from the absence of AMCs in the marketplace. These commenters also suggested that either the Agencies or the ASC should serve as a ``back-up'' regulator to register and supervise AMCs in non-participating States. These commenters suggested that this alternative would address the same policy concerns they expressed in arguing for mandatory State participation. In response to these comments, the Agencies note first that section 1124(a), by its plain terms, does not require any State to adopt an AMC registration and supervision program.\98\ Nor is there a stated penalty for a State that declines to do so. Rather, under section 1124(f), an AMC (that is not Federally regulated) in a non-participating State is barred from providing appraisal management services for Federally related transactions.\99\ The Agencies note that 38 States have already adopted AMC programs.\100\ The commenters also provided no substantiating basis to support the commenters' warning that lending will be inhibited or more costly in non-participating States. If after the 36-month period following issuance of the final rule (or any extended period permitted by the ASC), a State has not yet adopted an AMC registration and supervision program, many options exist for creditors to obtain appraisals for Federally related transactions. Creditors that do not wish to hire in-house appraisers can engage third-party appraisers directly.\101\ Smaller AMCs (those that have fewer than 15 appraisers in the State on their panel or fewer than 25 appraisers in two or more States) as well as Federally regulated AMCs can still perform services in Federally related transactions. AMCs that exceed the statutory size threshold may also continue to service transactions that are not Federally related and, if the State does later participate, can also then provide services in Federally related transactions. --------------------------------------------------------------------------- \98\ 12 U.S.C. 3353(a). \99\ 12 U.S.C. 3353(f). \100\ One commenter, an AMC, highlighted a report by a Hawaii State auditor regarding a proposed bill in the Hawaii legislature that concerns the registration of AMCs. The commenter argued that this report provided evidence that Hawaii would not adopt an AMC law. The auditor's report, however, does not indicate that it would be inappropriate for a State to participate in the AMC regulatory system established under section 1124. Rather, the report opined that the particular proposed bill would not be the appropriate method of participation for various reasons, including that the regulation of AMCs should not be managed by the State real estate commission. See Auditor of the State of Hawaii Report 10-07 (Sept. 2010) at 4, Sunrise Analysis: Real Estate Appraisal Management Companies, (Sept. 2010) at 4, available at http://files.hawaii.gov/auditor/Reports/2010/10-07.pdf. \101\ The valuation independence provisions of TILA section 129E and its implementing regulations do not require use of AMCs. 15 U.S.C. 1639e, implemented at 12 CFR 226.42 (Board) and 12 CFR 1026.42 (Bureau). --------------------------------------------------------------------------- Some commenters suggested that the Agencies or the ASC step in to register and supervise AMCs in non-participating States. Neither section 1124 nor FIRREA authorizes either the Agencies or the ASC to serve as a ``back up'' regulator for registration and supervision of AMCs.\102\ The Agencies are only permitted to directly supervise Federally regulated AMCs, as discussed in the section-by-section analysis of Sec. 34.215, below. --------------------------------------------------------------------------- \102\ 12 U.S.C. 3353. --------------------------------------------------------------------------- D. Section 34.214: Registration Limitations Section 34.214 finalizes proposed Sec. 34.215, which placed certain limitations on whether an AMC (whether or not Federally regulated) may be registered in a State or included in the AMC National Registry. Proposed Sec. 34.215 was based on section 1124(d), which provides that an AMC shall not be registered by a State or included on the AMC National Registry if the company, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State.\103\ Section 1124(d) provides further that each person who owns more than 10 percent of an AMC must be of good moral character, as determined by the State appraiser certifying and licensing agency, and must submit to a background investigation carried out by the State appraiser certifying and licensing agency.\104\ --------------------------------------------------------------------------- \103\ 12 U.S.C. 3353(d). \104\ 12 U.S.C. 3353(d). --------------------------------------------------------------------------- To implement this provision, proposed Sec. 34.215(a)--finalized in substantially similar form at Sec. 34.214(a)--provided that an AMC may not be registered by a State or included on the AMC National Registry if such company, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State. As the Agencies noted in the proposal, section 1124(d) states clearly that the limitations regarding appraiser licensure and certification determine both whether an AMC may be ``registered by a State'' and [[Page 32671]] whether an AMC may be ``included on the national registry'' of AMCs.\105\ --------------------------------------------------------------------------- \105\ 12 U.S.C. 3353(d). --------------------------------------------------------------------------- In addition, proposed Sec. 34.215(b)--finalized at Sec. 34.214(b)--provided that, for AMCs seeking to be registered in a State, each person who owns more than 10 percent of an AMC must be of good moral character, as determined by the State appraiser certifying and licensing agency, and must submit to a background investigation carried out by the State appraiser certifying and licensing agency. Under the proposal, this limitation would apply to Federally regulated AMCs only if they seek to register voluntarily with a State. Under the proposal, these threshold requirements concerning licensure would be ongoing obligations for State appraiser certifying and licensing agencies. As such, a State would be expected to review whether an AMC meets the proposed ownership limitations, as described in the statute and in proposed Sec. 34.215 (finalized at Sec. 34.214), at the time of registration of an AMC, and at the time of renewal of the AMC license each year, or more frequently as determined necessary by that State. 1. Section 34.214 (a): Technical Versus Substantive Licensing Violations Some commenters suggested that the Agencies consider circumstances in which an appraiser's license lapsed or was revoked for technical reasons unrelated to the quality of appraisals performed by the appraiser. They asserted that being barred from owning an AMC eligible for registration in a State or included in the AMC National Registry in these cases is potentially unfair. One example of this is when an appraiser neglects to renew his or her appraiser's license on time. Depending on the State law, an appraiser would typically be able to be reinstated, pending payment of certain penalties. In this situation, the lapse in the appraiser's license is unrelated to fraud or a failure to perform an appraisal in compliance with USPAP. The Agencies agree that non-substantive grounds for the revocation of an appraiser's license should not be construed to be within the scope of the registration limitations in section 1124(d).\106\ In connection with this, the Agencies agree that an appraiser who is subsequently reinstated by the State appraiser certifying and licensing agency should not be within the scope of the registration limitations. For example, if an appraiser's license lapses for non-payment of fees, and the appraiser is later reinstated by the State appraiser certifying and licensing agency after meeting his or her obligation, the appraiser should not be barred from owning an AMC. If, however, an appraiser's license or certificate is revoked, for example, for violations of the TILA independence standards or for failure to comply with USPAP, an AMC owned wholly or in part by that appraiser should not be eligible to register in a State or appear on the AMC National Registry. For these reasons, the final rule clarifies that an appraiser is subject to the ownership ban if the revocation of the appraiser's license or certification was for a substantive cause, as determined by the State certifying and licensing agency. --------------------------------------------------------------------------- \106\ 12 U.S.C. 3353(d). --------------------------------------------------------------------------- 2. Other Issues Some commenters expressed concern that States may not be able to obtain the information to determine whether an appraiser license has been revoked in another State. One commenter requested guidance on how to approach the moral character registration requirement within a corporate structure. Specifically, the commenter inquired about whether a State must review issues related to moral character to owners beyond the AMC, for example to a holding company. Another commenter suggested that the Agencies define ``good moral character'' rather than leaving it to participating States to adopt their own definition. With respect to the commenters' questions concerning the details and logistics of a State's investigation of an applicant for presence of the registration limitation factors, the Agencies believe that it is desirable to afford flexibility to the States, many of which currently perform background investigations in connection with various licensing regimes, to establish appropriate procedures and the scope of the background investigations to be performed by that particular State. The statute establishes the ASC as the agency that oversees the adequacy of State AMC registration and investigation procedures. Similarly, with respect to the comment suggesting the final rule define ``good moral character'' in a manner that all participating States would be required to adopt, the Agencies note that section 1124 provides for the good moral character limitation to be applied ``as determined by the State.'' Thus, consistent with the statute, the final rule defers to the participating States to make determinations as to the scope of the good moral character requirement.\107\ In overseeing implementation by participating States, the ASC potentially could provide input as well. --------------------------------------------------------------------------- \107\ State appraiser boards also have experience applying the ``good moral character'' standard, which is a common element of appraiser licensure standards already. See, e.g., Virginia 18 VAC 130-20-30(1); Pennsylvania Code Ch. 36.12(a); Michigan Code Ch. 339.2610; Missouri Code Ch. 339.511(2); N.J. S.A. Title 45 Ch. 14F- 10(b). --------------------------------------------------------------------------- Finally, the Agencies are also clarifying in Sec. 34.214(a) that the section regarding registration limitations applies to AMCs required to register with a State, not to Federally regulated AMCs (unless they voluntarily wish to register with a State). Accordingly, the title of this section has been revised from ``Registration limitations'' to ``Ownership limitations for AMCs registering in a State.'' As discussed in the section-by-section analysis of new Sec. 34.215(b), below, for clarity the Agencies added a separate provision regarding limitations on Federally regulated AMCs being included on the AMC National Registry, also pursuant to section 1124(d).\108\ --------------------------------------------------------------------------- \108\ 12 U.S.C. 3353(d). --------------------------------------------------------------------------- E. Section 34.215: Requirements for Federally Regulated AMCs Section 1124(c) provides that AMCs that are owned and controlled subsidiaries of an insured depository institution or an insured credit union and regulated by a Federal financial institutions regulatory agency, are not required to register with a State.\109\ These Federally regulated AMCs are, however, subject to the same minimum requirements as AMCs that are not regulated by a Federal financial institutions regulatory agency. --------------------------------------------------------------------------- \109\ 12 U.S.C. 3353(c). However, nothing in the proposed rule would prohibit a Federally regulated AMC from registering with a State if the State permitted it to do so. --------------------------------------------------------------------------- 1. Section 34.215(a): Requirements in Providing Services Section 34.215(a) finalizes without change the proposed Sec. 34.214(a) concerning requirements for Federally regulated AMCs. Pursuant to proposed Sec. 34.214(a), Federally regulated AMCs were subject to the same substantive standards that were proposed for non- Federally regulated AMCs. Specifically, pursuant to Sec. 34.214(a), Federally regulated AMCs were required to have systems in place to ensure that only State-certified or State-licensed appraisers perform appraisals for Federally related transactions; that appraisers with the requisite education, expertise, and experience necessary for the assignment are used; that appraisals comply with USPAP; and that the [[Page 32672]] valuation independence requirements of TILA section 129E are met.\110\ --------------------------------------------------------------------------- \110\ See section 129E of TILA, 15 U.S.C. 1639e (implemented at 12 CFR 1026.42). --------------------------------------------------------------------------- 2. Section 34.215(b): Ownership Limitations for Federally Regulated AMCs Section 34.215(b) reflects a non-substantive revision to the proposal. This provision implements limitations on inclusion in the AMC National Registry for Federally regulated AMCs pursuant to section 1124(d) and reorganizes them into a separate section for Federally regulated AMCs.\111\ The proposed rule folded the limitations on Federally regulated AMCs into proposed Sec. 34.215 (Registration limitations), which also addressed limitations on AMCs that are required to register with a State. --------------------------------------------------------------------------- \111\ 12 U.S.C. 3353(d). --------------------------------------------------------------------------- For clarity, the final rule separates the ownership limitations on AMCs required to register with States (proposed Sec. 32.215; finalized in Sec. 34.214) from the ownership limitations on Federally regulated AMCs that can be included on the AMC National Registry (Sec. 34.215(b)). Specifically, Sec. 34.215(b) states that a Federally regulated AMC shall not be included on the AMC National Registry if such AMC, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State for a substantive cause, as determined by the State. Section 34.215(b) also provides that an AMC is not barred by Sec. 34.215(b) from being included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest in the AMC has been reinstated by the State or States in which the appraiser was licensed or certified. 3. Section 34.215(c): Reporting Information for the AMC National Registry As part of being included on the AMC National Registry, the proposed rule required Federally regulated AMCs to provide to each participating State in which the AMC operates the information required by the ASC for administration of the AMC National Registry. Specifically, under proposed Sec. 34.214(b), Federally regulated AMCs would have been required to provide information relating to the determination of the AMC National Registry fee and the information needed to determine whether the ownership limitations under proposed Sec. 34.215 (finalized as Sec. 34.215(b), discussed above) apply. Finally, the proposed rule directed Federally regulated AMCs to contact the ASC concerning alternative means for submitting the information outlined in Sec. 34.214(b), in the event a State did not convey the information. The Agencies received comments concerning the requirement that States convey information on Federally regulated AMCs to the ASC, which many commenters addressed when responding to a specific question in the proposal concerning potential barriers to a State providing the necessary information to the ASC, as discussed below. The Agencies asked for comment on whether there may be barriers to collecting information on Federally regulated AMCs for the ASC. (See Question 10 in the proposal.) A number of commenters expressed the view that the supervision and handling of Federally regulated AMCs should be done by the ASC, not by the States. Other commenters expressed concern that States do not have a way to identify a Federally regulated AMC. Another set of commenters suggested that States would have difficulty with collecting information concerning Federally regulated AMCs because they do not have a process for the collection of such information. A few other commenters argued that States do not have authority over Federally regulated AMCs, which would make it impossible to police the collection requirement. Some commenters suggested that requiring States to collect information on Federally regulated AMCs amounted to an unfunded mandate, particularly if State law prohibited an agency from collecting a fee from an entity it does not license or regulate. These commenters argued that States should be compensated for collecting information from Federally regulated AMCs. The Agencies note that the proposed and final rules do not implement the statutory requirement for States to collect the AMC National Registry fee, nor do they determine the process for collection. The collection of the fee is provided for pursuant to FIRREA section 1109 and will be implemented by the ASC, not the Agencies as part of this joint rulemaking.\112\ In addition, the Agencies note that the requirement for States to collect fees from Federally regulated AMCs is statutory.\113\ Under FIRREA section 1109(a)(4)(B), participating States are required to collect an annual ASC fee from each AMC that is registered with the States or operated as a subsidiary of a Federally regulated financial institution.\114\ --------------------------------------------------------------------------- \112\ 12 U.S.C. 3338. \113\ See section 1109(a)(4)(B), 12 U.S.C. 3338(a)(4)(B). \114\ 12 U.S.C. 3338(a)(4)(B). --------------------------------------------------------------------------- In FIRREA section 1124(e), the Agencies are charged with jointly promulgating regulations for the reporting of the activities of AMCs to the ASC in determining the payment of the AMC National Registry fee.\115\ The Agencies interpret FIRREA sections 1109(a)(4)(B) and 1124(e) together to require States to collect information related to the determination of the fee for Federally regulated AMCs operating in their States.\116\ Therefore, in Sec. 34.215(c), the Agencies are adopting the proposal to require Federally regulated AMCs to submit information required for the AMC National Registry to the States in which they operate without substantive change. --------------------------------------------------------------------------- \115\ See FIRREA section 1124(e), 12 U.S.C. 3353(e). \116\ See 12 U.S.C. 3338(a)(4)(B), 3353(e). --------------------------------------------------------------------------- Specifically, new Sec. 34.215(c) requires Federally regulated AMCs to report to the State or States in which they operate the information required to be submitted by the State to the ASC, pursuant to policies that will be developed and issued by the ASC regarding the determination of the AMC National Registry fee, including but not necessarily limited to information related to the ownership limitations in Sec. 34.215(b). These ownership limitations relate to determining the AMC National Registry fee because the limitations determine whether an AMC is eligible to be included in the Registry in the first instance. The Agencies understand commenters' concerns about States collecting information from Federally regulated AMCs and submitting it to the ASC. As discussed, the Agencies interpret the statute to require that participating States have a mechanism for collecting information from identified Federally regulated AMCs operating in their States and submitting it to the ASC. However, the Agencies emphasize that this final rule does not require States to identify Federally regulated AMCs operating in their States, nor are they responsible for supervising or enforcing a Federally regulated AMC's compliance with information submission requirements related to the AMC National Registry. Rather, the Federal agencies overseeing Federally regulated AMCs are responsible for supervising and enforcing the compliance of Federally regulated AMCs with these requirements, including whether the [[Page 32673]] AMC identifies itself to the State and submits required information. States are also not required to assess whether any licensing issues in that State of owners of a Federally regulated AMC disqualify the AMC from being on the AMC National Registry, pursuant to the ownership limitations in Sec. 34.215(b). The final rule defers to the ASC to determine whether the cause of an appraiser license issue arose was ``substantive.'' The Agencies are sensitive to concerns raised about the cost to States of collecting and remitting information regarding Federally regulated AMCs. The final rule does not bar a State from collecting a fee from Federally regulated AMCs to offset the cost of collecting the AMC National Registry fee and the information related to the fee. In addition, pursuant to section 1109(b)(5), the ASC has the authority to provide grants to State appraiser certifying and licensing agencies to support the efforts of such agencies to comply with Title XI of FIRREA, including in connection with implementation of the AMC National Registry.\117\ Finally, the Agencies consulted further with the ASC regarding the proposal to give Federally regulated AMCs the alternative to report information directly to the ASC, for example, when operating in a non-participating State that is not collecting information. Due to operational challenges raised by the ASC, the Agencies are removing this alternative from the final rule. However, the Agencies recognize that practical challenges may arise as the minimum requirements are adopted in States and reporting requirements take effect and will be monitoring these issues. --------------------------------------------------------------------------- \117\ 12 U.S.C. 3338(b)(5). --------------------------------------------------------------------------- F. Section 34.216: Information To Be Presented to the ASC by Participating States Section Sec. 34.216 is adopted without change from proposed rule. Pursuant to Sec. 34.216, States that establish AMC registration and supervision programs are required to submit to the ASC the information regarding AMCs required by ASC regulations and guidance. This provision implements the requirement in section 1124(e) for the Agencies to establish these reporting requirements. The Agencies did not receive comments specifically relating to Sec. 34.216; however, as discussed above in response to questions concerning potential barriers to State registration and supervision of AMCs, some commenters expressed concern regarding the costs of collecting information related to fees and the registration limitations, as well as the logistics of doing so with respect to Federally regulated AMCs.\118\ As discussed above in the section-by- section analysis of Sec. 34.213, the Agencies are aware that there are States that currently charge AMCs a fee to offset administrative costs and could continue to do so. The Agencies also believe that cost concerns may be addressed by the ASC, through its authority to provide grants to States to assist States in complying with Title XI of FIRREA. The Agencies expect that the ASC will work with both the States and the Agencies to address logistical issues as the final rule is implemented. --------------------------------------------------------------------------- \118\ The commenters, however, did not offer data on what volume or burden the collection of information and transmission process would be expected to pose. --------------------------------------------------------------------------- G. Integration of FDIC and OTS Rules on Appraisals The FDIC proposed to integrate its appraisal regulations for both nonmember banks and State savings associations. Specifically, the FDIC proposed to rescind 12 CFR part 390, subpart X (part 390, subpart X), of the former OTS regulation entitled ``Appraisals.'' The FDIC did not receive any comments specifically relating to the integration of the former OTS rules on appraisals. The final rule implements this authority by rescinding the former OTS regulatory provisions on appraisals pertaining to State savings associations, as these entities are now covered by the FDIC's appraisal rules. IV. Statutory Implementation Period Pursuant to section 1124(f)(1), the limitation that applies to AMCs operating without registering with a participating State will apply as of 36 months from the effective date of this final rule.