In comments received by the
federal bank regulatory agencies
1 (collectively, “the agencies”) pursuant
to the agencies’ review of regulations under the Economic Growth
and Regulatory Paperwork Reduction Act (EGRPRA),
2 representatives from the financial industry raised concerns
regarding the timeliness of appraisals due largely to what they believe
to be problems with the availability of state-certified and -licensed
appraisers, particularly in rural areas. The agencies, jointly with
the National Credit Union Administration, are providing this advisory
to apprise insured depository institutions and bank holding companies
(collectively, “regulated institutions”) of two existing
options that may address appraiser shortages, particularly in rural
areas: temporary practice permits and temporary waivers.
Temporary Practice Permits Section 1122(a) of title XI of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (title XI)
3 requires a state appraiser certifying or licensing
agency to recognize the certification or license of an appraiser issued
by another state on a temporary basis for federally related transactions
(FRT).
4 Subject to limitations in states’
laws, temporary practice permits could allow state-certified or -licensed
appraisers to provide their services in states where they are not
certified or licensed, including those experiencing a shortage of
appraisers.
Appraisers must apply to the relevant state appraiser
regulatory agency for a temporary practice permit.
5 Section 1122 of title XI prohibits a state appraiser certifying
or licensing agency from imposing excessive fees or burdensome requirements
for a temporary practice permit.
In addition, reciprocity
6 is a widely used practice
in which one state recognizes the appraiser certification and licensing
of another state, permitting state-certified and -licensed appraisers
to perform appraisals across state lines.
Temporary Waivers Section 1119 of title XI authorizes the Appraisal Subcommittee
(ASC), after making certain findings and with the approval of the
Federal Financial Institution Examination Council (FFIEC), to grant
temporary waivers of any requirement relating to certification or
licensing of individuals to perform appraisals under title XI in states
or geographic political subdivisions of any states where there is
a shortage of appraisers leading to significant delays in obtaining
appraisals in connection with FRTs.
7 These temporary waivers may
provide
regulated institutions lending in affected areas with access to more
individuals eligible to complete the appraisals required under title
XI, which may help alleviate some of the cost and burden associated
with having a shortage of state-certified or -licensed appraisers
in affected areas.
The ASC has issued regulations
8 governing the processing of
temporary waiver requests. Requests can be submitted by any of the
following:
- A state appraiser certifying or licensing agency.
- A federal bank regulatory agency.
- A regulated financial institution or credit union.
- Other persons or institutions with a demonstrable
interest in appraiser regulation.
The requesting party must provide evidence of
the shortage of appraisers in a geographic area and must demonstrate
that the scarcity of appraisers has led to significant delays in the
performance of appraisals on FRTs in that area. While an individual
regulated institution may submit a request, the waiver request would
apply to the affected geographic area. If granted, the requirement
to use a certified or licensed appraiser on FRTs would be waived for
all regulated institutions engaging in FRTs in the affected geographic
area, regardless of who initially requested the waiver.
After receiving a waiver request,
the ASC’s regulations specify issuing a public notice in the Federal Register requesting comment on the proposed waiver. Within
15 days of the close of the 30-day comment period, the ASC is required
to issue a decision on the request for a temporary waiver. The ASC’s
decision is subject to approval by the FFIEC. The agencies have representatives
on the ASC board, are FFIEC members, and will work with the ASC to
streamline the process for evaluating temporary waiver requests.
After receiving FFIEC approval to grant a waiver request,
the ASC will issue an order specifying the time period during which
the waiver will be in effect. The ASC can extend the waiver upon petition
from an interested party and approval by the FFIEC after notice and
comment. In the event an appraiser shortage abates before the end
of the waiver period, the ASC has the discretion to terminate the
waiver before its expiration.
The agencies’ appraisal regulations
9 require regulated
institutions to obtain appraisals for FRTs unless an exemption applies.
Such appraisals must meet five criteria. One criterion requires that
the appraisal be performed by a state-certified or -licensed appraiser.
If the ASC grants a waiver from the certification and licensing requirement,
then regulated institutions will not be required to obtain appraisals
by state-certified or -licensed appraisers on FRTs originated in the
designated area for the duration of the waiver period. However, the
remaining appraisal criteria must still be met for the appraisal to
comply with title XI.
10Interagency advisory of May 31, 2017 (SR-17-4).