If there are insurance or guarantee components of any particular AVM, the institution is responsible for understanding the extent and limitations of the insurance policy or guarantee, and the claim process and financial strength of the insurer. However, to address commenters' concerns, the Agencies incorporated minor edits to better distinguish between regulatory requirements and prudent banking practices in the Guidelines. For example, in areas that have experienced a high incidence of fraud, the institution should consider whether the AVM may be relied upon for the transaction or another valuation method should be used. 1. The Guidelines retain the possible use of automated tools and sampling methods in the review of appraisals and evaluations supporting lower risk residential mortgages. 28. An institution should establish policies and procedures for resolving any inaccuracies or weaknesses in an appraisal or evaluation identified through the review process, including procedures for: An institution should establish policies for documenting the review of appraisals and evaluations in the credit file. In the Proposal, this section addressed the competency and qualifications of appraisers and persons who perform an evaluation. It would not be acceptable for an institution to base an evaluation on unsupported assumptions, such as a property is in “average” condition, the zoning will change, or the property is not affected by adverse market conditions. Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: Presold Unit—A unit may be considered presold if a buyer has entered into a binding contract to purchase the unit and has made a substantial and non-refundable earnest money deposit. For example, to be consistent with the standards for an evaluation, the results of an AVM would need to address a property's actual physical condition, and therefore, could not be based on an unsupported assumption, such as a property is in “average” condition. These communications should adhere to the institution's policies and procedures on independence of the appraiser and not unduly influence the appraiser. 12 CFR 722.3(d). Refer also to the Federal Financial Institutions Examination Council Bank Secrecy Act/Anti-Money Laundering Examination Manual (Revised April 29, 2010) to review the general criteria, but note that instructions on filing a SAR through the Financial Crime Enforcement Network (FinCEN) of the Department of the Treasury are attached to the SAR form. documents in the last year, by the Energy Department The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and the National Credit Union Administration have adopted the attached Interagency Appraisal and Evaluation Guidelines (guidelines), which replace the 1994 guidelines. Many commenters recognized that additional clarification of existing regulatory and supervisory expectations strengthen the real estate collateral valuation and risk management practices across federally regulated institutions. Selection of Appraisers or Persons Who Perform Evaluations, VII. Though a reviewer cannot change the value conclusion in the original appraisal, an appraisal review performed by an appropriately qualified and competent state certified or licensed appraiser in accordance with USPAP may result in a second opinion of market value. In response to these comments, the Agencies revised the Guidelines to address an institution's responsibility to file a suspicious activity report (SAR) with the Financial Crimes Enforcement Network of the Department of Treasury when it suspects inappropriate appraisal-related activity that meets the SAR filing criteria. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. Validation can be performed internally or with the assistance of a third party, as long as the validation is conducted by qualified individuals that are independent of the model development or sales functions. An institution should establish reporting lines independent of loan production for staff who administer the institution's collateral valuation program, including the ordering, reviewing, and acceptance of appraisals and evaluations. If the qualification for sale is not adequately documented, the transaction should be supported by an appraisal that conforms to the Agencies' appraisal regulations, unless another exemption applies. For loans to purchase an existing property, “value” means the lesser of the actual acquisition cost or the estimate of value. The Guidelines address the types of communications that would not be construed as coercion or undue influence on appraisers and persons performing evaluations, as well as examples of actions that would compromise independence. issuing the enclosed Interagency Appraisal and Evaluation Guidelines. 1. Transaction Value—As defined in the Agencies' appraisal regulations: For purposes of this definition, the transaction value for loans that permit negative amortization should be the institution's total committed amount, including any potential negative amortization. For residential transactions, loan production staff can use a revolving, pre-approved appraiser list, provided the development and maintenance of the list is not under their control. [25] An institution must not accept an appraisal that has been readdressed or altered by the appraiser with the intent to conceal the original client. Further, the Dodd-Frank Act provides “[i]n conjunction with the purchase of a consumer's principal dwelling, broker price opinions may not be used as the primary basis to determine the value of a piece of property for the purpose of loan origination of a residential mortgage loan secured by such piece of property.” [66]. Dodd-Frank Act, Section 1473(r). In order to facilitate recovery in designated major disaster areas, subject to safety and soundness considerations, the Depository Institutions Disaster Relief Act of 1992 provides the Agencies with the authority to waive certain appraisal requirements for up to three years after a Presidential declaration of a natural disaster. For example, an institution must obtain an appraisal on a transaction involving a capital lease, as the real estate interest is of sufficient magnitude to be recognized as an asset of the lessee for accounting purposes. 10. The final Interagency Appraisal and Evaluation Guidelines appear below. The Guidelines build on … documents in the last year, 986 documents in the last year, 764 Interagency Appraisal and Evaluation Guidelines, 75 Fed. Definition of Residential Real Estate Transaction 2. Therefore, to ensure that an appraisal is appropriate for the intended use, an institution should discuss its needs and expectations for the appraisal with the appraiser. are jointly issuing these Interagency Appraisal and Evaluation Guidelines (Guidelines), which supersede the 1994 Interagency Appraisal and Evaluation Guidelines. documents in the last year, 43 See, for example, Title IV of Division A of the Housing and Economic Recovery Act of 2008, Public Law 110-289, Title IV, Division A, 122 Stat. 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