\119\ As a result, States electing to participate have 36 months from August 10, 2015 to establish an AMC registration and supervision program that meets the minimum requirements in this final rule and register AMCs seeking to provide appraisal management services related to Federally related transactions in the State before this limitation begins to apply. Subject to the approval of the FFIEC, the ASC may extend this period by an additional 12 months if it makes a written finding that a State has made substantial progress towards implementing a registration and supervision program for AMCs that meets the standards in Title XI of FIRREA. The compliance date for the final rule for Federally regulated AMCs is 12 months after the effective date of this final rule with respect to practice requirements in Sec. 34.215(a). This 12-month compliance date will allow Federally regulated AMCs time to develop the processes and controls required by this final rule. The compliance date for AMCs that are regulated by States will be determined by each State. --------------------------------------------------------------------------- \119\ 12 U.S.C. 3353(f). --------------------------------------------------------------------------- V. Regulatory Analysis Paperwork Reduction Act Certain provisions of the final rule contain ``information collection'' requirements within the meaning of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501 et seq.). Under the PRA, the Agencies may not conduct or sponsor, and, notwithstanding any other provision of law, a person is not required to respond to, an information collection unless the information collection displays a valid Office of Management and Budget (OMB) control number. The information collection requirements contained in this final rule were submitted to OMB for review and approval at the proposed rule stage by the FDIC, FHFA, and OCC pursuant to section 3506 of the PRA and section 1320.11 of the OMB's implementing regulations (5 CFR part 1320). OMB instructed the agencies to examine public comment in response to the proposed rule and describe in the supporting statement of their next collections any public comments received regarding the collection as well as why (or why it did not) incorporate the commenter's recommendation. The Agencies received no public comments regarding the collection. The Board reviewed the proposed rule under the authority delegated to the Board by OMB. The collection of information requirements in the final rule are found in Sec. Sec. 34.212-34.216. This information is required to implement section 1473 of the Dodd-Frank Act. Title of Information Collection: Minimum Requirements for Appraisal Management Companies. OMB Control Nos.: The Agencies will be seeking new control numbers for these collections. Frequency of Response: Event generated. Affected Public: States; businesses or other for-profit and not- for-profit organizations. Abstract: State Recordkeeping Requirements States seeking to register AMCs must have an AMC registration and supervision program. Section 34.213(a) requires each participating State to establish and maintain within its [[Page 32674]] appraiser certifying and licensing agency a registration and supervision program with the legal authority and mechanisms to: (i) Review and approve or deny an application for initial registration; (ii) periodically review and renew, or deny renewal of, an AMC's registration; (iii) examine an AMC's books and records and require the submission of reports, information, and documents; (iv) verify an AMC's panel members' certifications or licenses; (v) investigate and assess potential law, regulation, or order violations; (vi) discipline, suspend, terminate, or deny registration renewals of, AMCs that violate laws, regulations, or orders; and (vii) report violations of appraisal- related laws, regulations, or orders, and disciplinary and enforcement actions to the ASC. Section 34.213(b) requires each participating State to impose requirements on AMCs not owned and controlled by an insured depository institution and regulated by a Federal financial institutions regulatory agency to: (i) Register with and be subject to supervision by a State appraiser certifying and licensing agency in each State in which the AMC operates; (ii) engage only State-certified or State- licensed appraisers for Federally regulated transactions in conformity with any Federally regulated transaction regulations; (iii) establish and comply with processes and controls reasonably designed to ensure that the AMC, in engaging an appraiser, selects an appraiser who is independent of the transaction and who has the requisite education, expertise, and experience necessary to competently complete the appraisal assignment for the particular market and property type; (iv) direct the appraiser to perform the assignment in accordance with USPAP; and (v) establish and comply with processes and controls reasonably designed to ensure that the AMC conducts its appraisal management services in accordance with section 129E(a)-(i) of TILA. State Reporting Burden Section 34.216 requires that each State electing to register AMCs for purposes of permitting AMCs to provide appraisal management services relating to covered transactions in the State must submit to the ASC the information required to be submitted under this Subpart and any additional information required by the ASC concerning AMCs. AMC Reporting Requirements Section 34.215(c) requires that a Federally regulated AMC must report to the State or States in which it operates the information required to be submitted by the State pursuant to the ASC's policies, including: (i) Information regarding the determination of the AMC National Registry fee; and (ii) the information listed in Sec. 34.214. Section 34.214 provides that an AMC may not be registered by a State or included on the AMC National Registry if such company is owned, directly or indirectly, by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State. Each person that owns more than 10 percent of an AMC shall submit to a background investigation carried out by the State appraiser certifying and licensing agency. While Sec. 34.214 does not authorize States to conduct background investigations of Federally regulated AMCs, it would allow a State to do so if the Federally regulated AMC chooses to register voluntarily with the State. AMC Recordkeeping Requirements Section 34.212(b) provides that an appraiser in an AMC's network or panel is deemed to remain on the network or panel until: (i) the AMC sends a written notice to the appraiser removing the appraiser with an explanation; or (ii) receives a written notice from the appraiser asking to be removed or a notice of the death or incapacity of the appraiser. The AMC would retain these notices in its files. Burden Estimates: Total Number of Respondents: 500 AMCs, 55 States. Bureau: Since the Bureau is merely adopting a cross-reference in Regulation Z to the OCC regulatory text, the Bureau is not imposing any new or additional information collection requirements on regulated entities. Therefore, the Bureau is not seeking OMB approval for the information collection requirements already accounted for by the other agencies' information collection requests submitted to OMB in association with this rule. FDIC Burden Total: 1,545 hours. FHFA Burden Total: 617 hours. OCC Burden Total: 1,545 hours. Board Burden Total: 1,545 hours. Total Burden: 5,252 hours. Regulatory Flexibility Act OCC: The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., generally requires that, in connection with a rulemaking, an agency prepare and make available for public comment a regulatory flexibility analysis that describes the impact of the rule on small entities. However, the regulatory flexibility analysis otherwise required under the RFA is not required if an agency certifies that the rule will not have a significant economic impact on a substantial number of small entities (defined in regulations promulgated by the Small Business Administration (SBA) to include commercial banks and savings institutions, and trust companies, with assets of $550 million or less and $38.5 million or less, respectively) and publishes its certification and a brief explanatory statement in the Federal Register together with the rule. The OCC currently supervises 1,492 insured depository institutions (1,051 commercial banks and 441 Federal savings associations) of which approximately 1,090 are small entities based on the SBA's definition of small entities for RFA purposes. The OCC classifies the economic impact of total costs on a small entity as significant if the total costs in a single year are greater than 5 percent of total salaries and benefits, or greater than 2.5 percent of total non-interest expense. As discussed in the SUPPLEMENTARY INFORMATION above, section 1473 of the Dodd-Frank Act requires the Agencies to jointly prescribe regulations to implement the minimum requirements for State registration and supervision of AMCs. The final rule meets this obligation by requiring States that elect to register and supervise AMCs to impose certain requirements on AMCs. The final rule also requires participating States to have certain basic supervisory authorities, such as the ability to investigate complaints against AMCs, and take disciplinary action with respect to AMCs that violate applicable laws. The OCC believes the final rule will not have a significant economic impact on a substantial number of small entities for several reasons. First, the final rule imposes requirements primarily on States, not on national banks or Federal savings associations. Second, to the extent that the final rule imposes burden on national banks or Federal savings associations that own and control an AMC, there are only two such AMCs, and these are owned by large national banks. For these reasons, the OCC believes that the final rule will not have an impact on a substantial number of OCC-supervised small entities. Therefore, the OCC certifies that the final rule would not have a significant economic impact on a substantial number of small entities. Board: The RFA, 5 U.S.C. 601 et seq., requires an agency to provide and make available for public comment a regulatory flexibility analysis that describes the impact of a proposed rule [[Page 32675]] on small entities. However, a regulatory flexibility analysis is not required, if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities (defined in regulations of the SBA to include banking organizations (commercial banks, savings institutions, and trust companies)) with total assets of less than or equal to $550 million and publishes its certification and a short explanatory statement in the Federal Register together with the rule.\120\ Based on its analysis, and for the reasons stated below, the Board believes that the final rule will not have a significant economic impact on a substantial number of small entities. --------------------------------------------------------------------------- \120\ U.S. Small Business Administration, Table of Small Business Size Standards Matched to North American Industry Classification System Codes, available at https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf. --------------------------------------------------------------------------- The AMC Rule applies to States that elect to establish licensing and certifying authorities to regulate AMCs. In the Board's regulatory flexibility analysis for this Rule, the Board determined that approximately 32 entities would be subject to direct regulation and supervision by Federal financial institutions regulatory agencies. These entities would be subject to direct regulation and supervision under the Rule because the entities are Federally regulated AMCs. The number of these 32 entities that actually would be subject to regulation under the AMC Rule is currently unknown because some of the entities may have a network or panel of contract appraisers that is too small to satisfy a threshold requirement of the AMC Rule and therefore would be exempt from regulation and supervision under the AMC Rule. Data currently available to the Board indicate that approximately five State member banks operate a Federally regulated AMC. Data available to the Board are not sufficient to estimate how many of the approximately five entities subject to Board regulation and supervision would be classified as ``small entities.'' Generally, the RFA requires an agency to perform a regulatory flexibility analysis of small entity impacts only when the agency's rule directly regulates the small entities. The impact of this final rule on small entities is indirect. This final rule does not impose directly any significant new recordkeeping, reporting, or compliance requirements on small entities, but instead requires participating States to impose certain requirements on AMCs. The final rule also requires participating States to have certain basic supervisory capabilities, such as the ability to investigate complaints against AMCs, and take disciplinary action with respect to AMCs that violate applicable laws and regulations. Moreover, while certain minimum requirements are imposed on participating States by the language of section 1473 of the Dodd-Frank Act, each State may establish requirements in addition to those required by section 1473. Furthermore, an entity with a network or panel of appraisers that does not meet the numerical test specified in section 1473 may voluntarily register with a participating state and the ASC, thus incurring some nominal expenses in establishing and maintaining the required registration information and meeting the minimum operational requirements. Because of these uncertainties, calculation of the impact of the final rule on the average Board- supervised institution or entity is uncertain, although the number of Board-supervised entities directly subject to supervision under the Rule is expected to be less than five. Based on its analysis, and for the reasons stated above, the Board certifies that the final rule will not have a significant economic impact on a substantial number of small entities. FDIC: The RFA generally requires that, in connection with a rulemaking, an agency prepare and make available for public comment an initial regulatory flexibility analysis (IRFA) that describes the impact of the final rule on small entities.\121\ A regulatory flexibility analysis is not required, however, if the agency certifies that the final rule will not have a significant economic impact on a substantial number of small entities (defined in regulations promulgated by the SBA to include banking organizations with total assets of less than or equal to $550 million) and publishes its certification and a short, explanatory statement in the Federal Register together with the final rule. --------------------------------------------------------------------------- \121\ See 5 U.S.C. 601 et seq. --------------------------------------------------------------------------- As of September 30, 2014, there were approximately 3,451 small FDIC-supervised institutions, which include 3,167 State nonmember banks and 284 State-chartered savings institutions. The FDIC analyzed the organizational structure information in the Board of Governors of the Federal Reserve System's National Information Center database. This analysis found that few FDIC-supervised institutions owned or controlled an entity that provides the types of appraisal management services specified in section 1473. Of these institutions, none oversees a network or panel of appraisers that meets the statutory panel size threshold specified in section 1473 for an entity to be an AMC. Therefore, the final rule would not have any impact on any FDIC- supervised institutions. If any FDIC-supervised institution that owns or controls an entity with a network or panel of appraisers that does not meet the statutory panel size threshold specified in section 1473 voluntarily decides to register that entity with the States, then the institution may incur some nominal expenses in establishing and maintaining a process for providing the required registration information and meeting the minimum operational requirements. In addition, the final rule implements the minimum requirements for States to register and supervise AMCs as required by section 1473 of the Dodd-Frank Act. The final rule meets this obligation by requiring States that elect to register and supervise AMCs to impose certain requirements on AMCs. The final rule also requires participating States to have certain basic supervisory authorities, such as the ability to investigate complaints against AMCs and take disciplinary action with respect to AMCs that violate applicable laws. It is the opinion of the FDIC that the final rule will not have a significant economic impact on a substantial number of small entities that it regulates in light of the fact that no FDIC-supervised institutions own or control an entity with a network or panel of appraisers that meets the statutory panel size threshold specified in section 1473 for an entity to be an AMC. In addition, the final rule imposes requirements primarily on States and not on FDIC-supervised institutions. Accordingly, the FDIC certifies that the final rule would not have a significant economic impact on a substantial number of small entities. Thus, a regulatory flexibility analysis is not required. Bureau: The RFA generally requires an agency to conduct an IRFA and a final regulatory flexibility analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.\122\ --------------------------------------------------------------------------- \122\ For purposes of assessing the impacts of the proposed rule on small entities, ``small entities'' is defined in the RFA to include small businesses, small not-for-profit organizations, and small government jurisdictions. 5 U.S.C. 601(6). A ``small business'' is determined by application of SBA regulations and reference to the North American Industry Classification System (NAICS) classifications and size standards. 5 U.S.C. 601(3). A ``small organization'' is any ``not-for-profit enterprise which is independently owned and operated and is not dominant in its field.'' 5 U.S.C. 601(4). A ``small governmental jurisdiction'' is the government of a city, county, town, township, village, school district, or special district with a population of less than 50,000. 5 U.S.C. 601(5). Given this definition, participating States are not small governmental jurisdictions and the burden on them is not relevant to this analysis. --------------------------------------------------------------------------- [[Page 32676]] An FRFA is not required because this rule will not have a significant economic impact on a substantial number of small entities. This final rule implements the minimum requirements to be applied by participating States in the registration and supervision of AMCs, as well as requirements directly applicable to Federally regulated AMCs. The Bureau notes that the final rule does not impose requirements on AMCs (other than Federally regulated AMCs), but instead seeks to encourage States to adopt minimum requirements in their regulation of AMCs. Burden may be generated from the States' exercise of discretion to implement the final rule, based on the States having the option to decline to participate. The Bureau does not view this as burden resulting from the rule itself, however. Nonetheless, to inform the rulemaking and to inform the public, the Bureau exercised its discretion to analyze economic impacts that will be imposed on AMCs by States that implement final rule.\123\ For this purpose, the Bureau assumed States that have not yet passed an AMC licensing and registration law (17 States, as of November 2014) would all elect to pass such a law and establish an AMC licensing and supervision program that satisfies the standards of the final rule. This assumption is taken to establish an outer bound. Because the final rule does not require States to adopt the minimum requirements in the final rule, however, it is possible that not all 17 States (as defined in the final rule) would do so.\124\ --------------------------------------------------------------------------- \123\ The Bureau does not assume costs associated with the final rule's requirements to ensure compliance with USPAP and other regulations, because AMCs would be subject to these standards even without their being referenced in the final rule. \124\ A State could accept the consequences on AMCs' business in the State from not implementing the final rule. FIRREA section 1124(f) provides that three years after the final rule takes effect, AMCs cannot provide services in Federally related transactions unless and until a State has implemented the final rule. However, the Bureau understands that only a minority of mortgage transactions are ``Federally related transactions'' within the meaning of FIRREA. See, e.g., 12 CFR 225.62(f) (transaction must ``[r]equire the services of an appraiser'' to be federally related). But see id. at Sec. 225.63(a)(1),(9),(10) (exemptions from FIRREA appraisal requirements for transactions of $250,000 or less, transactions insured by or sold to a U.S. government agency, and transactions that conform to GSE appraisal standards). However, the Bureau believes all States will choose to participate. Several industry comments expressed concerns with the possible consequences if States did not participate. These comments did not establish that it was likely that States would not do so, however. Thus, the Bureau continues to rely on the assumption that the remaining States will choose to participate either within three years or soon thereafter. However, even if this is not the case, the transactions affected until a State did participate would be portfolio loans over $250,000 that are not insured by either the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the United States Department of Agriculture Rural Housing Service (USDA RHS). These loans represent a small percentage of the market, and therefore inability by certain market participants (certain types of AMCs) to provide appraisal management services in these types of transactions in a non-participating State will not result in a significant economic impact on a substantial number of small entities. --------------------------------------------------------------------------- Various commenters expressed their concerns with State and Federal fees that may be instituted in connection with AMC registration and supervision. This rule does not determine fee amounts for States to charge, require collection of registration fees by the ASC, or authorize the collection of such ASC fees. It instead provides minimum requirements for States to use to regulate AMCs within the State. How a State chooses to implement these requirements, including which if any new State fees to charge, is within the discretion of the States. With respect to the ASC registration fee, the Dodd-Frank Act grants authority to set that fee exclusively to the ASC.\125\ Therefore, the Bureau does not consider any fees imposed on AMCs by the ASC (whether directly or through the States for forwarding to the ASC) as an impact of the final rule. --------------------------------------------------------------------------- \125\ See 12 U.S.C. 3338. This provision in FIRREA is not part of the joint rulemaking authority in section 1124 that is the basis for the Agencies' issuance of this final rule. --------------------------------------------------------------------------- A national association commented explicitly on the fees that AMCs would pay and the fees' effect on consumers: ``150+- AMCs, $2,500 average fee per State (includes application fee, surety bond fees, background checks, secretary of State application fees, administration fees, and etc.) 150 AMCs x $2,500 x 50 States = $18,750,000.00 150 AMCs x 2500 appraisers x $50 ASC fee = $18,750,000.00.'' The Bureau's analysis differs from the commenter's in several ways. First, for the purposes of RFA, the Bureau is concerned only with smaller AMCs, and an AMC with 2,500 appraisers that operates in all 50 States is unlikely to be small under the SBA definition that would include only AMCs with yearly revenues below $7,500,000. Second, the Bureau does not count as a burden imposed by the final rule those registration fees in States that already established AMC registration regimes before adoption of the final rule; thus the multiplier in the first calculation should be 17 rather than 50. Third, the Bureau assumes for its base calculations that only the minimum State rate is caused by the rule (Vermont's $250 fee), thus the multiplier is $250 instead of $2,500. Finally, as mentioned above, the Bureau does not include the ASC fee or, in other words the third line overall (which in any event assumes a fee amount that the ASC has not yet established). Note that the Bureau's use of the minimum State rate for its base calculation of impacts does not imply that the Bureau suggests that the remaining 17 States adopt this rate. Commenters also discussed the impact of the rule on States and the burden that may result with the implementation of the final rule. While the Bureau acknowledges these comments, for the purposes of making a determination under the RFA, the impact of the final rule on the States is not incorporated into the FRFA because States are not classified as small entities. As discussed in the proposed rulemaking, State registration fees in States that have not yet passed an AMC licensing and registration law would constitute the primary economic impact of the final rule. As also noted in the proposed rule, such fees in States that have established such laws vary widely. Such State registration and renewal fees are not necessarily for the sole purpose of recovering costs of administering the minimum requirements under the final rule. States can impose charges for a variety of reasons, including to raise revenue (independent of the cost of the registration regime) or to fund the administration of a regime that exceeds the minimum requirements under the final rule. The Bureau believes that the fee charged by Vermont-- $125 for registration and $250 for annual renewal--would be sufficient to recover the cost of implementing the final rule in a newly- participating State.\126\ The Bureau therefore considered this fee in estimating the economic impact of the final rule in the 17 States that do not yet have AMC registration requirements. As discussed further below, however, the Bureau also considered more [[Page 32677]] conservative estimates of the impact of the final rule using significantly higher fee amounts. The Bureau believes that the 38 States that already have AMC registration requirements would have to do minimal, if any, updating of the requirements due to this rule, as discussed in the preamble. Thus, the Bureau believes that the rule's indirect burden on the AMCs operating in these 38 States is negligible. --------------------------------------------------------------------------- \126\ The application fee in Vermont is $125. See https://www.sec.state.vt.us/media/188701/amc_application.pdf. The annualized renewal fee is $250 ($500 for a two-year period). See https://www.sec.state.vt.us/media/486847/Appraisal-Management-Company-Renewal-Form-077-2014.pdf. In addition, while some States may elect to impose additional requirements relating to examination and inspection of their AMCs, the Bureau does not believe that the minimum requirements that States must provide would lead to significant costs for AMCs. --------------------------------------------------------------------------- As noted in the section-by-section analysis, it is possible that an appraisal firm, which hires employees to perform appraisals, could also oversee more than 15 appraisers engaged as independent contractors in a State, or 25 or more appraisers in two or more States, in a given year. Comments did not establish that such firms--described in the section- by-section analysis as `hybrid firms'--currently exist to any meaningful extent. The Bureau believes that to the extent such firms do exist, they are either already included in what the Bureau has counted as an AMC, or the firm is unlikely to be considered ``small'' within the meaning of the RFA. An additional requirement in the final rule is that the State AMC licensing programs have authority and mechanisms to examine books and records of the AMCs, to otherwise obtain information from the AMCs, and to discipline AMCs. The Bureau believes that existing State registration fees generally already account for the cost to the States of having such authority and mechanisms, and that the requirement in the final rule therefore would not lead to higher registration fees in any significant amount.\127\ Accordingly, in the 17 States that would adopt new registration and renewal systems, the Bureau believes the renewal fee currently charged in Vermont would cover the State's cost associated with implementing this requirement. --------------------------------------------------------------------------- \127\ See, e.g., Vermont Statutes Title 26 section 3324 (requiring AMCs to ``retain all records related to an appraisal, review, or consulting assignment for no less than five years . . . [and w]ith reasonable notice, a licensee or registrant shall produce any records governed by this section for inspection and copying by the board or its authorized agent.''). --------------------------------------------------------------------------- The Bureau notes that the final rule is not prescriptive as to how or when the States must exercise the authority or mechanisms. Exercise of such authority and mechanisms is determined at the discretion of the States, subject to monitoring by the ASC for effectiveness in the judgment or discretion of the ASC. Accordingly, to the extent that State exercise of such authority and mechanisms leads to burden on small entities, such burden would be attributable to such State implementation and/or ASC oversight expectations rather than to the final rule itself. Therefore, State statutes that implement this requirement relating to establishing examination authority and mechanisms are not expected to cause fee increases or new burden above the $250 overall baseline that is assumed for purposes of this analysis.\128\ --------------------------------------------------------------------------- \128\ In addition, the Bureau does not believe that in States that add this requirement there will be any significant new burden on the AMCs. The Bureau believes that the AMCs already keep their books and records in order as a standard course of business practice, and thus the occasional State examiner visits should not impose any significant burden. In addition, the final rule requires only that the State have the authority and mechanism to request records and information. The final rule does not require that the State exercise this authority and any burdensome exercise of this authority would therefore not be caused by the final rule. Finally, to the extent State supervision programs do increase burden, the Bureau believes this burden would be within the sensitivity tolerances described in the footnote at the end of this section. --------------------------------------------------------------------------- Similarly, the Bureau believes that other minimum requirements for AMCs under the final rule (verifying the use of licensed or certified status of appraisers, requiring that appraisers comply with USPAP, complying with any contractual review provisions, and establishing and complying with processes to ensure appraisers are qualified and independent and that the AMC acts in compliance with applicable valuation independence regulations), as well as the standard for removing appraisers from the appraiser panel, would not result in new burden on AMCs because these standards merely reinforce existing compliance requirements as well as industry practice.\129\ The Bureau further notes that States have discretion to interpret the requirements to establish processes and controls to ensure compliance, subject to monitoring by the ASC for effectiveness in the judgment or discretion of the ASC. Accordingly, to the extent that State interpretations of such requirements leads to burden on small entities, such burden would be attributable to such State implementation and/or ASC oversight expectations rather than to the final rule itself. --------------------------------------------------------------------------- \129\ These requirements also would not result in new burden on Federally regulated AMCs, for the same reason. Federally regulated AMCs do not have to comply with State registration and renewal requirements, which can entail fees. Conservatively, however, the Bureau applied the State fee burden to all of the small AMCs in its calculation method described herein. As a result, the estimated burden of State fees associated with the final rule may be over- estimated. --------------------------------------------------------------------------- Just as these conduct standards would not impose a significant burden on AMCs required to register at the State level, the Bureau does not believe they would impose significant burdens on Federally regulated AMCs either. See Interagency Appraisal and Evaluation Guidelines, 75 FR 77450 (Dec. 10, 2010) (Interagency Guidelines). The Interagency Guidelines, part VI, already require Federal financial institutions, when obtaining required appraisals, to select appraisers who are certified or licensed, qualified, in compliance with USPAP, and independent. 75 FR at 77458. Federally regulated AMCs frequently perform appraisals for their affiliates. Therefore, it can be assumed that in delegating these functions to AMCs, these Federal financial institutions also delegated these requirements from part VI of the Interagency Guidelines to these AMCs. To estimate the impact of the final rule on small AMCs, the Bureau conducted a survey. The Bureau called nine AMCs, selected randomly from a list of approximately 500 AMCs provided by industry trade associations. The AMCs were asked for certain basic data including the number of States in which they operate, their revenue (including the revenue from any non-appraisal business), and the number of appraisals that they performed in 2012.\130\ The Bureau estimated the revenue to be the number of appraisals performed in 2012 multiplied by $350--the average appraisal cost assumed in the Agencies' analysis under section 1022 of the Dodd-Frank Act in the 2013 Interagency Appraisals Rule. This revenue estimate is likely to be underestimated, given that several AMCs out of nine reported additional revenue that was not due to the residential appraisal business. Out of the nine AMCs, six had revenues of less than $7,500,000 in 2012, and thus would be within the scope of the RFA analysis based upon SBA guidelines.\131\ The Bureau computed the cost of registration and renewal fees in States that do not already have them, allocated these costs to individual AMCs based upon the number of States in which the AMC operated,\132\ and computed the ratio of these allocated costs to the AMCs' revenues. --------------------------------------------------------------------------- \130\ One of the AMCs did not report its revenue. \131\ NAICS code 531320--Offices of Real Estate Appraisers-- includes ``appraisal services,'' which we believe would include services provided by AMCs in the processing and review of appraisals. An alternative classification would be NAICS code 561110--Office Administrative Services. In any event, this code also has an SBA threshold of $7,500,000. \132\ The Bureau assumed that an AMC that operated in x States needs to register in additional (17/55)*x States. This assumption results in a (17/55)*x*$250 State registration and renewal fee burden on an AMC operating in x States. --------------------------------------------------------------------------- [[Page 32678]] The Bureau acknowledges that requiring AMCs to send letters to the appraisers that the AMC decides to remove from its panel might add burden in States that do not already have registration requirements (which typically include notice provisions). The Bureau does not possess any evidence on the number of appraisers to whom an AMC would have to send these letters. According to the Bureau of Labor and Statistics' August 2014 preliminary numbers, 1.9 percent of the labor force in the real estate and rental and leasing industry was either laid off or discharged in the most recent month. Thus, the Bureau estimates that an AMC will dismiss approximately a quarter of appraisers from its panel in any given year. The Bureau assumes that each AMC will have several standardized letters explaining the reason for dismissal: for example, changing economic conditions or the appraiser's violation of USPAP or work performance issues. Each AMC might incur a minimal one-time cost to draft these letters, with some industry associations potentially providing templates. After this minimal one-time cost is incurred, the ongoing cost would include a minimal adjustment of the letter based on the appraiser's particular circumstances and the actual printing and mailing cost. These letters also could be sent in batches, periodically, such as on an annual basis. Thus, for the purposes of this analysis, the Bureau implicitly accounts for these costs in the sensitivity analyses below (which use a State fee of $5,150 and include a $300 administrative expense). The Bureau then fit the received ratios using three different distributions: normal, generalized extreme value, and logistic. The three different distributions were used because no a priori assumptions regarding how these ratios are distributed can be made. The three distributions mentioned above are commonly used by empirical researchers to fit observed values. Considering the costs imposed by the States as a result of the final rule, the Bureau believes that less than 1 percent of the small entities would experience a cost of over 1 percent of their revenue, using either the normal, or the logistic, or the generalized extreme value distributions.\133\ The Bureau also notes that because the sample did not include any AMCs that were either too small (for example, with 15 or fewer appraisers in one State) or that were Federally regulated AMCs, these estimates are likely overstated. --------------------------------------------------------------------------- \133\ The Bureau notes that the percentage of small institutions for which the estimated burden of the final rule would amount to over 3 percent of the revenue would remain under 1 percent even if the Bureau had used the following alternative assumptions: (1) $5,150 as the assumed burden of the proposed rule for states that adopt new registration regimes--the highest among the existing state registration fees (in Minnesota, per http://mn.gov/elicense/licenses/licensedetail.jsp?URI=tcm:29-9313&CT_URI=tcm:27-117-32), and assumed this same amount as the annual renewal fee (even though the Minnesota renewal fee is only $2,650, per http://mn.gov/elicense/licenses/licensedetail.jsp?URI=tcm:29-9313&CT_URI=tcm:27-117-32); and (2) an additional annual labor cost of $300 for any possible associated burden of (a) filling out registration and renewal forms in those states (assuming an AMC operates in approximately 20 states on average, such that 6.26 of those states adopt new AMC licensing programs) and any additional burden related to notices from small AMCs removing appraisers from their panels in those states. The percentages of institutions for which this cost would amount to over 1 percent of the revenue changed, respectively, to 26 percent, 18 percent, and 15 percent of the small institutions affected, according to the normal, generalized extreme value, and logistic distributions. --------------------------------------------------------------------------- Certification Accordingly, the Bureau Director, by signing below, certifies that this final rule would not have a significant economic impact on a substantial number of small entities. FHFA: The RFA (5 U.S.C. 601 et seq.) requires an agency to analyze a proposed regulation's impact on small entities if the final rule is expected to have a significant economic impact on a substantial number of small entities.\134\ A regulatory flexibility analysis is not required if the agency certifies that the final rule will not have a significant economic impact on a substantial number of small entities and publishes its certification and a short statement in the Federal Register together with the final rule. --------------------------------------------------------------------------- \134\ 5 U.S.C. 605(b). --------------------------------------------------------------------------- The rule implements section 1124 of FIRREA and establishes minimum requirements to be imposed by a participating State appraiser certifying and licensing agency on AMCs doing business in the State. FHFA has considered the impact of this regulation and determined that it is not likely to have a significant economic impact on a substantial number of small entities because States and FHFA's regulated entities-- Fannie Mae, Freddie Mac, and the Federal Home Loan Banks--are not small entities for purposes of the RFA. See 5 U.S.C. 601(6). NCUA: The RFA \135\ requires NCUA to provide a regulatory flexibility analysis to certify that a rulemaking will not have a significant economic impact on a substantial number of small entities (defined for purposes of the RFA to include credit unions with assets less than $50 million) and publish its certification and a short explanatory statement in the Federal Register with the final rule.\136\ As explained above, the requirements of this rule would only apply directly to AMC subsidiaries owned and controlled by an insured depository institution, or an insured credit union, and regulated by a Federal financial institutions regulatory agency. NCUA, unlike the other banking agencies to this rulemaking, does not directly oversee or regulate any subsidiaries owned and controlled by credit unions, including AMC subsidiaries. Rather, NCUA's regulations permit Federal credit unions to invest in or lend only to CUSOs that conform to specific requirements outlined in part 712 of the NCUA's regulations. Because NCUA does not directly regulate or oversee CUSOs owned by State or Federally chartered credit unions, NCUA is not adopting regulatory text or any requirements through this rulemaking that would directly affect small entities. Accordingly, the NCUA Board certifies the rule will not have a significant economic impact on a substantial number of small entities. --------------------------------------------------------------------------- \135\ 5 U.S.C. 601 et seq. \136\ 78 FR 4032 (Jan. 18, 2013). --------------------------------------------------------------------------- Unfunded Mandates Reform Act of 1995 Determination OCC: The OCC has analyzed the final rule under the factors in the Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this analysis, the OCC considered whether the final rule includes Federal mandates that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year (adjusted annually for inflation). For the following reasons, the OCC finds that the final rule does not trigger the $100 million UMRA threshold. First, the mandates in the final rule apply only to those States that choose to establish an AMC registration system. Second, the costs specifically related to requirements set forth in law are excluded from expenditures under the UMRA. Although the OCC estimates that expenditures by State governments could be $82 million in one year, the UMRA cost estimate for the final rule is zero, given that the final rule's mandates are set forth in section 1473. For this reason, and for the other reasons cited above, the OCC has determined that this final rule will not result in expenditures by State, local, and tribal governments, or the private sector, of $100 million or more in any one year. Accordingly, this [[Page 32679]] final rule is not subject to section 202 of the UMRA. List of Subjects 12 CFR Part 34 Appraisal, Appraiser, Banks, Banking, Consumer protection, Credit, Mortgages, National banks, Reporting and recordkeeping requirements, Savings associations, Truth in lending. 12 CFR Part 208 Accounting, Agriculture, Banks, Banking, Confidential business information, Consumer protection, Crime, Currency, Insurance, Investments, Mortgages, Reporting and recordkeeping requirements, Securities. 12 CFR Part 225 Administrative practice and procedure, Banks, Banking, Federal Reserve System, Holding companies, Reporting and recordkeeping requirements, Securities. 12 CFR Part 323 Banks, Banking, Mortgages, Reporting and recordkeeping requirements, Savings associations. 12 CFR Part 1026 Advertising, Appraisal, Appraiser, Banks, Banking, Consumer protection, Credit, Credit unions, Mortgages, National banks, Reporting and recordkeeping requirements, Savings associations, Truth in lending. 12 CFR Part 1222 Appraisals, Government sponsored enterprises, Mortgages. Department of the Treasury Office of the Comptroller of the Currency Authority and Issuance For the reasons set forth in the preamble, the OCC is amending 12 CFR part 34 as follows: PART 34--REAL ESTATE LENDING AND APPRAISALS 0 1. The authority citation for part 34 is revised to read as follows: Authority: 12 U.S.C. 1 et seq., 25b, 29, 93a, 371, 1462a, 1463, 1464, 1465, 1701j-3, 1828(o), 3331 et seq., 5101 et seq., and 5412(b)(2)(B) and 15 U.S.C. 1639h. 0 2. Subpart H to part 34 is added to read as follows: Subpart H--Appraisal Management Company Minimum Requirements Sec. 34.210 Authority, purpose, and scope. 34.211 Definitions. 34.212 Appraiser panel--annual size calculation. 34.213 Appraisal management company registration. 34.214 Ownership limitations for State-registered appraisal management companies. 34.215 Requirements for Federally regulated appraisal management companies. 34.216 Information to be presented to the Appraisal Subcommittee by participating States. Sec. 34.210 Authority, purpose, and scope. (a) Authority. This subpart is issued by the Office of the Comptroller of the Currency under 12 U.S.C. 93a and Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) (Pub. L. 111-203, 124 Stat. 1376 (2010)), 12 U.S.C. 3331 et seq. (b) Purpose. The purpose of this subpart is to implement sections 1109, 1117, 1121, and 1124 of FIRREA Title XI, 12 U.S.C. 3338, 3346, 3350, and 3353. (c) Scope. This subpart applies to States and to appraisal management companies (AMCs) providing appraisal management services in connection with consumer credit transactions secured by a consumer's principal dwelling or securitizations of those transactions. (d) Rule of construction. Nothing in this subpart should be construed to prevent a State from establishing requirements in addition to those in this subpart. In addition, nothing in this subpart should be construed to alter guidance in, and applicability of, the Interagency Appraisal and Evaluation Guidelines \3\ or other relevant agency guidance that cautions banks, bank holding companies, Federal savings associations, state savings associations, and credit unions, as applicable, that each such entity is accountable for overseeing the activities of third-party service providers and ensuring that any services provided by a third party comply with applicable laws, regulations, and supervisory guidance applicable directly to the financial institution. --------------------------------------------------------------------------- \3\ See http://www.occ.gov/news-issuances/bulletins/2010/bulletin-2010-42.html. --------------------------------------------------------------------------- Sec. 34.211 Definitions. For purposes of this subpart: (a) Affiliate has the meaning provided in 12 U.S.C. 1841. (b) AMC National Registry means the registry of State-registered AMCs and Federally regulated AMCs maintained by the Appraisal Subcommittee. (c)(1) Appraisal management company (AMC) means a person that: (i) Provides appraisal management services to creditors or to secondary mortgage market participants, including affiliates; (ii) Provides such services in connection with valuing a consumer's principal dwelling as security for a consumer credit transaction or incorporating such transactions into securitizations; and (iii) Within a given 12-month period, as defined in Sec. 34.212(d), 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, as described in Sec. 34.212; (2) An AMC does not include a department or division of an entity that provides appraisal management services only to that entity. (d) Appraisal management services means one or more of the following: (1) Recruiting, selecting, and retaining appraisers; (2) Contracting with State-certified or State-licensed appraisers to perform appraisal assignments; (3) Managing the process of having an appraisal performed, including providing administrative services such as receiving appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and secondary market participants, collecting fees from creditors and secondary market participants for services provided, and paying appraisers for services performed; and (4) Reviewing and verifying the work of appraisers. (e) Appraiser panel means a network, list or roster of licensed or certified appraisers approved by an AMC to perform appraisals as independent contractors for the AMC. Appraisers on an AMC's ``appraiser panel'' under this part include both appraisers accepted by the AMC for consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions and appraisers engaged by the AMC to perform one or more appraisals in covered transactions or for secondary mortgage market participants in connection with covered transactions. An appraiser is an independent contractor for purposes of this subpart if the appraiser is treated as an independent contractor by the AMC for purposes of Federal income taxation. (f) Appraisal Subcommittee means the Appraisal Subcommittee of the Federal Financial Institutions Examination Council. [[Page 32680]] (g) Consumer credit means credit offered or extended to a consumer primarily for personal, family, or household purposes. (h) Covered transaction means any consumer credit transaction secured by the consumer's principal dwelling. (i) Creditor means: (1) A person who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract. (2) A person regularly extends consumer credit if the person extended credit (other than credit subject to the requirements of 12 CFR 1026.32) more than 5 times for transactions secured by a dwelling in the preceding calendar year. If a person did not meet these numerical standards in the preceding calendar year, the numerical standards shall be applied to the current calendar year. A person regularly extends consumer credit if, in any 12-month period, the person originates more than one credit extension that is subject to the requirements of 12 CFR 1026.32 or one or more such credit extensions through a mortgage broker. (j) Dwelling means: (1) A residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence. (2) A consumer can have only one ``principal'' dwelling at a time. Thus, a vacation or other second home would not be a principal dwelling. However, if a consumer buys or builds a new dwelling that will become the consumer's principal dwelling within a year or upon the completion of construction, the new dwelling is considered the principal dwelling for purposes of this section. (k) Federally regulated AMC means an AMC that is owned and controlled by an insured depository institution, as defined in 12 U.S.C. 1813 and regulated by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, or the Federal Deposit Insurance Corporation. (l) Federally related transaction regulations means regulations established by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the National Credit Union Administration, pursuant to sections 1112, 1113, and 1114 of FIRREA Title XI, 12 U.S.C. 3341-3343. (m) Person means a natural person or an organization, including a corporation, partnership, proprietorship, association, cooperative, estate, trust, or government unit. (n) Secondary mortgage market participant means a guarantor or insurer of mortgage-backed securities, or an underwriter or issuer of mortgage-backed securities. Secondary mortgage market participant only includes an individual investor in a mortgage-backed security if that investor also serves in the capacity of a guarantor, insurer, underwriter, or issuer for the mortgage-backed security. (o) States mean the 50 States and the District of Columbia and the territories of Guam, Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. (p) Uniform Standards of Professional Appraisal Practice (USPAP) means the appraisal standards promulgated by the Appraisal Standards Board of the Appraisal Foundation. Sec. 34.212 Appraiser panel--annual size calculation. For purposes of determining whether, within a 12-month period, an AMC 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 pursuant to Sec. 34.211(c)(1)(iii)-- (a) An appraiser is deemed part of the AMC's appraiser panel as of the earliest date on which the AMC: (1) Accepts the appraiser for the AMC's consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions; or (2) Engages the appraiser to perform one or more appraisals on behalf of a creditor for a covered transaction or secondary mortgage market participant in connection with covered transactions. (b) An appraiser who is deemed part of the AMC's appraiser panel pursuant to paragraph (a) of this section is deemed to remain on the panel until the date on which the AMC: (1) Sends written notice to the appraiser removing the appraiser from the appraiser panel, with an explanation of its action; or (2) Receives written notice from the appraiser asking to be removed from the appraiser panel or notice of the death or incapacity of the appraiser. (c) If an appraiser is removed from an AMC's appraiser panel pursuant to paragraph (b) of this section, but the AMC subsequently accepts the appraiser for consideration for future assignments or engages the appraiser at any time during the twelve months after the AMC's removal, the removal will be deemed not to have occurred, and the appraiser will be deemed to have been part of the AMC's appraiser panel without interruption. (d) The period for purposes of counting appraisers on an AMC's appraiser panel may be the calendar year or a 12-month period established by law or rule of each State with which the AMC is required to register. Sec. 34.213 Appraisal management company registration. Each State electing to register AMCs pursuant to paragraph (b)(1) of this section must: (a) Establish and maintain within the State appraiser certifying and licensing agency a licensing program that is subject to the limitations set forth in Sec. 34.214 and with the legal authority and mechanisms to: (1) Review and approve or deny an AMC's application for initial registration; (2) Review and renew or review and deny an AMC's registration periodically; (3) Examine the books and records of an AMC operating in the State and require the AMC to submit reports, information, and documents; (4) Verify that the appraisers on the AMC's appraiser panel hold valid State certifications or licenses, as applicable; (5) Conduct investigations of AMCs to assess potential violations of applicable appraisal-related laws, regulations, or orders; (6) Discipline, suspend, terminate, or deny renewal of the registration of an AMC that violates applicable appraisal-related laws, regulations, or orders; and (7) Report an AMC's violation of applicable appraisal-related laws, regulations, or orders, as well as disciplinary and enforcement actions and other relevant information about an AMC's operations, to the Appraisal Subcommittee. (b) Impose requirements on AMCs that are not owned and controlled by an insured depository institution and not regulated by a Federal financial institutions regulatory agency to: (1) Register with and be subject to supervision by the State appraiser certifying and licensing agency; (2) Engage only State-certified or State-licensed appraisers for Federally related transactions in conformity with any Federally related transaction regulations; (3) Establish and comply with processes and controls reasonably [[Page 32681]] designed to ensure that the AMC, in engaging an appraiser, selects an appraiser who is independent of the transaction and who has the requisite education, expertise, and experience necessary to competently complete the appraisal assignment for the particular market and property type; (4) Direct the appraiser to perform the assignment in accordance with USPAP; and (5) Establish and comply with processes and controls reasonably designed to ensure that the AMC conducts its appraisal management services in accordance with the requirements of section 129E(a) through (i) of the Truth in Lending Act, 15 U.S.C. 1639e(a) through (i), and regulations thereunder. Sec. 34.214 Ownership limitations for State-registered appraisal management companies. (a) Appraiser certification or licensing of owners. (1) An AMC subject to State registration pursuant to Sec. 34.213 shall not be registered by a State or included on the AMC National Registry if such AMC, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State for a substantive cause, as determined by the appropriate State appraiser certifying and licensing agency. (2) An AMC subject to State registration pursuant to Sec. 34.213 is not barred by paragraph (a)(1) of this section from being registered by a State or included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for a substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (b) Good moral character of owners. An AMC shall not be registered by a State if any person that owns more than 10 percent of the AMC-- (1) Is determined by the State appraiser certifying and licensing agency not to have good moral character; or (2) Fails to submit to a background investigation carried out by the State appraiser certifying and licensing agency. Sec. 34.215 Requirements for Federally regulated appraisal management companies. (a) Requirements in providing services. To provide appraisal management services for a creditor or secondary mortgage market participant relating to a covered transaction, a Federally regulated AMC must comply with the requirements in Sec. 34.213(b)(2) through (5). (b) Ownership limitations. (1) A Federally regulated AMC shall not be included on the AMC National Registry if such AMC, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State for a substantive cause, as determined by the Appraisal Subcommittee. (2) A Federally regulated AMC is not barred by this paragraph (b) from being included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for a substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (c) Reporting information for the AMC National Registry. A Federally regulated AMC must report to the State or States in which it operates the information required to be submitted by the State to the Appraisal Subcommittee, pursuant to the Appraisal Subcommittee's policies regarding the determination of the AMC National Registry fee, including but not necessarily limited to the collection of information related to the limitations set forth in this section, as applicable. Sec. 34.216 Information to be presented to the Appraisal Subcommittee by participating States. Each State electing to register AMCs for purposes of permitting AMCs to provide appraisal management services relating to covered transactions in the State must submit to the Appraisal Subcommittee the information required to be submitted by Appraisal Subcommittee regulations or guidance concerning AMCs that operate in the State. Board of Governors of the Federal Reserve System For the reasons set forth in the preamble, the Board amends 12 CFR parts 208 and 225, as follows: PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL RESERVE SYSTEM (REGULATION H) 0 3. The authority citation for part 208 is revised to read as follows: Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a, 371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1833(j), 1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1882, 2901-2907, 3105, 3310, 3331-3351, 3353, and 3905-3909; 15 U.S.C. 78b, 78l(b), 78l(i), 780-4(c)(5), 78q, 78q-1, 78w, 1681s, 1681w, 6801 and 6805; 31 U.S.C. 5318; 42 U.S.C. 4012a, 4104b, 4106, and 4128. 0 4. Revise the heading of subpart E to read as follows: Subpart E--Real Estate Lending, Appraisal Standards, and Minimum Requirements for Appraisal Management Companies 0 5. Section 208.50 is revised to read as follows: Sec. 208.50 Authority, purpose, and scope. (a) Authority. Subpart E of Regulation H (12 CFR part 208, subpart E) is issued by the Board of Governors of the Federal Reserve System pursuant to section 304 of the Federal Deposit Insurance Corporation Improvement Act of 1991, (12 U.S.C 1828(o)), Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act, (12 U.S.C 3331- 3351), and section 1473 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, (12 U.S.C. 3353). (b) Purpose and scope. This subpart prescribes standards for real estate lending to be used by state member banks in adopting internal real estate lending policies. The standards applicable to appraisals rendered in connection with Federally related transactions entered into by member banks and the minimum requirements for appraisal management companies are set forth in 12 CFR part 225, subparts G and M respectively (Regulation Y). PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL (REGULATION Y) 0 6. The authority citation for part 225 is revised to read as follows: Authority: 12 U.S.C. 1844(b), 3106 and 3108, 1817(j)(13), 1818(b), 1831i, 1972, 3310, 3331-3351 and 3353; 12 U.S.C. 3901, et seq.; and 12 U.S.C. 1841, et seq. 0 7. Subpart M is added to part 225 to read as follows: Subpart M--Minimum Requirements for Appraisal Management Companies Sec. 225.190 Authority, purpose, and scope. 225.191 Definitions. 225.192 Appraiser panel--annual size calculation. 225.193 Appraisal management company registration. 225.194 Ownership limitations for State-registered appraisal management companies. 225.195 Requirements for Federally regulated appraisal management companies. [[Page 32682]] 225.196 Information to be presented to the Appraisal Subcommittee by participating States. Sec. 225.190 Authority, purpose, and scope. (a) Authority. This subpart is issued by the Board of Governors of the Federal Reserve System (the Board) pursuant to title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) (Pub. L. 101-73, 103 Stat. 183 (1989)), 12 U.S.C. 3310, 3331- 3351, section 1473 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. 3353, and section 5(b) of the Bank Holding Company Act, 12 U.S.C. 1844(b). (b) Purpose and scope. (1) The purpose of this subpart is to implement sections 1109, 1117, 1121, and 1124 of FIRREA Title XI, 12 U.S.C. 3338, 3346, 3350, and 3353. Title XI provides protection for Federal financial and public policy interests in real estate related transactions by requiring real estate appraisals used in connection with Federally related transactions to be performed in writing, in accordance with uniform standards, by appraisers whose competency has been demonstrated and whose professional conduct will be subject to effective supervision. This subpart implements the requirements of title XI as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act and applies to all Federally related transactions and to States and to appraisal management companies (AMCs) performing appraisal management services in connection with consumer credit transactions secured by a consumer's principal dwelling or securitizations of those transactions. (2) This subpart: (i) Identifies which real estate related financial transactions require the services of an appraiser. (ii) Prescribes which categories of Federally related transactions shall be appraised by a State-certified appraiser and which by a State- licensed appraiser; (iii) Prescribes minimum standards for the performance of real estate appraisals in connection with Federal related transactions under the jurisdiction of the Board; (iv) Prescribes minimum requirements to be applied by participating States in the registration and supervision of AMCs; and (v) Prescribes minimum requirements to be applied by participating States to report certain information concerning AMCs registered with the States to a national registry of AMCs. (c) Rule of construction. Nothing in this subpart should be construed to prevent a State from establishing requirements in addition to those in this subpart. In addition, nothing in this subpart should be construed to alter guidance in, and applicability of, the Interagency Appraisal and Evaluation Guidelines \1\ or other relevant agency guidance that cautions banks and bank holding companies, that each organization is accountable for overseeing the activities of third-party service providers and ensuring that any services provided by a third party comply with applicable laws, regulations, and supervisory guidance applicable directly to the creditor. --------------------------------------------------------------------------- \1\ See, Agencies issue final appraisal and evalutation guidelines, http://www.federalreserve.gov/newsevents/press/bcreg/20101202a.htm. --------------------------------------------------------------------------- Sec. 225.191 Definitions. For purposes of this subpart: (a) Affiliate has the meaning provided in 12 U.S.C. 1841. (b) AMC National Registry means the registry of State-registered AMCs and Federally regulated AMCs maintained by the Appraisal Subcommittee. (c) Appraisal Foundation means the Appraisal Foundation established on November 30, 1987, as a not-for-profit corporation under the laws of Illinois. (d)(1) Appraisal management company (AMC) means a person that: (i) Provides appraisal management services to creditors or to secondary mortgage market participants, including affiliates; (ii) Provides such services in connection with valuing a consumer's principal dwelling as security for a consumer credit transaction or incorporating such transactions into securitizations; and (iii) Within a 12-month period, as defined in Sec. 225.192(d), 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, as described in Sec. 225.192; (2) An AMC does not include a department or division of an entity that provides appraisal management services only to that entity. (e) Appraisal management services means one or more of the following: (1) Recruiting, selecting, and retaining appraisers; (2) Contracting with State-certified or State-licensed appraisers to perform appraisal assignments; (3) Managing the process of having an appraisal performed, including providing administrative services such as receiving appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and secondary market participants, collecting fees from creditors and secondary market participants for services provided, and paying appraisers for services performed; and (4) Reviewing and verifying the work of appraisers. (f) Appraiser panel means a network, list or roster of licensed or certified appraisers approved by an AMC to perform appraisals as independent contractors for the AMC. Appraisers on an AMC's ``appraiser panel'' under this part include both appraisers accepted by the AMC for consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions and appraisers engaged by the AMC to perform one or more appraisals in covered transactions or for secondary mortgage market participants in connection with covered transactions. An appraiser is an independent contractor for purposes of this part if the appraiser is treated as an independent contractor by the AMC for purposes of Federal income taxation. (g) Consumer credit means credit offered or extended to a consumer primarily for personal, family, or household purposes. (h) Covered transaction means any consumer credit transaction secured by the consumer's principal dwelling. (i) Creditor means: (1) A person who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract. (2) A person regularly extends consumer credit if the person extended credit (other than credit subject to the requirements of 12 CFR 1026.32) more than 5 times for transactions secured by a dwelling in the preceding calendar year. If a person did not meet these numerical standards in the preceding calendar year, the numerical standards shall be applied to the current calendar year. A person regularly extends consumer credit if, in any 12-month period, the person originates more than one credit extension that is subject to the requirements of 12 CFR 1026.32 or one or more such credit extensions through a mortgage broker. (j) Dwelling means: (1) A residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, [[Page 32683]] cooperative unit, mobile home, and trailer, if it is used as a residence. (2) A consumer can have only one ``principal'' dwelling at a time. Thus, a vacation or other second home would not be a principal dwelling. However, if a consumer buys or builds a new dwelling that will become the consumer's principal dwelling within a year or upon the completion of construction, the new dwelling is considered the principal dwelling for purposes of this section. (k) Federally regulated AMC means an AMC that is owned and controlled by an insured depository institution, as defined in 12 U.S.C. 1813 and regulated by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, or the Federal Deposit Insurance Corporation. (l) Federally related transaction regulations means regulations established by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the National Credit Union Administration, pursuant to sections 1112, 1113, and 1114 of FIRREA Title XI, 12 U.S.C. 3341-3343. (m) Person means a natural person or an organization, including a corporation, partnership, proprietorship, association, cooperative, estate, trust, or government unit. (n) Secondary mortgage market participant means a guarantor or insurer of mortgage-backed securities, or an underwriter or issuer of mortgage-backed securities. Secondary mortgage market participant only includes an individual investor in a mortgage-backed security if that investor also serves in the capacity of a guarantor, insurer, underwriter, or issuer for the mortgage-backed security. (o) States mean the 50 States and the District of Columbia and the territories of Guam, Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. (p) Uniform Standards of Professional Appraisal Practice (USPAP) means the appraisal standards promulgated by the Appraisal Standards Board of the Appraisal Foundation. Sec. 225.192 Appraiser panel--annual size calculation. For purposes of determining whether, within a 12-month period, an AMC 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 pursuant to Sec. 225.191(d)(1)(iii)- (a) An appraiser is deemed part of the AMC's appraiser panel as of the earliest date on which the AMC: (1) Accepts the appraiser for the AMC's consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions; or (2) Engages the appraiser to perform one or more appraisals on behalf of a creditor for a covered transaction or secondary mortgage market participant in connection with a covered transaction. (b) An appraiser who is deemed part of the AMC's appraiser panel pursuant to paragraph (a) of this section is deemed to remain on the panel until the date on which the AMC: (1) Sends written notice to the appraiser removing the appraiser from the appraiser panel, with an explanation of its action; or (2) Receives written notice from the appraiser asking to be removed from the appraiser panel or notice of the death or incapacity of the appraiser. (c) If an appraiser is removed from an AMC's appraiser panel pursuant to paragraph (b) of this section, but the AMC subsequently accepts the appraiser for consideration for future assignments or engages the appraiser at any time during the twelve months after the AMC's removal, the removal will be deemed not to have occurred, and the appraiser will be deemed to have been part of the AMC's appraiser panel without interruption. (d) The period for purposes of counting appraisers on an AMC's appraiser panel may be the calendar year or a 12-month period established by law or rule of each State with which the AMC is required to register. Sec. 225.193 Appraisal management company registration. Each State electing to register AMCs pursuant to paragraph (b)(1) of this section must: (a) Establish and maintain within the State appraiser certifying and licensing agency a licensing program that is subject to the limitations set forth in Sec. 225.194 and with the legal authority and mechanisms to: (1) Review and approve or deny an AMC's application for initial registration; (2) Review and renew or review and deny an AMC's registration periodically; (3) Examine the books and records of an AMC operating in the State and require the AMC to submit reports, information, and documents; (4) Verify that the appraisers on the AMC's appraiser panel hold valid State certifications or licenses, as applicable; (5) Conduct investigations of AMCs to assess potential violations of applicable appraisal-related laws, regulations, or orders; (6) Discipline, suspend, terminate, or deny renewal of the registration of an AMC that violates applicable appraisal-related laws, regulations, or orders; and (7) Report an AMC's violation of applicable appraisal-related laws, regulations, or orders, as well as disciplinary and enforcement actions and other relevant information about an AMC's operations, to the Appraisal Subcommittee. (b) Impose requirements on AMCs that are not owned and controlled by an insured depository institution and not regulated by a Federal financial institutions regulatory agency to: (1) Register with and be subject to supervision by the State appraiser certifying and licensing agency; (2) Engage only State-certified or State-licensed appraisers for Federally related transactions in conformity with any Federally related transaction regulations; (3) Establish and comply with processes and controls reasonably designed to ensure that the AMC, in engaging an appraiser, selects an appraiser who is independent of the transaction and who has the requisite education, expertise, and experience necessary to competently complete the appraisal assignment for the particular market and property type; (4) Direct the appraiser to perform the assignment in accordance with USPAP; and (5) Establish and comply with processes and controls reasonably designed to ensure that the AMC conducts its appraisal management services in accordance with the requirements of section 129E(a)-(i) of the Truth in Lending Act, 15 U.S.C. 1639e(a)-(i), and regulations thereunder. Sec. 225.194 Ownership limitations for State-registered appraisal management companies. (a) Appraiser certification or licensing of owners. (1) An AMC subject to State registration pursuant to Sec. 225.193 shall not be registered by a State or included on the AMC National Registry if such AMC, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State for a substantive cause, as determined by the appropriate State appraiser certifying and licensing agency. [[Page 32684]] (2) An AMC subject to State registration pursuant to Sec. 225.193 is not barred by paragraph (a)(1) of this section from being registered by a State or included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for a substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (b) Good moral character of owners. An AMC shall not be registered by a State if any person that owns more than 10 percent of the AMC-- (1) Is determined by the State appraiser certifying and licensing agency not to have good moral character; or (2) Fails to submit to a background investigation carried out by the State appraiser certifying and licensing agency. Sec. 225.195 Requirements for Federally regulated appraisal management companies. (a) Requirements in providing services. To provide appraisal management services for a creditor or secondary mortgage market participant relating to a covered transaction, a Federally regulated AMC must comply with the requirements in Sec. 225.193(b)(2) through (5). (b) Ownership limitations. (1) A Federally regulated AMC shall not be included on the AMC National Registry if such AMC, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State for a substantive cause, as determined by the ASC. (2) A Federally regulated AMC is not barred by this paragraph (b) from being included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for a substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (c) Reporting information for the AMC National Registry. A Federally regulated AMC must report to the State or States in which it operates the information required to be submitted by the State to the Appraisal Subcommittee pursuant to the Appraisal Subcommittee's policies regarding the determination of the AMC National Registry fee, including but not necessarily limited to the collection of information related to the limitations set forth in this section. Sec. 225.196 Information to be presented to the Appraisal Subcommittee by participating States. Each State electing to register AMCs for purposes of permitting AMCs to provide appraisal management services relating to covered transactions in the State must submit to the Appraisal Subcommittee the information required to be submitted by Appraisal Subcommittee regulations or guidance concerning AMCs that operate in the State. Federal Deposit Insurance Corporation Authority and Issuance For the reasons set forth in the preamble, the FDIC amends 12 CFR parts 323 and 390 as follows: PART 323--APPRAISALS 0 8. Revise the authority citation for part 323 to read as follows: Authority: 12 U.S.C. 1818, 1819 [``Seventh'' and ``Tenth''] and 3331 et seq. 0 9. Add a heading for new subpart A to read as follows: Subpart A--Appraisals Generally Sec. Sec. 323.1 through 323.7--[Designated as subpart A] 0 10. Designate Sec. Sec. 323.1 through 323.7 as new subpart A. Sec. Sec. 323.1, 323.3, 323.4, and 323.5--[Amended] 0 11. Amend Sec. Sec. 323.1, 323.3, 323.4, and 323.5 by removing ``part'' and adding ``subpart'' in its place in each instance in which it appears. 0 12. Add subpart B to part 323 to read as follows: Subpart B--Appraisal Management Company Minimum Requirements Sec. 323.8 Authority, purpose, and scope. 323.9 Definitions. 323.10 Appraiser panel--annual size calculation. 323.11 Appraisal management company registration. 323.12 Ownership limitations for State-registered appraisal management companies. 323.13 Requirements for Federally regulated appraisal management companies. 323.14 Information to be presented to the Appraisal Subcommittee by participating States. Sec. 323.8 Authority, purpose, and scope. (a) Authority. This subpart is issued pursuant to12 U.S.C. 1818, 1819 [``Seventh'' and ``Tenth''] and Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) (Pub. L. 111-203, 124 Stat. 1376 (2010)), 12 U.S.C. 3331 et seq. (b) Purpose. The purpose of this subpart is to implement sections 1109, 1117, 1121, and 1124 of FIRREA Title XI, 12 U.S.C. 3338, 3346, 3350, and 3353. (c) Scope. This subpart applies to States and to appraisal management companies (AMCs) providing appraisal management services in connection with consumer credit transactions secured by a consumer's principal dwelling or securitizations of those transactions. (d) Rule of construction. Nothing in this subpart should be construed to prevent a State from establishing requirements in addition to those in this subpart. In addition, nothing in this subpart should be construed to alter guidance in, and applicability of, the Interagency Appraisal and Evaluation Guidelines \1\ or other relevant agency guidance that cautions banks, bank holding companies, Federal savings associations, state savings association, and credit unions, as applicable, that each such entity is accountable for overseeing the activities of third-party service providers and ensuring that any services provided by a third party comply with applicable laws, regulations, and supervisory guidance applicable directly to the financial institution. --------------------------------------------------------------------------- \1\ https://www.fdic.gov/regulations/laws/rules/5000-4800.html. --------------------------------------------------------------------------- Sec. 323.9 Definitions. For purposes of this subpart: (a) Affiliate has the meaning provided in 12 U.S.C. 1841. (b) AMC National Registry means the registry of State-registered AMCs and Federally regulated AMCs maintained by the Appraisal Subcommittee. (c)(1) Appraisal management company (AMC) means a person that: (i) Provides appraisal management services to creditors or to secondary mortgage market participants, including affiliates; (ii) Provides such services in connection with valuing a consumer's principal dwelling as security for a consumer credit transaction or incorporating such transactions into securitizations; and (iii) Within a given 12-month period, as defined in Sec. 323.10(d), 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, as described in Sec. 323.12; [[Page 32685]] (2) An AMC does not include a department or division of an entity that provides appraisal management services only to that entity. (d) Appraisal management services means one or more of the following: (1) Recruiting, selecting, and retaining appraisers; (2) Contracting with State-certified or State-licensed appraisers to perform appraisal assignments; (3) Managing the process of having an appraisal performed, including providing administrative services such as receiving appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and secondary market participants, collecting fees from creditors and secondary market participants for services provided, and paying appraisers for services performed; and (4) Reviewing and verifying the work of appraisers. (e) Appraiser panel means a network, list or roster of licensed or certified appraisers approved by an AMC to perform appraisals as independent contractors for the AMC. Appraisers on an AMC's ``appraiser panel'' under this part include both appraisers accepted by the AMC for consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions and appraisers engaged by the AMC to perform one or more appraisals in covered transactions or for secondary mortgage market participants in connection with covered transactions. An appraiser is an independent contractor for purposes of this subpart if the appraiser is treated as an independent contractor by the AMC for purposes of Federal income taxation. (f) Appraisal Subcommittee means the Appraisal Subcommittee of the Federal Financial Institutions Examination Council. (g) Consumer credit means credit offered or extended to a consumer primarily for personal, family, or household purposes. (h) Covered transaction means any consumer credit transaction secured by the consumer's principal dwelling. (i) Creditor means: (1) A person who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract. (2) A person regularly extends consumer credit if the person extended credit (other than credit subject to the requirements of 12 CFR 1026.32) more than 5 times for transactions secured by a dwelling in the preceding calendar year. If a person did not meet these numerical standards in the preceding calendar year, the numerical standards shall be applied to the current calendar year. A person regularly extends consumer credit if, in any 12-month period, the person originates more than one credit extension that is subject to the requirements of 12 CFR 1026.32 or one or more such credit extensions through a mortgage broker. (j) Dwelling means: (1) A residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence. (2) A consumer can have only one ``principal'' dwelling at a time. Thus, a vacation or other second home would not be a principal dwelling. However, if a consumer buys or builds a new dwelling that will become the consumer's principal dwelling within a year or upon the completion of construction, the new dwelling is considered the principal dwelling for purposes of this section. (k) Federally regulated AMC means an AMC that is owned and controlled by an insured depository institution, as defined in 12 U.S.C. 1813 and regulated by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, or the Federal Deposit Insurance Corporation. (l) Federally related transaction regulations means regulations established by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the National Credit Union Administration, pursuant to sections 1112, 1113, and 1114 of FIRREA Title XI, 12 U.S.C. 3341-3343. (m) Person means a natural person or an organization, including a corporation, partnership, proprietorship, association, cooperative, estate, trust, or government unit. (n) Secondary mortgage market participant means a guarantor or insurer of mortgage-backed securities, or an underwriter or issuer of mortgage-backed securities. Secondary mortgage market participant only includes an individual investor in a mortgage-backed security if that investor also serves in the capacity of a guarantor, insurer, underwriter, or issuer for the mortgage-backed security. (o) States mean the 50 States and the District of Columbia and the territories of Guam, Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. (p) Uniform Standards of Professional Appraisal Practice (USPAP) means the appraisal standards promulgated by the Appraisal Standards Board of the Appraisal Foundation. Sec. 323.10 Appraiser panel--annual size calculation. For purposes of determining whether, within a 12-month period, an AMC 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 pursuant to Sec. 323.9(c)(1)(iii)-- (a) An appraiser is deemed part of the AMC's appraiser panel as of the earliest date on which the AMC: (1) Accepts the appraiser for the AMC's consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions; or (2) Engages the appraiser to perform one or more appraisals on behalf of a creditor for a covered transaction or secondary mortgage market participant in connection with a covered transaction. (b) An appraiser who is deemed part of the AMC's appraiser panel pursuant to paragraph (a) of this section is deemed to remain on the panel until the date on which the AMC: (1) Sends written notice to the appraiser removing the appraiser from the appraiser panel, with an explanation of its action; or (2) Receives written notice from the appraiser asking to be removed from the appraiser panel or notice of the death or incapacity of the appraiser. (c) If an appraiser is removed from an AMC's appraiser panel pursuant to paragraph (b) of this section, but the AMC subsequently accepts the appraiser for consideration for future assignments or engages the appraiser at any time during the twelve months after the AMC's removal, the removal will be deemed not to have occurred, and the appraiser will be deemed to have been part of the AMC's appraiser panel without interruption. (d) The period for purposes of counting appraisers on an AMC's appraiser panel may be the calendar year or a 12-month period established by law or rule of each State with which the AMC is required to register. Sec. 323.11 Appraisal management company registration. Each State electing to register AMCs pursuant to paragraph (b)(1) of this section must: [[Page 32686]] (a) Establish and maintain within the State appraiser certifying and licensing agency a licensing program that is subject to the limitations set forth in Sec. 323.12 and with the legal authority and mechanisms to: (1) Review and approve or deny an AMC's application for initial registration; (2) Review and renew or review and deny an AMC's registration periodically; (3) Examine the books and records of an AMC operating in the State and require the AMC to submit reports, information, and documents; (4) Verify that the appraisers on the AMC's appraiser panel hold valid State certifications or licenses, as applicable; (5) Conduct investigations of AMCs to assess potential violations of applicable appraisal-related laws, regulations, or orders; (6) Discipline, suspend, terminate, or deny renewal of the registration of an AMC that violates applicable appraisal-related laws, regulations, or orders; and (7) Report an AMC's violation of applicable appraisal-related laws, regulations, or orders, as well as disciplinary and enforcement actions and other relevant information about an AMC's operations, to the Appraisal Subcommittee. (b) Impose requirements on AMCs that are not owned and controlled by an insured depository institution and not regulated by a Federal financial institution regulatory agency to: (1) Register with and be subject to supervision by the State appraiser certifying and licensing agency; (2) Engage only State-certified or State-licensed appraisers for Federally regulated transactions in conformity with any Federally related transaction regulations; (3) Establish and comply with processes and controls reasonably designed to ensure that the AMC, in engaging an appraiser, selects an appraiser who is independent of the transaction and who has the requisite education, expertise, and experience necessary to competently complete the appraisal assignment for the particular market and property type; (4) Direct the appraiser to perform the assignment in accordance with USPAP; and (5) Establish and comply with processes and controls reasonably designed to ensure that the AMC conducts its appraisal management services in accordance with the requirements of section 129E(a)-(i) of the Truth in Lending Act, 15 U.S.C. 1639e(a)-(i), and regulations thereunder. Sec. 323.12 Ownership limitations for State-registered appraisal management companies. (a) Appraiser certification or licensing of owners. (1) An AMC subject to State registration pursuant to this section shall not be registered by a State or included on the AMC National Registry if such AMC, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State for a substantive cause, as determined by the appropriate State appraiser certifying and licensing agency. (2) An AMC subject to State registration pursuant to this section is not barred by Sec. 323.11(a)(1) from being registered by a State or included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for a substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (b) Good moral character of owners. An AMC shall not be registered by a State if any person that owns more than 10 percent of the AMC-- (1) Is determined by the State appraiser certifying and licensing agency not to have good moral character; or (2) Fails to submit to a background investigation carried out by the State appraiser certifying and licensing agency. Sec. 323.13 Requirements for Federally regulated appraisal management companies. (a) Requirements in providing services. To provide appraisal management services for a creditor or secondary mortgage market participant relating to a covered transaction, a Federally regulated AMC must comply with the requirements in Sec. 323.11(b)(2) through (5). (b) Ownership limitations. (1) A Federally regulated AMC shall not be included on the AMC National Registry if such AMC, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State for a substantive cause, as determined by the ASC. (2) A Federally regulated AMC is not barred by Sec. 323.12(b) from being included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for a substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (c) Reporting information for the AMC National Registry. A Federally regulated AMC must report to the State or States in which it operates the information required to be submitted by the State pursuant to the Appraisal Subcommittee's policies regarding the determination of the AMC National Registry fee, including but not necessarily limited to the collection of information related to the limitations set forth in Sec. 323.12, as applicable. Sec. 323.14 Information to be presented to the Appraisal Subcommittee by participating States. Each State electing to register AMCs for purposes of permitting AMCs to provide appraisal management services relating to covered transactions in the State must submit to the Appraisal Subcommittee the information required to be submitted by Appraisal Subcommittee regulations or guidance concerning AMCs that operate in the State. PART 390--REGULATIONS TRANSFERRED FROM THE OFFICE OF THRIFT SUPERVISION 0 13. The authority citation for part 390 is revised to read as follows: Authority: 12 U.S.C. 1819. Subpart A also issued under 12 U.S.C. 1820. Subpart B also issued under 12 U.S.C. 1818. Subpart C also issued under 5 U.S.C. 504; 554-557; 12 U.S.C. 1464; 1467; 1468; 1817; 1818; 1820; 1829; 3349, 4717; 15 U.S.C. 78l; 78o-5; 78u-2; 28 U.S.C. 2461 note; 31 U.S.C. 5321; 42 U.S.C. 4012a. Subpart D also issued under 12 U.S.C. 1817; 1818; 1820; 15 U.S.C. 78l. Subpart E also issued under 12 U.S.C. 1813; 1831m; 15 U.S.C. 78. Subpart F also issued under 5 U.S.C. 552; 559; 12 U.S.C. 2901 et seq. Subpart G also issued under 12 U.S.C. 2810 et seq., 2901 et seq.; 15 U.S.C. 1691; 42 U.S.C. 1981, 1982, 3601-3619. Subpart I also issued under 12 U.S.C. 1831x. Subpart J also issued under 12 U.S.C. 1831p-1. Subpart K also issued under 12 U.S.C. 1817; 1818; 15 U.S.C. 78c; 78l. Subpart L also issued under 12 U.S.C. 1831p-1. Subpart M also issued under 12 U.S.C. 1818. Subpart N also issued under 12 U.S.C. 1821. Subpart O also issued under 12 U.S.C. 1828. Subpart P also issued under 12 U.S.C. 1470; 1831e; 1831n; 1831p- 1; 3339. Subpart Q also issued under 12 U.S.C. 1462; 1462a; 1463; 1464. [[Page 32687]] Subpart R also issued under 12 U.S.C. 1463; 1464; 1831m; 1831n; 1831p-1. Subpart S also issued under 12 U.S.C. 1462; 1462a; 1463; 1464; 1468a; 1817; 1820; 1828; 1831e; 1831o; 1831p-1; 1881-1884; 3207; 3339; 15 U.S.C. 78b; 78l; 78m; 78n; 78p; 78q; 78w; 31 U.S.C. 5318; 42 U.S.C. 4106. Subpart T also issued under 12 U.S.C. 1462a; 1463; 1464; 15 U.S.C. 78c; 78l; 78m; 78n; 78w. Subpart U also issued under 12 U.S.C. 1462a; 1463; 1464; 15 U.S.C. 78c; 78l; 78m; 78n; 78p; 78w; 78d-1; 7241; 7242; 7243; 7244; 7261; 7264; 7265. Subpart V also issued under 12 U.S.C. 3201-3208. Subpart W also issued under 12 U.S.C. 1462a; 1463; 1464; 15 U.S.C. 78c; 78l; 78m; 78n; 78p; 78w. Subpart Y also issued under 12 U.S.C.1831o. Subpart Z also issued under 12 U.S.C. 1462; 1462a; 1463; 1464; 1828 (note). Subpart X--[Removed and Reserved] 0 14. Remove and reserve subpart X consisting of Sec. Sec. 390.440 through 390.447. Bureau of Consumer Financial Protection Authority and Issuance For the reasons stated above, the Bureau amends Regulation Z, 12 CFR part 1026, as follows: PART 1026--TRUTH IN LENDING (REGULATION Z) 0 15. The authority citation for part 1026 is revised to read as follows: Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353, 5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq. Subpart A--General 0 16. Section 1026.1 is amended by revising paragraph (a) to read as follows: Sec. 1026.1 Authority, purpose, coverage, organization, enforcement, and liability. (a) Authority. This part, known as Regulation Z, is issued by the Bureau of Consumer Financial Protection to implement the Federal Truth in Lending Act, which is contained in title I of the Consumer Credit Protection Act, as amended (15 U.S.C. 1601 et seq.). This part also implements title XII, section 1204 of the Competitive Equality Banking Act of 1987 (Pub. L. 100-86, 101 Stat. 552). Furthermore, this part implements certain provisions of the Real Estate Settlement Procedures Act of 1974, as amended (12 U.S.C. 2601 et seq.). In addition, this part implements certain provisions of the Financial Institutions Reform, Recovery, and Enforcement Act, as amended (12 U.S.C. 3331 et seq.). The Bureau's information-collection requirements contained in this part have been approved by the Office of Management and Budget (OMB) under the provisions of 44 U.S.C. 3501 et seq. and have been assigned OMB No. 3170-0015 (Truth in Lending). * * * * * Subpart E--Special Rules for Certain Home Mortgage Transactions 0 17. Section 1026.42 is amended by adding paragraph (h) to read as follows: Sec. 1026.42 Valuation independence. * * * * * (h) The Bureau issued a joint rule to implement the appraisal management company minimum requirements in the Financial Institutions Reform, Recovery, and Enforcement Act, as amended by section 1473 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. See 12 CFR part 34. Federal Housing Finance Agency Authority and Issuance For the reasons set forth in the SUPPLEMENTARY INFORMATION, FHFA amends 12 CFR part 1222, as follows: PART 1222--APPRAISALS 0 18. The authority citation for part 1222 is revised to read as follows: Authority: 12 U.S.C. 4501 et seq., 12 U.S.C. 4526 and 15 U.S.C. 1639h. 0 19. Add subpart B to part 1222 to read as follows: Subpart B--Appraisal Management Company Minimum Requirements Sec. 1222.20 Authority, purpose, and scope. 1222.21 Definitions. 1222.22 Appraiser panel--annual size calculation. 1222.23 Appraisal management company registration. 1222.24 Ownership limitations for State-registered appraisal management companies. 1222.25 Requirements for Federally regulated appraisal management companies. 1222.26 Information to be presented to the Appraisal Subcommittee by participating States. Sec. 1222.20 Authority, purpose, and scope. (a) Authority. This subpart is issued by the Federal Housing Finance Agency pursuant to 12 U.S.C. 4501 et seq., 12 U.S.C. 4526, and Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) (Pub. L. 111- 203, 124 Stat. 1376 (2010)), 12 U.S.C. 3331 et seq. (b) Purpose. The purpose of this subpart is to implement sections 1109, 1117, 1121, and 1124 of FIRREA Title XI, 12 U.S.C. 3338, 3346, 3350, and 3353. (c) Scope. This subpart applies to States and to appraisal management companies (AMCs) providing appraisal management services in connection with consumer credit transactions secured by a consumer's principal dwelling or securitizations of those transactions. (d) Rule of construction. Nothing in this subpart should be construed to prevent a State from establishing requirements in addition to those in this subpart. In addition, nothing in this subpart should be construed to alter guidance in, and applicability of, the Interagency Appraisal and Evaluation Guidelines \1\ or other relevant agency guidance that cautions banks, bank holding companies, Federal savings associations, state savings associations, and credit unions, as applicable, that each such entity is accountable for overseeing the activities of third-party service providers and ensuring that any services provided by a third party comply with applicable laws, regulations, and supervisory guidance applicable directly to the financial institution. --------------------------------------------------------------------------- \1\ 75 FR 77450 (December 10, 2010). --------------------------------------------------------------------------- Sec. 1222.21 Definitions. For purposes of this subpart: (a) Affiliate has the meaning provided in 12 U.S.C. 1841. (b) AMC National Registry means the registry of State-registered AMCs and Federally regulated AMCs maintained by the Appraisal Subcommittee. (c)(1) Appraisal management company (AMC) means a person that: (i) Provides appraisal management services to creditors or to secondary mortgage market participants, including affiliates; (ii) Provides such services in connection with valuing a consumer's principal dwelling as security for a consumer credit transaction or incorporating such transactions into securitizations; and (iii) Within a given 12-month period, as defined in Sec. 1222.22(d), 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, as described in Sec. 1222.22; (2) An AMC does not include a department or division of an entity that [[Page 32688]] provides appraisal management services only to that entity. (d) Appraisal management services means one or more of the following: (1) Recruiting, selecting, and retaining appraisers; (2) Contracting with State-certified or State-licensed appraisers to perform appraisal assignments; (3) Managing the process of having an appraisal performed, including providing administrative services such as receiving appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and secondary market participants, collecting fees from creditors and secondary market participants for services provided, and paying appraisers for services performed; and (4) Reviewing and verifying the work of appraisers. (e) Appraiser panel means a network, list or roster of licensed or certified appraisers approved by an AMC to perform appraisals as independent contractors for the AMC. Appraisers on an AMC's ``appraiser panel'' under this part include both appraisers accepted by the AMC for consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions and appraisers engaged by the AMC to perform one or more appraisals in covered transactions or for secondary mortgage market participants in connection with covered transactions. An appraiser is an independent contractor for purposes of this subpart if the appraiser is treated as an independent contractor by the AMC for purposes of Federal income taxation. (f) Appraisal Subcommittee means the Appraisal Subcommittee of the Federal Financial Institutions Examination Council. (g) Consumer credit means credit offered or extended to a consumer primarily for personal, family, or household purposes. (h) Covered transaction means any consumer credit transaction secured by the consumer's principal dwelling. (i) Creditor means: (1) A person who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract. (2) A person regularly extends consumer credit if the person extended credit (other than credit subject to the requirements of 12 CFR 1026.32) more than 5 times for transactions secured by a dwelling in the preceding calendar year. If a person did not meet these numerical standards in the preceding calendar year, the numerical standards shall be applied to the current calendar year. A person regularly extends consumer credit if, in any 12-month period, the person originates more than one credit extension that is subject to the requirements of 12 CFR 1026.32 or one or more such credit extensions through a mortgage broker. (j) Dwelling means: (1) A residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence. (2) A consumer can have only one ``principal'' dwelling at a time. Thus, a vacation or other second home would not be a principal dwelling. However, if a consumer buys or builds a new dwelling that will become the consumer's principal dwelling within a year or upon the completion of construction, the new dwelling is considered the principal dwelling for purposes of this section. (k) Federally regulated AMC means an AMC that is owned and controlled by an insured depository institution, as defined in 12 U.S.C. 1813 and that is regulated by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, or the Federal Deposit Insurance Corporation. (l) Federally related transaction regulations means regulations established by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the National Credit Union Administration, pursuant to sections 1112, 1113, and 1114 of FIRREA Title XI, 12 U.S.C. 3341-3343. (m) Person means a natural person or an organization, including a corporation, partnership, proprietorship, association, cooperative, estate, trust, or government unit. (n) Secondary mortgage market participant means a guarantor or insurer of mortgage-backed securities, or an underwriter or issuer of mortgage-backed securities. Secondary mortgage market participant only includes an individual investor in a mortgage-backed security if that investor also serves in the capacity of a guarantor, insurer, underwriter, or issuer for the mortgage-backed security. (o) States mean the 50 States and the District of Columbia and the territories of Guam, Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. (p) Uniform Standards of Professional Appraisal Practice (USPAP) means the appraisal standards promulgated by the Appraisal Standards Board of the Appraisal Foundation. Sec. 1222.22 Appraiser panel--annual size calculation. For purposes of determining whether, within a 12-month period, an AMC 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 pursuant to Sec. 1222.21(c)(1)(iii)-- (a) An appraiser is deemed part of the AMC's appraiser panel as of the earliest date on which the AMC: (1) Accepts the appraiser for the AMC's consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions; or (2) Engages the appraiser to perform one or more appraisals on behalf of a creditor for a covered transaction or secondary mortgage market participant in connection with covered transactions. (b) An appraiser who is deemed part of the AMC's appraiser panel pursuant to paragraph (a) of this section is deemed to remain on the panel until the date on which the AMC: (1) Sends written notice to the appraiser removing the appraiser from the appraiser panel, with an explanation of its action; or (2) Receives written notice from the appraiser asking to be removed from the appraiser panel or notice of the death or incapacity of the appraiser. (c) If an appraiser is removed from an AMC's appraiser panel pursuant to paragraph (b) of this section, but the AMC subsequently accepts the appraiser for consideration for future assignments or engages the appraiser at any time during the twelve months after the AMC's removal, the removal will be deemed not to have occurred, and the appraiser will be deemed to have been part of the AMC's appraiser panel without interruption. (d) The period for purposes of counting appraisers on an AMC's appraiser panel may be the calendar year or a 12-month period established by law or rule of each State with which the AMC is required to register. Sec. 1222.23 Appraisal management company registration. Each State electing to register AMCs pursuant to paragraph (b)(1) of this section must: [[Page 32689]] (a) Establish and maintain within the State appraiser certifying and licensing agency a licensing program that is subject to the limitations set forth in Sec. 1222.24 and with the legal authority and mechanisms to: (1) Review and approve or deny an AMC's application for initial registration; (2) Review and renew or review and deny an AMC's registration periodically; (3) Examine the books and records of an AMC operating in the State and require the AMC to submit reports, information, and documents; (4) Verify that the appraisers on the AMC's panel hold valid State certifications or licenses, as applicable; (5) Conduct investigations of AMCs to assess potential violations of applicable appraisal-related laws, regulations, or orders; (6) Discipline, suspend, terminate, or deny renewal of the registration of an AMC that violates applicable appraisal-related laws, regulations, or orders; and (7) Report an AMC's violation of applicable appraisal-related laws, regulations, or orders, as well as disciplinary and enforcement actions and other relevant information about an AMC's operations, to the Appraisal Subcommittee. (b) Impose requirements on AMCs that are not owned and controlled by an insured depository institution and not regulated by a Federal financial institutions regulatory agency to: (1) Register with and be subject to supervision by the State appraiser certifying and licensing agency; (2) Engage only State-certified or State-licensed appraisers for Federally related transactions in conformity with any Federally related transaction regulations; (3) Establish and comply with processes and controls reasonably designed to ensure that the AMC, in engaging an appraiser, selects an appraiser who is independent of the transaction and who has the requisite education, expertise, and experience necessary to competently complete the appraisal assignment for the particular market and property type; (4) Direct the appraiser to perform the assignment in accordance with USPAP; and (5) Establish and comply with processes and controls reasonably designed to ensure that the AMC conducts its appraisal management services in accordance with the requirements of section 129E(a)-(i) of the Truth in Lending Act, 15 U.S.C. 1639e(a)-(i), and regulations thereunder. Sec. 1222.24 Ownership limitations for State-registered appraisal management companies. (a) Appraiser certification or licensing of owners. (1) An AMC subject to State registration pursuant to Sec. 1222.23 shall not be registered by a State or included on the AMC National Registry if such AMC, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State for a substantive cause, as determined by the appropriate State appraiser certifying and licensing agency. (2) An AMC subject to State registration pursuant to Sec. 1222.23 is not barred by paragraph (a)(1) of this section from being registered by a State or included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for a substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (b) Good moral character of owners. An AMC shall not be registered by a State if any person that owns more than 10 percent of the AMC-- (1) Is determined by the State appraiser certifying and licensing agency not to have good moral character; or (2) Fails to submit to a background investigation carried out by the State appraiser certifying and licensing agency. Sec. 1222.25 Requirements for Federally regulated appraisal management companies. (a) Requirements in providing services. To provide appraisal management services for a creditor or secondary mortgage market participant relating to a covered transaction, a Federally regulated AMC must comply with the requirements in Sec. 1222.23(b)(2) through (5). (b) Ownership limitations. (1) A Federally regulated AMC shall not be included on the AMC National Registry if such AMC, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State for a substantive cause, as determined by the ASC. (2) A Federally regulated AMC is not barred pursuant to paragraph (b)(1) of this section from being included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (c) Reporting information for the AMC National Registry. A Federally regulated AMC must report to the State or States in which it operates the information required to be submitted by the State to the Appraisal Subcommittee pursuant to the Appraisal Subcommittee's policies regarding the determination of the AMC National Registry fee, including but not necessarily limited to the collection of information related to the limitations set forth in this section, as applicable. Sec. 1222.26 Information to be presented to the Appraisal Subcommittee by participating States. Each State electing to register AMCs for purposes of permitting AMCs to provide appraisal management services relating to covered transactions in the State must submit to the Appraisal Subcommittee the information required to be submitted by Appraisal Subcommittee regulations or guidance concerning AMCs that operate in the State. Dated: April 21, 2015. Thomas J. Curry, Comptroller of the Currency. By order of the Board of Governors of the Federal Reserve System, April 29, 2015 Robert deV. Frierson, Secretary of the Board. Dated: April 21, 2015. Robert E. Feldman, Executive Secretary. By order of the Board of Directors. Federal Deposit Insurance Corporation. Dated: April 14, 2015. Richard Cordray, Director, Bureau of Consumer Financial Protection. Dated: March 23, 2015. Melvin L. Watt, Director, Federal Housing Finance Agency. In concurrence: Dated: April 22, 2015. Gerard Poliquin, Secretary of the Board, NCUA. [FR Doc. 2015-12719 Filed 6-8-15; 8:45 am] BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 7535-01-P; 4810-AM-P; 8070-01-P
![32658 Federal Register / Vol. 80, No. 110 / Tuesday, June 9, 2015 / Rules and Regulations
DEPARTMENT OF THE TREASURY State, but are subject to the same Counsel, Office of Regulations, 1700 G
minimum requirements as State- Street NW., Washington, DC 20552, at
Office of the Comptroller of the regulated AMCs. The final rule also (202) 435–7000.
Currency implements the requirement for States FHFA: Robert Witt, Senior Policy
to report to the Appraisal Subcommittee Analyst, Office of Housing and
12 CFR Part 34 (ASC) of the Federal Financial Regulatory Policy, (202) 649–3128, or
[Docket No. OCC–2014–0002]
Institutions Examination Council Ming-Yuen Meyer-Fong, Assistant
(FFIEC) the information required by the General Counsel, Office of General
RIN 1557–AD64 ASC to administer the new national Counsel, (202) 649–3078, Federal
registry of AMCs (AMC National Housing Finance Agency, 400 Seventh
FEDERAL RESERVE SYSTEM Registry). In conjunction with this Street SW., Washington, DC 20024.
implementation, the FDIC is integrating SUPPLEMENTARY INFORMATION:
12 CFR Parts 208 and 225 its appraisal regulations for State
nonmember banks and State savings I. Background
[Docket No. R–1486]
associations. AMC Minimum Requirements
RIN 7100–AE15
DATES: Effective date. This final rule Section 1473 of the Dodd-Frank Act 1
FEDERAL DEPOSIT INSURANCE will become effective on August 10, added a new section 1124 to Title XI of
CORPORATION 2015. the Financial Institutions Reform,
Compliance date: Federally regulated Recovery, and Enforcement Act of
12 CFR Parts 323 and 390 AMCs must comply with the minimum 1989 2 (FIRREA) that established
requirements for providing appraisal minimum requirements to be applied by
RIN 3064–AE10 management services under 12 CFR States in the registration and
34.215(a) no later than 12 months from supervision of AMCs. An AMC is an
BUREAU OF CONSUMER FINANCIAL the effective date of this final rule. The
PROTECTION entity that serves as an intermediary for,
participating State or States in which a and provides certain services to,
State-regulated AMC operates will creditors.3 These minimum
12 CFR Part 1026 establish the compliance deadline for requirements apply to States that have
RIN 3170–AA44 State-regulated AMCs. elected to establish, pursuant to section
FOR FURTHER INFORMATION CONTACT: 1117 of FIRREA,4 an appraiser certifying
FEDERAL HOUSING FINANCE OCC: Robert L. Parson, Appraisal and licensing agency with authority to
AGENCY Policy Specialist, (202) 649–6423, G. register and supervise AMCs
Kevin Lawton, Appraiser (Real Estate (participating States). Section 1473 of
12 CFR Part 1222 Specialist), (202) 649–7152, Mitchell E. the Dodd-Frank Act 5 also requires the
Plave, Special Counsel, Legislative and ASC to maintain an AMC National
RIN 2590–AA61
Regulatory Activities Division, (202) Registry, which will include AMCs that
Minimum Requirements for Appraisal 649–5490, for persons who are deaf or are either registered with, and subject to
Management Companies hard of hearing, TTY, (202) 649–5597, supervision by, a State appraiser
or Christopher Manthey, Special certifying and licensing agency or are
AGENCIES: Office of the Comptroller of Counsel, Bank Activities and Structure subsidiaries owned and controlled by a
the Currency, Treasury (OCC); Board of Division, (202) 649–5500. Federally regulated insured depository
Governors of the Federal Reserve Board: Carmen Holly, Supervisory institution and regulated by a Federal
System (Board); Federal Deposit Financial Analyst, Division of Banking financial institutions regulatory
Insurance Corporation (FDIC); National Supervision and Regulation, at (202) agency.6 Section 1124(e) further
Credit Union Administration (NCUA); 973–6122, or Walter McEwen, Senior requires the Agencies to promulgate
Bureau of Consumer Financial Counsel, Legal Division, at (202) 452– regulations for the reporting of the
Protection (Bureau); and Federal 3321, Board of Governors of the Federal activities of AMCs to the ASC in
Housing Finance Agency (FHFA). Reserve System, Washington, DC 20551. determining the payment of the annual
ACTION: Final rule. FDIC: Beverlea S. Gardner, Senior fee for the AMC National Registry.7
Examination Specialist, Division of Risk Pursuant to FIRREA section 1124, the
SUMMARY: The OCC, Board, FDIC, Management and Supervision, at (202) Agencies must establish, by rule,
NCUA, Bureau, and FHFA (collectively, 898–3640, Sandra S. Barker, Senior minimum requirements to be imposed
the Agencies) are adopting a final rule Policy Analyst, Division of Depository by a participating State appraiser
to implement the minimum and Consumer Protection, at (202) 898– certifying and licensing agency on
requirements in the Dodd-Frank Wall 3915, Mark Mellon, Counsel, Legal
Street Reform and Consumer Protection Division, at (202) 898–3884, or 1 Public Law 111–203, 124 Stat. 1376.
Act (the Dodd-Frank Act) to be applied Benjamin K. Gibbs, Senior Regional 2 Public Law 101–73, 103 Stat. 183.
by participating States in the Attorney, at (678) 916–2458, Federal 3 The term ‘‘appraisal management company’’ is
registration and supervision of appraisal Deposit Insurance Corporation, 550 17th defined in more detail in section 1121(11) of Title
management companies (AMCs). The Street NW., Washington, DC 20429. XI of FIRREA, 12 U.S.C. 3350(11), and in § 34.211(c)
of this final rule.
final rule also implements the minimum NCUA: John Brolin or Pamela Yu, 4 12 U.S.C. 3346.
requirements in the Dodd-Frank Act for Staff Attorneys, Office of General 5 Hereafter, section references are to Title XI of
AMCs that are subsidiaries owned and Counsel, at (703) 518–6540, or Vincent
tkelley on DSK3SPTVN1PROD with RULES2
FIRREA, unless otherwise noted.
controlled by an insured depository Vieten, Program Officer, Office of 6 12 U.S.C. 3332(a)(6).
institution and regulated by a Federal Examination and Insurance, at (703) 7 12 U.S.C. 3353(e). See also FIRREA section
financial institutions regulatory agency 518–6360, or 1775 Duke Street, 1109(a)(3), 12 U.S.C. 3338(a)(3) (requiring States to
submit reports to the ASC concerning supervisory
(Federally regulated AMCs). Under the Alexandria, Virginia, 22314. activities involving AMCs). This final rule does not
final rule, these Federally regulated Bureau: Owen Bonheimer, Counsel, implement section 1109(a)(3); this section of
AMCs do not need to register with a Office of Regulations, and David Friend, FIRREA is implemented by the ASC.
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encompass not only appraisal mortgage transactions secured by the basis for this position, one commenter
management services provided for consumer’s principal dwelling and noted that the definition of AMC is
securitizations of consumer purpose securitizations of those loans. statutory, and therefore should be
residential mortgages, but also appraisal binding on all the participating States.
b. ‘‘External Third Party’’ Within the The Agencies agree that the definition
services in connection with
Definition of AMC of AMC in section 1121 sets the uniform
securitizations of commercial
mortgages.29 The Agencies proposed the Section 1121 defines an AMC as any minimum standards for assessing
former. The Agencies’ reading of the ‘‘external third party’’ authorized to take whether an entity is an AMC under this
statute—that it extends only to certain actions by a creditor of a rule.34 Under the proposed rule, a
consumer purpose residential mortgage consumer credit transaction secured by participating State would be required to
transactions and securitizations of those the consumer’s principal dwelling or by treat an entity as an AMC if the entity
mortgages—is consistent with the text of an underwriter of or other principal in provides services described in the
section 1124 and with the Dodd-Frank the secondary mortgage markets.31 definition and meets the statutory panel
Act as a whole.30 Non-residential or Consistent with the statutory definition, size threshold. As such, pursuant to
commercial mortgages are not the proposal defined the term ‘‘appraisal section 1121 and the proposed rule, a
mentioned in any AMC provisions in management company’’ to exclude a participating State could not revise the
section 1473 of the Dodd Frank Act (or department or division of an entity if definition of AMC to eliminate or limit
elsewhere in Title XIV of the Dodd- the department or division provides the range of services that would classify
Frank Act). The lack of a reference to appraisal management services only to an entity as an AMC with respect to the
commercial mortgage lending in the that entity. This reflects the Agencies’ minimum requirements in the rule.
relevant Dodd-Frank Act provisions interpretation that a department or a Similarly, a State could not void the
suggests that AMCs were not intended division of an entity is not an ‘‘external statutory panel size threshold that
to be covered by the AMC minimum third party’’ as required by the statute. triggers the minimum requirements by,
requirements when they are providing Under the proposed rule, an AMC that for example, adopting an AMC law that
appraisal management services for is an affiliate (rather than a department provides that an entity is an AMC only
underwriters or other principals in or division) of a creditor or secondary if it has 50 or more appraisers on its
commercial mortgage securitizations. market principal would, however, be nationwide panel.35 Thus, all States
Moreover, the Agencies understand that treated as an AMC, even if the AMC electing to establish an AMC regulatory
individual appraisers, as opposed to provides appraisal management services program under the rule would have a
AMCs, are more typically retained to only to the entity with which it is uniform minimum scope as to coverage
provide an appraisal of properties affiliated, because the affiliate is a of their program.
securing commercial mortgage loans separate legal entity. While the Agencies understand the
The Agencies believe that this commenters’ desire for uniformity,
(and securitizations of such loans)
interpretation of the term ‘‘external FIRREA section 1124(b) recognizes
because of the size and complexity of
third party’’ is consistent with the plain expressly the authority of States to
those properties. This understanding is
meaning of ‘‘external’’ and ‘‘third adopt requirements in addition to those
based on the supervisory experience of
party,’’ as well as with section 1124(c), in the final rule: ‘‘Nothing in this
the Agencies as well as outreach during
which provides that the requirements of section [1124] shall be construed to
the proposed rule process to a trade
section 1124 would apply to AMCs that prevent States from establishing
association for AMCs and an individual
are owned and controlled by financial requirements in addition to any rules
AMC, which confirmed that, under the
institutions.32 In the Agencies’ view, promulgated under subsection(a)[by the
current business model, AMCs do not
this interpretation is also consistent Agencies].’’ 36 Therefore, the Agencies
generally provide services in connection decline to require all participating
with commercial mortgages. with section 1124 as a whole, which is
directed at regulating parties that States to adopt a uniform definition of
The Agencies received a small AMC.
number of comments concerning provide appraisal management services
whether an AMC’s services for on behalf of creditors and secondary d. ‘‘Portals’’ Within the Definition of
commercial mortgage transactions market principals, but does not regulate AMC
should be covered by the final rule. creditors or secondary market principals
The Agencies received one comment
Several commenters supported the directly.33
The Agencies received one comment from an entity that provides appraisal
proposal to exclude commercial real related services through electronic
estate transactions from the definition of on this topic, which supported the
mechanisms, described as a ‘‘portal’’
AMC. One commenter disagreed, stating exclusion of departments and divisions
business model. The commenter
that both commercial and consumer from the definition of AMC. The
requested that the Agencies address the
transactions should be covered by the Agencies are adopting in the final rule
question of whether a portal is an AMC.
rule, but did not elaborate. the proposed approach to ‘‘external The Agencies do not support a
The Agencies continue to believe that third party.’’ categorical rule in this regard. The
commercial real estate transactions c. Uniformity and the Definition of AMC business model an entity uses to
should be excluded from the definition provide services should not be
The Agencies received a number of
of AMC based on the reasons outlined
comments suggesting that the Agencies
above. As such, the definition of AMC 34 12 U.S.C. 3350(11). This rule establishes
require all participating States to adopt ‘‘minimum’’ requirements for a State to apply in
in the final rule includes entities only
the definition of AMC in the proposed registering AMCs. Thus, the Agencies interpret the
when they are providing appraisal
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rule. Several commenters also stated rule of construction in FIRREA section 1124(b) to
management services for consumer recognize that States may adopt requirements that
that reducing burden for AMCs would
exceed those in the rule, for example, defining AMC
29 While it is clear that the definition of AMC
reduce costs for consumers. As a legal to cover more entities than would be covered under
encompasses only residential mortgage loans, there the minimum requirements of this rule. 15 U.S.C.
31 12 U.S.C. 3350(11). 3353(b).
is some question as to whether the definition
includes securitizations of commercial mortgages. 32 12 U.S.C. 3353(c). 35 12 U.S.C. 3350(11).
30 12 U.S.C. 3353. 33 12 U.S.C. 3353. 36 12 U.S.C. 3353(b).
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determinative of whether the entity is valuation independence to TILA.39 limited number of appraisers, based on
an AMC; rather, if a portal is providing These provisions contemplate expressly identified need, and hire inexperienced
appraisal management services, and that certain entities would not be trainees and train them to become
meets the other elements of the covered by the AMC minimum qualified appraisers. AMCs, on the other
definition, then it should be considered requirements in FIRREA section 1124 hand, generally have a large number of
an AMC under the final rule. Thus, the and describe this type of entity, in pre-approved appraisers in their
final rule does not limit or affect the pertinent part, as one that ‘‘utilizes the network or panel who are available, as
discretion of States to treat a portal as services of State licensed or certified independent contractors, for potential
an AMC if a State finds that a portal appraisers and receives a fee for assignments and do not conduct
provides appraisal management performing appraisals in accordance training for inexperienced appraisers.
services. with the Uniform Standards of
f. Hybrid Entities
Professional Appraisal Practice.’’ 40 The
e. Distinction Between AMCs and In the proposal, the Agencies
Agencies understand that the type of
Appraisal Firms discussed the possibility that there are,
entity described here as excluded from
In the proposal, the Agencies the AMC minimum requirements is an or may be in the future, ‘‘hybrid’’
addressed whether appraisal firms appraisal firm, which receives fees for entities, meaning entities that both hire
should be considered AMCs pursuant to directly performing appraisals. Second, appraisers as employees to perform
sections 1124 and 1121(11) 37 and FIRREA section 1124 uses the term appraisals and engage independent
requested comment on whether the ‘‘appraisal management company,’’ and contractors to perform appraisals. In this
distinction between employees and not appraisal firm.41 Third, section situation, the entity could be considered
independent contractors served as a 1121(11) describes the activities of both an AMC and an appraisal firm. As
basis for excluding appraisal firms from AMCs as including ‘‘contracting with such, under the proposed rule, the
the definition of an AMC. (See Question State-certified or State-licensed hybrid entity would be treated as an
3 in the proposal.) The technical appraisers to perform appraisal AMC for purposes of State registration
distinction between independent assignments,’’ but not directly if it meets the statutory panel size
contractors and employees, for purposes performing appraisals.42 Section threshold (of overseeing more than 15
of determining whether an entity meets 1121(11) also defines an AMC as an State-certified or State-licensed
the statutory panel size thresholds, is entity that ‘‘oversees a network or panel appraisers in a State or 25 or more State-
addressed in the section-by-section of more than 15 certified or licensed certified or State-licensed appraisers in
analysis of § 34.212 (Appraiser Panel), appraisers in a State or 25 or more two or more States within a given year).
which discusses how to calculate the nationally (meaning two or more States) Under the proposal, the numerical
number of appraisers on a panel. The within a given year . . .’’ 43 By contrast, calculation of panel size for hybrid
following is a discussion of the the Agencies understand that appraisal entities would only include appraisers
comments on the broader issue of firms perform appraisals as a primary engaged as independent contractors.
whether the proposal appropriately function directly through employees Some commenters supported the
excluded appraisal firms from the scope and do not oversee a ‘‘network or panel’’ proposed treatment of firms that have
of the rule. of non-employee appraisers. both employee appraisers and
A number of commenters supported As stated in the proposal, the independent contractor appraisers. One
the proposal to construe section 1124 as Agencies believe that the fundamental commenter suggested that the Agencies
applying only to AMCs or hybrid reasons to distinguish between AMCs should not recognize a hybrid firm as a
entities (discussed in detail below) and and appraisal firms are that the business valid business model, but did not
not to appraisal firms. These models of AMCs and appraisal firms are elaborate. The Agencies adopt in the
commenters stated that the business different and that Congress expressed an final rule the proposed definition of
models of AMCs and appraisal firms are intention to exclude entities operating AMC and the proposed treatment of
different. Under the different business on an appraisal firm model from hybrid firms. The Agencies continue to
models, according to these commenters, coverage by the AMC minimum believe that sections 1124 and 1121(11)
employees of appraisal firms perform requirements. This conclusion is are best interpreted to apply only to
appraisals, while AMCs contract for consistent with the fact that AMCs AMCs, as defined in the proposed and
appraisal services, but do not perform provide appraisal management services final rules, and not to appraisal firms
appraisals. Another set of commenters to third parties, including retaining (with the exception of hybrid firms). In
argued that appraisal firms should be appraisers to perform appraisals, but addition to the statutory distinction
covered by the rule. The basis for this AMCs do not perform appraisals. By between appraisal firms and AMCs, the
argument was the commenters’ assertion contrast, appraisal firms perform Agencies believe this interpretation is
that there is no substantive distinction appraisals using one or more of the consistent with, and supported by, the
between AMCs, which hire others to firm’s employees or partners. In key distinction between AMCs and
perform appraisals, and appraisal firms, addition, appraisal firms typically hire a appraisal firms—that the former
which generally hire appraisers as contracts with appraisers to perform
employees. 39 See TILA section 129F, 15 U.S.C. 1639e. appraisals, while the latter performs
As discussed in the preamble to the 40 15 U.S.C. 1639e(i)(2) (emphasis added); see appraisals directly through employees.
proposed rule, the Agencies interpret also 12 U.S.C. 3353. A ‘‘fee appraiser’’ is defined Even if some services provided by
in TILA section 129E, 15 U.S.C. 1639(e)(i), as a AMCs and appraisal firms overlap,
section 1124 to distinguish between person who: (1) Is not an employee of a loan
AMCs and appraisal firms for three key originator or AMC engaging the appraiser; (2) which some commenters assert, this key
difference between the two entities (that
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reasons.38 First, the distinction between performs an appraisal in compliance with USPAP;
appraisal firms and AMCs is reflected in and (3) is a company [an appraisal firm] not subject AMCs contract with appraisers to
to the requirements of section 1124 (minimum perform appraisals and appraisal firms
section 1472 of the Dodd-Frank Act, requirements for AMCs, 12 U.S.C. 3353) and that
which added provisions concerning receives a fee for performing appraisals. perform appraisals directly through
41 Id. their own employees) remains. The final
37 12 U.S.C. 3353 and 3350(11). 42 12 U.S.C. 3350(11). rule also reflects the definition of
38 12 U.S.C. 3353. 43 12 U.S.C. 3350(11). ‘‘appraisal management company’’ in
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section 1121(11), which provides that whether a ‘‘network or panel’’ consists Question 2 in the proposal.) Some
an AMC is an entity that ‘‘oversees a of employees of an AMC or independent commenters argued that employees as
network or panel’’ of appraisers.44 contractors retained by the AMC (or well as independent contractor
Appraisal firms do not oversee networks both). However, by including only appraisers should be counted as part of
or panels of non-employee appraisers. independent contractors with the AMC, an appraiser network or panel. These
The Agencies also continue to believe the proposed and adopted definition of commenters did not disagree with the
that recognition of hybrid firms as ‘‘appraiser panel’’ reflects the approach Agencies’ understanding that AMCs
AMCs is appropriate when the entity taken by the majority of States that have generally use independent contractors
maintains a panel of appraisers that adopted AMC registration laws or have rather than employee appraisers. Nor
includes independent contractors proposed AMC laws 46 and reflects the did the commenters address the key
meeting the threshold minimum Agencies’ understanding that AMCs distinction between AMCs and
numbers pursuant to § 34.212. The typically engage appraisers as appraisal firms, which is that AMCs
Agencies believe that this interpretation independent contractors under the primarily engage third parties to
of the definition of AMC is consistent current AMC business model.47 Section perform appraisals, whereas appraisal
with the statutory language and 34.211(e) also reflects the definition of firms perform appraisals directly
purpose, appropriately reflects the AMC in section 1121(11), which through employees.
business models of AMCs, and outlines typical tasks carried out by As discussed above in the section-by-
accommodates the possibility that AMCs, including as ‘‘contract[ing] with section analysis of § 34.211(c), the
appraisal firms may evolve over time. licensed and certified appraisers.’’ 48 As commenters argued that appraisal firms
For these reasons, the Agencies adopt in discussed above in the section-by- should be regulated as AMCs as a matter
the final rule the proposed definition of section analysis of § 34.211(c), the of policy. As such, these commenters
AMC and the proposed treatment of definition of AMC and its description of suggested that the distinction between
hybrid firms. appraisal management services does not employee and independent contractor
include directly performing appraisals appraisers be removed from the rule. In
3. Section 34.211(e) Appraiser Panel
through the AMC’s own employees— support of this position, the commenters
The Agencies are adopting the rather, AMCs contract with external stated that appraisal firms and AMCs
proposed definition of ‘‘appraiser third parties to perform appraisals.49 provide substantially the same services,
panel’’ with minor clarifications. The method for calculating whether and therefore should both be covered by
Specifically, proposed § 34.211(e) an entity has an ‘‘appraiser network or the AMC registration and supervision
defined an appraiser network or panel panel’’ of more than 15 State-certified or programs.
as a network of State-licensed or State- State-licensed appraisers in a State or 25 Other commenters agreed with the
certified appraisers who are or more appraisers nationally (meaning employee-independent contractor
independent contractors to an AMC. In two or more States) within a calendar distinction, stating that defining
the final rule, ‘‘appraiser panel’’ is year or 12-month period under State law ‘‘appraiser panel’’ to be comprised only
defined as a network, list or roster of is discussed further under the section- of independent contractor appraisers
licensed or certified appraisers by-section analysis of § 34.212, below. reflects the difference between the AMC
approved by the AMC to perform The Agencies requested comment on and appraisal firm business models.
appraisals as independent contractors the proposed definition of ‘‘appraiser Specifically, these commenters stated
for the AMC. Appraisers on an AMC’s panel’’ and on the alternative of that appraisal firms’ employees perform
‘‘appraiser panel’’ under this part defining this term to include employees appraisals directly, while AMCs provide
include both appraisers accepted by the as well as independent contractors. (See appraisal management services and
AMC for consideration for future engage third-party appraisers to perform
appraisal assignments and appraisers 46 A majority of States with AMC laws define appraisals.
‘‘appraiser panel’’ as being comprised of The Agencies adopt in the final rule
engaged by the AMC to perform one or independent contractors. See, e.g., N.C. Gen. Stat.
more appraisals. The final rule also section 93E–2–2 (defining an appraiser panel as a
the proposed definition of ‘‘appraiser
clarifies in the definition of ‘‘appraiser network or panel of appraisers who are panel,’’ which includes only appraisers
panel’’ that an appraiser is an independent contractors to the AMC); Vernon’s who are independent contractors to an
Tex. Code Ann. Occupations Code section AMC. The Agencies note the
independent contractor for purposes of 1104.003(b)(3) (same); Louisiana La. Rev. Stat. Ann.
this rule if the appraiser is treated as an section 37:3415.2(a) (same); see also Ohio (draft
predominance of comments in favor of
independent contractor by the AMC for code) (same). A minority of States use a broader retaining the employee-independent
purposes of Federal income taxation. definition for ‘‘appraiser panel’’ that encompasses contractor distinction. The final rule
a combination of independent contractors and also reflects that the commenters who
a. Distinction Between Employees and employees. See, e.g., Cal. Bus. & Prof. Code section
opposed the proposed employee-
Independent Contractors in Determining 11302 (defining AMC to include both independent
contractors and employees); Ark. Code Ann. section independent contractor distinction
Panel Membership 17–14–402(2) (same); Ky. Rev. Stat. section effectively conceded that the distinction
The definition of ‘‘appraisal 324A.150(2)(same). The majority approach is is accurate, arguing instead that AMCs
consistent with the model AMC code offered by a
management company’’ in section trade association for appraisers and the minority
and appraisal firms should both be
1121(11) provides that an entity will be approach is consistent with a model code offered regulated as AMCs under section 1124
treated as an AMC subject to State by a trade association for AMCs. and implementing State laws, regardless
registration if it has an ‘‘appraiser 47 As discussed in the proposal, this
of the way these entities structure their
understanding is based on outreach conducted by operations.50 This larger policy question
network or panel’’ of more than 15 the Agencies with associations that represent AMCs
State-certified or State-licensed and appraisers, as well as outreach with State is addressed above in the discussion of
the distinction between employees and
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appraisers in a State or 25 or more appraiser certifying and licensing agencies.
appraisers nationally (meaning two or 48 12 U.S.C. 3350(11). independent contractors as a basis for
more States) within a given year.45 49 The Agencies will monitor AMCs to assess
exclusion of an appraisal firm from the
whether they are hiring appraisers as part-time definition of an AMC. See the section-
Section 1121(11) does not specify employees to avoid State registration requirements.
Outreach with State officials before the issuance of by-section analysis of § 34.211(c)
44 12 U.S.C. 3350(11). the proposed rule did not indicate this is currently
45 12 U.S.C. 3350(11). occurring or at significant risk of occurring. 50 12 U.S.C. 3353.
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these procedural provisions to give for several reasons, the Agencies decline evade the definition, the alternative
States clarity and prevent to amend the rule such that only approach suggested by commenters of
circumvention of the registration appraisers actually given assignments in relying only on the number of
requirement. a particular year will be counted as appraisers actually used during a 12-
The Agencies received a wide variety being on the panel. First, the Agencies month period will also encourage
of comments relating to the calculation interpret sections 1124 and 1121(11) to evasion attempts. This alternative
of appraiser panel membership under mean that the counting of appraisers in would allow AMCs to accumulate
Question 2 of the proposal. Some determining whether an entity is subject relationships with large numbers of
commenters suggested that the approach to the AMC minimum requirements independent contractors, advertise this
in the proposal, which would count does not control or affect the counting breadth of coverage, and evade the rule
appraisers either engaged to perform of appraisers for purposes of payment of by managing the actual use of appraisers
appraisals or pre-approved to do so, the AMC National Registry fee.64 through the year.
would result in the unintended Therefore, this final rule does not The Agencies will monitor the effect
consequence of limiting the number of address or require the collection or of the rule and the definition of AMC for
appraisers in AMC networks or panels. calculation of these fees. Section 34.212 evasion and revisit the rule to the extent
These commenters argued that pre- of the rule implements FIRREA section appropriate and permitted by statute in
approved appraisers who have not yet 1121(11) and governs how to count the light of future developments.
been engaged by the AMC for an number of appraisers on a panel only for
purposes of whether an entity is an 2. Section 34.212(d): Annual Period for
assignment should not be counted. They
AMC subject to the AMC minimum Counting Appraisers on AMC Panel
argued that the proposed method of
counting appraisers would provide a requirements of this final rule, either as Proposed § 34.212(d) provided two
strong incentive for AMCs to limit an AMC registered with a State that options to States for calculating the
significantly the size of networks or adopts these requirements or as a number of appraisers on an entity’s
panels, given that the AMC National Federally regulated AMC.65 The rule panel for determining whether the
Registry fee will be determined based on requires AMCs to provide information entity meets the minimum thresholds
the number of appraisers on an AMC’s to the State or States in which they for designation as an AMC. The first was
network or panel of appraisers. The operate, to be used in determining the the 12-month calendar year and the
commenters stated that, to reduce costs, payment of the annual AMC National second was any other 12-month period
AMCs would likely reduce the size of Registry fee, but does not address or set by a State. One commenter suggested
appraiser panels if the proposed method control how to calculate the number of that, to promote uniformity, all States
of counting appraisers were adopted as appraisers on a network or panel for should be required to use the calendar
final. purposes of determining the fee. The year for determining whether an entity
As background, the commenters AMC National Registry fee provisions has the requisite number of appraisers
explained that AMCs maintain large pertaining to the calculation, on its panel to qualify as an AMC.
panels of pre-approved appraisers in assessment, and collection of the fee are Under the proposed rule, States
order to offer timely appraisal services addressed in FIRREA section 1109(a), would have the flexibility to align the
in a wide variety of areas, including which is enforced and administered by 12-month period for determining AMC
smaller communities and rural areas the ASC, not by the Agencies pursuant status with their AMC registration
where appraisers are engaged less often to section 1124.66 As such, it is the ASC, calendars, which may, or may not, be
than in more populated communities. and not the Agencies in this rulemaking, based on the calendar year. In this
The commenters noted that, if the AMCs that will determine how to calculate and regard, the Agencies are aware that
reduce panels to actively engaged pay the AMC National Registry fee. many States already do not use a
appraisers, then real estate transactions Second, the statute that the Agencies calendar year for their existing appraiser
in small communities and rural areas are charged with implementing registration process. The Agencies
will take more time because AMCs expressly defines an AMC with believe that allowing states to set the 12-
would not typically have pre-approved reference to the number of appraisers month period provides appropriate
appraisers readily available for this type that the AMC ‘‘oversees’’ on a ‘‘network flexibility and will help States comply
of assignment.63 For these reasons, the or panel’’ in a given year, not only on with the minimum requirements and
the number of appraisers to which it reduce regulatory burden for State
commenters requested that the Agencies
actually gives assignments.67 While governments. Thus, the Agencies adopt
modify the proposed method of
commenters speculate that this § 34.212(d) in the final rule without
counting appraisers in an AMC’s
approach to defining the number of change.
network or panel to include only
appraisers that an AMC oversees on a
appraisers who are actually engaged to C. Section 34.213: Appraisal
network or panel may lead to efforts to
perform an appraisal during a 12-month Management Company Registration
period. 64 12 U.S.C. 3350(11) (defining an AMC subject to
The Agencies understand the the minimum requirements as, in pertinent part, an 1. Section 34.213(a): Minimum
commenters’ concerns relating to the entity with a ‘‘network or panel of more than 15 Requirements for Participating States
panel membership and the potential for certified or licensed appraisers in a State or 25 or
more nationally (meaning two or more States) Under proposed § 34.213(a), adopted
AMCs to reduce their appraiser within a given year.’’ 12 U.S.C. 3350(11). The without change in this final rule,
networks or panels to reduce ASC fees. provision of the statute relevant to determining the participating States must have a
The Agencies are also cognizant of, and registry fee is in section 1109(a)(4)(B), which
licensing program in place within the
concerned about, the potential adverse provides that the fee is based on the number of
State appraiser certifying and licensing
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appraisers ‘‘working for or contracting with [an
effects this may have on small AMC] in [a] state during the previous year.’’ agency that has the authority to: (1)
communities and rural areas. However, FIRREA section 1109(a)(4)(B), 12 U.S.C. Review and approve or deny an AMC’s
3338(a)(4)(B).
63 One commenter, a coalition of three AMCs, 65 12 U.S.C. 3350(11).
application for initial registration; (2)
stated the process of approving an appraiser for a 66 12 U.S.C. 3338(a), 3353. review and renew or refuse to renew an
panel typically requires from one week at a 67 FIRREA section 1121(11), 12 U.S.C. 3350(11) AMC’s registration periodically; (3)
minimum to a month. (defining AMC). examine the books and records of an
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An FRFA is not required because this Various commenters expressed their before adoption of the final rule; thus
rule will not have a significant concerns with State and Federal fees the multiplier in the first calculation
economic impact on a substantial that may be instituted in connection should be 17 rather than 50. Third, the
number of small entities. with AMC registration and supervision. Bureau assumes for its base calculations
This final rule implements the This rule does not determine fee that only the minimum State rate is
minimum requirements to be applied by amounts for States to charge, require caused by the rule (Vermont’s $250 fee),
participating States in the registration collection of registration fees by the thus the multiplier is $250 instead of
and supervision of AMCs, as well as ASC, or authorize the collection of such $2,500. Finally, as mentioned above, the
requirements directly applicable to ASC fees. It instead provides minimum Bureau does not include the ASC fee or,
Federally regulated AMCs. The Bureau requirements for States to use to in other words the third line overall
notes that the final rule does not impose regulate AMCs within the State. How a (which in any event assumes a fee
requirements on AMCs (other than State chooses to implement these amount that the ASC has not yet
Federally regulated AMCs), but instead requirements, including which if any established). Note that the Bureau’s use
seeks to encourage States to adopt new State fees to charge, is within the of the minimum State rate for its base
minimum requirements in their discretion of the States. With respect to calculation of impacts does not imply
regulation of AMCs. Burden may be the ASC registration fee, the Dodd-Frank that the Bureau suggests that the
generated from the States’ exercise of Act grants authority to set that fee remaining 17 States adopt this rate.
discretion to implement the final rule, exclusively to the ASC.125 Therefore, Commenters also discussed the
based on the States having the option to the Bureau does not consider any fees impact of the rule on States and the
decline to participate. The Bureau does imposed on AMCs by the ASC (whether burden that may result with the
not view this as burden resulting from directly or through the States for implementation of the final rule. While
the rule itself, however. Nonetheless, to forwarding to the ASC) as an impact of the Bureau acknowledges these
inform the rulemaking and to inform the the final rule. comments, for the purposes of making a
public, the Bureau exercised its A national association commented determination under the RFA, the
discretion to analyze economic impacts explicitly on the fees that AMCs would impact of the final rule on the States is
that will be imposed on AMCs by States pay and the fees’ effect on consumers: not incorporated into the FRFA because
that implement final rule.123 For this ‘‘150+¥ AMCs, $2,500 average fee per States are not classified as small
purpose, the Bureau assumed States that State (includes application fee, surety entities.
have not yet passed an AMC licensing bond fees, background checks, secretary As discussed in the proposed
and registration law (17 States, as of of State application fees, administration rulemaking, State registration fees in
November 2014) would all elect to pass fees, and etc.) States that have not yet passed an AMC
such a law and establish an AMC 150 AMCs × $2,500 × 50 States = licensing and registration law would
licensing and supervision program that $18,750,000.00 constitute the primary economic impact
satisfies the standards of the final rule. 150 AMCs × 2500 appraisers × $50 of the final rule. As also noted in the
This assumption is taken to establish an ASC fee = $18,750,000.00.’’ proposed rule, such fees in States that
outer bound. Because the final rule does The Bureau’s analysis differs from the have established such laws vary widely.
not require States to adopt the minimum commenter’s in several ways. First, for Such State registration and renewal fees
requirements in the final rule, however, the purposes of RFA, the Bureau is are not necessarily for the sole purpose
it is possible that not all 17 States (as concerned only with smaller AMCs, and of recovering costs of administering the
defined in the final rule) would do an AMC with 2,500 appraisers that minimum requirements under the final
so.124 operates in all 50 States is unlikely to rule. States can impose charges for a
be small under the SBA definition that variety of reasons, including to raise
operated and is not dominant in its field.’’ 5 U.S.C. would include only AMCs with yearly revenue (independent of the cost of the
601(4). A ‘‘small governmental jurisdiction’’ is the registration regime) or to fund the
government of a city, county, town, township, revenues below $7,500,000. Second, the
village, school district, or special district with a Bureau does not count as a burden administration of a regime that exceeds
population of less than 50,000. 5 U.S.C. 601(5). imposed by the final rule those the minimum requirements under the
Given this definition, participating States are not registration fees in States that already final rule. The Bureau believes that the
small governmental jurisdictions and the burden on fee charged by Vermont—$125 for
them is not relevant to this analysis. established AMC registration regimes
123 The Bureau does not assume costs associated
registration and $250 for annual
with the final rule’s requirements to ensure with the possible consequences if States did not renewal—would be sufficient to recover
compliance with USPAP and other regulations, participate. These comments did not establish that the cost of implementing the final rule
because AMCs would be subject to these standards it was likely that States would not do so, however. in a newly-participating State.126 The
even without their being referenced in the final Thus, the Bureau continues to rely on the
rule. assumption that the remaining States will choose to
Bureau therefore considered this fee in
124 A State could accept the consequences on participate either within three years or soon estimating the economic impact of the
AMCs’ business in the State from not implementing thereafter. However, even if this is not the case, the final rule in the 17 States that do not yet
the final rule. FIRREA section 1124(f) provides that transactions affected until a State did participate have AMC registration requirements. As
three years after the final rule takes effect, AMCs would be portfolio loans over $250,000 that are not
insured by either the Federal Housing
discussed further below, however, the
cannot provide services in Federally related
transactions unless and until a State has Administration (FHA), the U.S. Department of Bureau also considered more
implemented the final rule. However, the Bureau Veterans Affairs (VA), or the United States
understands that only a minority of mortgage Department of Agriculture Rural Housing Service 126 The application fee in Vermont is $125. See
transactions are ‘‘Federally related transactions’’ (USDA RHS). These loans represent a small https://www.sec.state.vt.us/media/188701/amc_
within the meaning of FIRREA. See, e.g., 12 CFR percentage of the market, and therefore inability by application.pdf. The annualized renewal fee is $250
225.62(f) (transaction must ‘‘[r]equire the services of certain market participants (certain types of AMCs) ($500 for a two-year period). See https://
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an appraiser’’ to be federally related). But see id. at to provide appraisal management services in these www.sec.state.vt.us/media/486847/Appraisal-
§ 225.63(a)(1),(9),(10) (exemptions from FIRREA types of transactions in a non-participating State Management-Company-Renewal-Form-077-
appraisal requirements for transactions of $250,000 will not result in a significant economic impact on 2014.pdf. In addition, while some States may elect
or less, transactions insured by or sold to a U.S. a substantial number of small entities. to impose additional requirements relating to
government agency, and transactions that conform 125 See 12 U.S.C. 3338. This provision in FIRREA examination and inspection of their AMCs, the
to GSE appraisal standards). However, the Bureau is not part of the joint rulemaking authority in Bureau does not believe that the minimum
believes all States will choose to participate. section 1124 that is the basis for the Agencies’ requirements that States must provide would lead
Several industry comments expressed concerns issuance of this final rule. to significant costs for AMCs.
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conservative estimates of the impact of attributable to such State would impose significant burdens on
the final rule using significantly higher implementation and/or ASC oversight Federally regulated AMCs either. See
fee amounts. The Bureau believes that expectations rather than to the final rule Interagency Appraisal and Evaluation
the 38 States that already have AMC itself. Therefore, State statutes that Guidelines, 75 FR 77450 (Dec. 10, 2010)
registration requirements would have to implement this requirement relating to (Interagency Guidelines). The
do minimal, if any, updating of the establishing examination authority and Interagency Guidelines, part VI, already
requirements due to this rule, as mechanisms are not expected to cause require Federal financial institutions,
discussed in the preamble. Thus, the fee increases or new burden above the when obtaining required appraisals, to
Bureau believes that the rule’s indirect $250 overall baseline that is assumed for select appraisers who are certified or
burden on the AMCs operating in these purposes of this analysis.128 licensed, qualified, in compliance with
38 States is negligible. Similarly, the Bureau believes that USPAP, and independent. 75 FR at
As noted in the section-by-section other minimum requirements for AMCs 77458. Federally regulated AMCs
analysis, it is possible that an appraisal under the final rule (verifying the use of frequently perform appraisals for their
firm, which hires employees to perform licensed or certified status of appraisers, affiliates. Therefore, it can be assumed
appraisals, could also oversee more than requiring that appraisers comply with that in delegating these functions to
15 appraisers engaged as independent USPAP, complying with any contractual AMCs, these Federal financial
contractors in a State, or 25 or more review provisions, and establishing and institutions also delegated these
appraisers in two or more States, in a complying with processes to ensure requirements from part VI of the
given year. Comments did not establish appraisers are qualified and Interagency Guidelines to these AMCs.
that such firms—described in the independent and that the AMC acts in
section-by-section analysis as ‘hybrid compliance with applicable valuation To estimate the impact of the final
firms’—currently exist to any independence regulations), as well as rule on small AMCs, the Bureau
meaningful extent. The Bureau believes the standard for removing appraisers conducted a survey. The Bureau called
that to the extent such firms do exist, from the appraiser panel, would not nine AMCs, selected randomly from a
they are either already included in what result in new burden on AMCs because list of approximately 500 AMCs
the Bureau has counted as an AMC, or these standards merely reinforce provided by industry trade associations.
the firm is unlikely to be considered existing compliance requirements as The AMCs were asked for certain basic
‘‘small’’ within the meaning of the RFA. well as industry practice.129 The Bureau data including the number of States in
An additional requirement in the final further notes that States have discretion which they operate, their revenue
rule is that the State AMC licensing to interpret the requirements to (including the revenue from any non-
programs have authority and establish processes and controls to appraisal business), and the number of
mechanisms to examine books and ensure compliance, subject to appraisals that they performed in
records of the AMCs, to otherwise monitoring by the ASC for effectiveness 2012.130 The Bureau estimated the
obtain information from the AMCs, and in the judgment or discretion of the revenue to be the number of appraisals
to discipline AMCs. The Bureau ASC. Accordingly, to the extent that performed in 2012 multiplied by $350—
believes that existing State registration State interpretations of such the average appraisal cost assumed in
fees generally already account for the requirements leads to burden on small the Agencies’ analysis under section
cost to the States of having such entities, such burden would be 1022 of the Dodd-Frank Act in the 2013
authority and mechanisms, and that the attributable to such State Interagency Appraisals Rule. This
requirement in the final rule therefore implementation and/or ASC oversight revenue estimate is likely to be
would not lead to higher registration expectations rather than to the final rule underestimated, given that several
fees in any significant amount.127 itself. AMCs out of nine reported additional
Accordingly, in the 17 States that would Just as these conduct standards would revenue that was not due to the
adopt new registration and renewal not impose a significant burden on residential appraisal business. Out of
systems, the Bureau believes the AMCs required to register at the State the nine AMCs, six had revenues of less
renewal fee currently charged in level, the Bureau does not believe they than $7,500,000 in 2012, and thus
Vermont would cover the State’s cost would be within the scope of the RFA
128 In addition, the Bureau does not believe that
associated with implementing this analysis based upon SBA guidelines.131
in States that add this requirement there will be any
requirement. significant new burden on the AMCs. The Bureau
The Bureau computed the cost of
The Bureau notes that the final rule is believes that the AMCs already keep their books registration and renewal fees in States
not prescriptive as to how or when the and records in order as a standard course of that do not already have them, allocated
States must exercise the authority or business practice, and thus the occasional State these costs to individual AMCs based
examiner visits should not impose any significant
mechanisms. Exercise of such authority burden. In addition, the final rule requires only that
upon the number of States in which the
and mechanisms is determined at the the State have the authority and mechanism to AMC operated,132 and computed the
discretion of the States, subject to request records and information. The final rule does ratio of these allocated costs to the
not require that the State exercise this authority and AMCs’ revenues.
monitoring by the ASC for effectiveness any burdensome exercise of this authority would
in the judgment or discretion of the therefore not be caused by the final rule. Finally,
ASC. Accordingly, to the extent that to the extent State supervision programs do increase 130 One of the AMCs did not report its revenue.
burden, the Bureau believes this burden would be 131 NAICS code 531320—Offices of Real Estate
State exercise of such authority and
within the sensitivity tolerances described in the Appraisers—includes ‘‘appraisal services,’’ which
mechanisms leads to burden on small footnote at the end of this section. we believe would include services provided by
entities, such burden would be 129 These requirements also would not result in AMCs in the processing and review of appraisals.
new burden on Federally regulated AMCs, for the An alternative classification would be NAICS code
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127 See, e.g., Vermont Statutes Title 26 section same reason. Federally regulated AMCs do not have 561110—Office Administrative Services. In any
3324 (requiring AMCs to ‘‘retain all records related to comply with State registration and renewal event, this code also has an SBA threshold of
to an appraisal, review, or consulting assignment requirements, which can entail fees. Conservatively, $7,500,000.
for no less than five years . . . [and w]ith however, the Bureau applied the State fee burden 132 The Bureau assumed that an AMC that
reasonable notice, a licensee or registrant shall to all of the small AMCs in its calculation method operated in x States needs to register in additional
produce any records governed by this section for described herein. As a result, the estimated burden (17/55)*x States. This assumption results in a (17/
inspection and copying by the board or its of State fees associated with the final rule may be 55)*x*$250 State registration and renewal fee
authorized agent.’’). over-estimated. burden on an AMC operating in x States.
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(2) An AMC subject to State § 225.196 Information to be presented to Frank Wall Street Reform and Consumer
registration pursuant to § 225.193 is not the Appraisal Subcommittee by Protection Act (the Dodd-Frank Act)
barred by paragraph (a)(1) of this section participating States. (Pub. L. 111–203, 124 Stat. 1376 (2010)),
from being registered by a State or Each State electing to register AMCs 12 U.S.C. 3331 et seq.
included on the AMC National Registry for purposes of permitting AMCs to (b) Purpose. The purpose of this
if the license or certificate of the provide appraisal management services subpart is to implement sections 1109,
appraiser with an ownership interest relating to covered transactions in the 1117, 1121, and 1124 of FIRREA Title
was not revoked for a substantive cause State must submit to the Appraisal XI, 12 U.S.C. 3338, 3346, 3350, and
and has been reinstated by the State or Subcommittee the information required 3353.
States in which the appraiser was to be submitted by Appraisal (c) Scope. This subpart applies to
licensed or certified. Subcommittee regulations or guidance States and to appraisal management
concerning AMCs that operate in the companies (AMCs) providing appraisal
(b) Good moral character of owners. State. management services in connection
An AMC shall not be registered by a
Federal Deposit Insurance Corporation with consumer credit transactions
State if any person that owns more than
secured by a consumer’s principal
10 percent of the AMC— Authority and Issuance dwelling or securitizations of those
(1) Is determined by the State For the reasons set forth in the transactions.
appraiser certifying and licensing preamble, the FDIC amends 12 CFR (d) Rule of construction. Nothing in
agency not to have good moral parts 323 and 390 as follows: this subpart should be construed to
character; or prevent a State from establishing
(2) Fails to submit to a background PART 323—APPRAISALS requirements in addition to those in this
investigation carried out by the State subpart. In addition, nothing in this
■ 8. Revise the authority citation for part subpart should be construed to alter
appraiser certifying and licensing
323 to read as follows: guidance in, and applicability of, the
agency.
Authority: 12 U.S.C. 1818, 1819 Interagency Appraisal and Evaluation
§ 225.195 Requirements for Federally [‘‘Seventh’’ and ‘‘Tenth’’] and 3331 et seq. Guidelines 1 or other relevant agency
regulated appraisal management ■ 9. Add a heading for new subpart A guidance that cautions banks, bank
companies. to read as follows: holding companies, Federal savings
(a) Requirements in providing associations, state savings association,
services. To provide appraisal Subpart A—Appraisals Generally and credit unions, as applicable, that
management services for a creditor or §§ 323.1 through 323.7—[Designated each such entity is accountable for
secondary mortgage market participant as subpart A] overseeing the activities of third-party
relating to a covered transaction, a service providers and ensuring that any
■ 10. Designate §§ 323.1 through 323.7
Federally regulated AMC must comply services provided by a third party
as new subpart A.
with the requirements in § 225.193(b)(2) comply with applicable laws,
§§ 323.1, 323.3, 323.4, and 323.5—
through (5). regulations, and supervisory guidance
[Amended]
applicable directly to the financial
(b) Ownership limitations. (1) A ■ 11. Amend §§ 323.1, 323.3, 323.4, and
institution.
Federally regulated AMC shall not be 323.5 by removing ‘‘part’’ and adding
included on the AMC National Registry ‘‘subpart’’ in its place in each instance § 323.9 Definitions.
if such AMC, in whole or in part, in which it appears. For purposes of this subpart:
directly or indirectly, is owned by any ■ 12. Add subpart B to part 323 to read (a) Affiliate has the meaning provided
person who has had an appraiser license as follows: in 12 U.S.C. 1841.
or certificate refused, denied, cancelled, (b) AMC National Registry means the
surrendered in lieu of revocation, or Subpart B—Appraisal Management registry of State-registered AMCs and
revoked in any State for a substantive Company Minimum Requirements Federally regulated AMCs maintained
cause, as determined by the ASC. Sec.
by the Appraisal Subcommittee.
(2) A Federally regulated AMC is not 323.8 Authority, purpose, and scope. (c)(1) Appraisal management
barred by this paragraph (b) from being 323.9 Definitions. company (AMC) means a person that:
included on the AMC National Registry 323.10 Appraiser panel—annual size (i) Provides appraisal management
if the license or certificate of the calculation. services to creditors or to secondary
appraiser with an ownership interest 323.11 Appraisal management company mortgage market participants, including
registration. affiliates;
was not revoked for a substantive cause 323.12 Ownership limitations for State-
and has been reinstated by the State or (ii) Provides such services in
registered appraisal management connection with valuing a consumer’s
States in which the appraiser was companies.
licensed or certified. principal dwelling as security for a
323.13 Requirements for Federally
regulated appraisal management consumer credit transaction or
(c) Reporting information for the AMC incorporating such transactions into
companies.
National Registry. A Federally regulated securitizations; and
323.14 Information to be presented to the
AMC must report to the State or States Appraisal Subcommittee by participating (iii) Within a given 12-month period,
in which it operates the information States. as defined in § 323.10(d), oversees an
required to be submitted by the State to appraiser panel of more than 15 State-
the Appraisal Subcommittee pursuant to § 323.8 Authority, purpose, and scope.
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certified or State-licensed appraisers in
the Appraisal Subcommittee’s policies (a) Authority. This subpart is issued a State or 25 or more State-certified or
regarding the determination of the AMC pursuant to12 U.S.C. 1818, 1819 State-licensed appraisers in two or more
National Registry fee, including but not [‘‘Seventh’’ and ‘‘Tenth’’] and Title XI of States, as described in § 323.12;
necessarily limited to the collection of the Financial Institutions Reform,
information related to the limitations set Recovery, and Enforcement Act 1 https://www.fdic.gov/regulations/laws/rules/
forth in this section. (FIRREA), as amended by the Dodd- 5000–4800.html.
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Subpart R also issued under 12 U.S.C. 3331 et seq.). The Bureau’s information- 124 Stat. 1376 (2010)), 12 U.S.C. 3331 et
1463; 1464; 1831m; 1831n; 1831p–1. collection requirements contained in seq.
Subpart S also issued under 12 U.S.C. this part have been approved by the (b) Purpose. The purpose of this
1462; 1462a; 1463; 1464; 1468a; 1817; 1820; Office of Management and Budget subpart is to implement sections 1109,
1828; 1831e; 1831o; 1831p–1; 1881–1884;
3207; 3339; 15 U.S.C. 78b; 78l; 78m; 78n;
(OMB) under the provisions of 44 U.S.C. 1117, 1121, and 1124 of FIRREA Title
78p; 78q; 78w; 31 U.S.C. 5318; 42 U.S.C. 3501 et seq. and have been assigned XI, 12 U.S.C. 3338, 3346, 3350, and
4106. OMB No. 3170–0015 (Truth in Lending). 3353.
Subpart T also issued under 12 U.S.C. * * * * * (c) Scope. This subpart applies to
1462a; 1463; 1464; 15 U.S.C. 78c; 78l; 78m; States and to appraisal management
78n; 78w. Subpart E—Special Rules for Certain companies (AMCs) providing appraisal
Subpart U also issued under 12 U.S.C. Home Mortgage Transactions management services in connection
1462a; 1463; 1464; 15 U.S.C. 78c; 78l; 78m; with consumer credit transactions
78n; 78p; 78w; 78d–1; 7241; 7242; 7243; ■ 17. Section 1026.42 is amended by
7244; 7261; 7264; 7265.
secured by a consumer’s principal
adding paragraph (h) to read as follows: dwelling or securitizations of those
Subpart V also issued under 12 U.S.C.
3201–3208. § 1026.42 Valuation independence. transactions.
Subpart W also issued under 12 U.S.C. * * * * * (d) Rule of construction. Nothing in
1462a; 1463; 1464; 15 U.S.C. 78c; 78l; 78m; (h) The Bureau issued a joint rule to this subpart should be construed to
78n; 78p; 78w. prevent a State from establishing
implement the appraisal management
Subpart Y also issued under 12 requirements in addition to those in this
U.S.C.1831o. company minimum requirements in the
Financial Institutions Reform, Recovery, subpart. In addition, nothing in this
Subpart Z also issued under 12 U.S.C. subpart should be construed to alter
1462; 1462a; 1463; 1464; 1828 (note). and Enforcement Act, as amended by
section 1473 of the Dodd-Frank Wall guidance in, and applicability of, the
Subpart X—[Removed and Reserved] Street Reform and Consumer Protection Interagency Appraisal and Evaluation
Act. See 12 CFR part 34. Guidelines 1 or other relevant agency
■ 14. Remove and reserve subpart X guidance that cautions banks, bank
consisting of §§ 390.440 through Federal Housing Finance Agency holding companies, Federal savings
390.447. Authority and Issuance associations, state savings associations,
and credit unions, as applicable, that
Bureau of Consumer Financial For the reasons set forth in the each such entity is accountable for
Protection SUPPLEMENTARY INFORMATION, FHFA overseeing the activities of third-party
Authority and Issuance amends 12 CFR part 1222, as follows: service providers and ensuring that any
For the reasons stated above, the services provided by a third party
PART 1222—APPRAISALS
Bureau amends Regulation Z, 12 CFR comply with applicable laws,
part 1026, as follows: ■ 18. The authority citation for part regulations, and supervisory guidance
1222 is revised to read as follows: applicable directly to the financial
PART 1026—TRUTH IN LENDING institution.
Authority: 12 U.S.C. 4501 et seq., 12 U.S.C.
(REGULATION Z) 4526 and 15 U.S.C. 1639h. § 1222.21 Definitions.
■ 15. The authority citation for part ■ 19. Add subpart B to part 1222 to read For purposes of this subpart:
1026 is revised to read as follows: as follows: (a) Affiliate has the meaning provided
Authority: 12 U.S.C. 2601, 2603–2605, Subpart B—Appraisal Management in 12 U.S.C. 1841.
2607, 2609, 2617, 3353, 5511, 5512, 5532, Company Minimum Requirements (b) AMC National Registry means the
5581; 15 U.S.C. 1601 et seq. registry of State-registered AMCs and
Sec. Federally regulated AMCs maintained
Subpart A—General 1222.20 Authority, purpose, and scope. by the Appraisal Subcommittee.
1222.21 Definitions. (c)(1) Appraisal management
■ 16. Section 1026.1 is amended by 1222.22 Appraiser panel—annual size company (AMC) means a person that:
revising paragraph (a) to read as follows: calculation.
1222.23 Appraisal management company
(i) Provides appraisal management
§ 1026.1 Authority, purpose, coverage, registration. services to creditors or to secondary
organization, enforcement, and liability. 1222.24 Ownership limitations for State- mortgage market participants, including
(a) Authority. This part, known as registered appraisal management affiliates;
Regulation Z, is issued by the Bureau of companies. (ii) Provides such services in
Consumer Financial Protection to 1222.25 Requirements for Federally connection with valuing a consumer’s
implement the Federal Truth in Lending regulated appraisal management principal dwelling as security for a
companies. consumer credit transaction or
Act, which is contained in title I of the
1222.26 Information to be presented to the incorporating such transactions into
Consumer Credit Protection Act, as Appraisal Subcommittee by participating
amended (15 U.S.C. 1601 et seq.). This States.
securitizations; and
part also implements title XII, section (iii) Within a given 12-month period,
1204 of the Competitive Equality § 1222.20 Authority, purpose, and scope. as defined in § 1222.22(d), oversees an
Banking Act of 1987 (Pub. L. 100–86, (a) Authority. This subpart is issued appraiser panel of more than 15 State-
101 Stat. 552). Furthermore, this part by the Federal Housing Finance Agency certified or State-licensed appraisers in
implements certain provisions of the pursuant to 12 U.S.C. 4501 et seq., 12 a State or 25 or more State-certified or
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Real Estate Settlement Procedures Act of U.S.C. 4526, and Title XI of the State-licensed appraisers in two or more
1974, as amended (12 U.S.C. 2601 et Financial Institutions Reform, Recovery, States, as described in § 1222.22;
seq.). In addition, this part implements and Enforcement Act (FIRREA), as (2) An AMC does not include a
certain provisions of the Financial amended by the Dodd-Frank Wall Street department or division of an entity that
Institutions Reform, Recovery, and Reform and Consumer Protection Act
Enforcement Act, as amended (12 U.S.C. (the Dodd-Frank Act) (Pub. L. 111–203, 1 75 FR 77450 (December 10, 2010).
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(a) Establish and maintain within the the Truth in Lending Act, 15 U.S.C. (2) A Federally regulated AMC is not
State appraiser certifying and licensing 1639e(a)–(i), and regulations barred pursuant to paragraph (b)(1) of
agency a licensing program that is thereunder. this section from being included on the
subject to the limitations set forth in AMC National Registry if the license or
§ 1222.24 Ownership limitations for State-
§ 1222.24 and with the legal authority certificate of the appraiser with an
registered appraisal management
and mechanisms to: companies. ownership interest was not revoked for
(1) Review and approve or deny an substantive cause and has been
(a) Appraiser certification or licensing
AMC’s application for initial reinstated by the State or States in
of owners. (1) An AMC subject to State
registration; which the appraiser was licensed or
registration pursuant to § 1222.23 shall
(2) Review and renew or review and certified.
not be registered by a State or included
deny an AMC’s registration periodically; (c) Reporting information for the AMC
(3) Examine the books and records of on the AMC National Registry if such
AMC, in whole or in part, directly or National Registry. A Federally regulated
an AMC operating in the State and
indirectly, is owned by any person who AMC must report to the State or States
require the AMC to submit reports,
has had an appraiser license or in which it operates the information
information, and documents;
certificate refused, denied, cancelled, required to be submitted by the State to
(4) Verify that the appraisers on the
surrendered in lieu of revocation, or the Appraisal Subcommittee pursuant to
AMC’s panel hold valid State
revoked in any State for a substantive the Appraisal Subcommittee’s policies
certifications or licenses, as applicable;
(5) Conduct investigations of AMCs to cause, as determined by the appropriate regarding the determination of the AMC
assess potential violations of applicable State appraiser certifying and licensing National Registry fee, including but not
appraisal-related laws, regulations, or agency. necessarily limited to the collection of
(2) An AMC subject to State information related to the limitations set
orders;
registration pursuant to § 1222.23 is not forth in this section, as applicable.
(6) Discipline, suspend, terminate, or
barred by paragraph (a)(1) of this section
deny renewal of the registration of an § 1222.26 Information to be presented to
from being registered by a State or
AMC that violates applicable appraisal- the Appraisal Subcommittee by
included on the AMC National Registry
related laws, regulations, or orders; and participating States.
if the license or certificate of the
(7) Report an AMC’s violation of
appraiser with an ownership interest Each State electing to register AMCs
applicable appraisal-related laws,
was not revoked for a substantive cause for purposes of permitting AMCs to
regulations, or orders, as well as
and has been reinstated by the State or provide appraisal management services
disciplinary and enforcement actions
States in which the appraiser was relating to covered transactions in the
and other relevant information about an
licensed or certified. State must submit to the Appraisal
AMC’s operations, to the Appraisal (b) Good moral character of owners.
Subcommittee. Subcommittee the information required
An AMC shall not be registered by a to be submitted by Appraisal
(b) Impose requirements on AMCs
State if any person that owns more than Subcommittee regulations or guidance
that are not owned and controlled by an
10 percent of the AMC— concerning AMCs that operate in the
insured depository institution and not (1) Is determined by the State
regulated by a Federal financial State.
appraiser certifying and licensing
institutions regulatory agency to: agency not to have good moral
Dated: April 21, 2015.
(1) Register with and be subject to Thomas J. Curry,
character; or
supervision by the State appraiser (2) Fails to submit to a background Comptroller of the Currency.
certifying and licensing agency; investigation carried out by the State By order of the Board of Governors of the
(2) Engage only State-certified or appraiser certifying and licensing Federal Reserve System, April 29, 2015
State-licensed appraisers for Federally agency. Robert deV. Frierson,
related transactions in conformity with
Secretary of the Board.
any Federally related transaction § 1222.25 Requirements for Federally
regulations; regulated appraisal management Dated: April 21, 2015.
(3) Establish and comply with companies. Robert E. Feldman,
processes and controls reasonably (a) Requirements in providing Executive Secretary.
designed to ensure that the AMC, in services. To provide appraisal By order of the Board of Directors.
engaging an appraiser, selects an management services for a creditor or Federal Deposit Insurance Corporation.
appraiser who is independent of the secondary mortgage market participant Dated: April 14, 2015.
transaction and who has the requisite relating to a covered transaction, a Richard Cordray,
education, expertise, and experience Federally regulated AMC must comply Director, Bureau of Consumer Financial
necessary to competently complete the with the requirements in § 1222.23(b)(2) Protection.
appraisal assignment for the particular through (5). Dated: March 23, 2015.
market and property type; (b) Ownership limitations. (1) A
Melvin L. Watt,
(4) Direct the appraiser to perform the Federally regulated AMC shall not be
assignment in accordance with USPAP; included on the AMC National Registry Director, Federal Housing Finance Agency.
and if such AMC, in whole or in part, In concurrence:
(5) Establish and comply with directly or indirectly, is owned by any Dated: April 22, 2015.
processes and controls reasonably person who has had an appraiser license Gerard Poliquin,
designed to ensure that the AMC or certificate refused, denied, cancelled, Secretary of the Board, NCUA.
tkelley on DSK3SPTVN1PROD with RULES2
conducts its appraisal management surrendered in lieu of revocation, or [FR Doc. 2015–12719 Filed 6–8–15; 8:45 am]
services in accordance with the revoked in any State for a substantive BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P;
requirements of section 129E(a)–(i) of cause, as determined by the ASC. 7535–01–P; 4810–AM–P; 8070–01–P
VerDate Sep<11>2014 18:57 Jun 08, 2015 Jkt 235001 PO 00000 Frm 00033 Fmt 4701 Sfmt 9990 E:\FR\FM\09JNR2.SGM 09JNR2](https://thefederalregister.org/doc/80_FR_32767/page/33.svg)
Document Created: 2015-12-15 15:26:09
Document Modified: 2015-12-15 15:26:09
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Final rule. | |
| Dates | Effective date. This final rule will become effective on August 10, 2015. | |
| Contact | OCC: Robert L. Parson, Appraisal Policy Specialist, (202) 649-6423, G. Kevin Lawton, Appraiser (Real Estate Specialist), (202) 649-7152, Mitchell E. Plave, Special Counsel, Legislative and Regulatory Activities Division, (202) 649-5490, for persons who are deaf or hard of hearing, TTY, (202) 649-5597, or Christopher Manthey, Special Counsel, Bank Activities and Structure Division, (202) 649-5500. | |
| FR Citation | 80 FR 32657 | |
| RIN Number | 1557-AD64, 7100-AE15, 3064-AE10, 3170-AA44 and 2590-AA61 | |
| CFR Citation | 12
CFR
1026 12 CFR 1222 12 CFR 208 12 CFR 225 12 CFR 323 12 CFR 34 12 CFR 390 | |
| CFR Associated | Advertising; Credit Unions; Appraisals; Government Sponsored Enterprises; Accounting; Agriculture; Confidential Business Information; Crime; Currency; Insurance; Investments; Securities; Administrative Practice and Procedure; Federal Reserve System; Holding Companies; Appraisal; Appraiser; Banks; Banking; Consumer Protection; Credit; Mortgages; National Banks; Reporting and Recordkeeping Requirements; Savings Associations and Truth in Lending |
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