Proposed Rule2024-27698
Appraisal Subcommittee Enforcement Authority Regarding the Effectiveness of State Appraiser and Appraisal Management Company Regulatory Programs
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Published
December 6, 2024
Issuing agencies
Federal Financial Institutions Examination Council
Abstract
The Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council invites comment on a proposed rule to implement a framework to govern the ASC's enforcement authority regarding the effectiveness of Appraiser and Appraisal Management Company (AMC) Programs overseen by State Appraiser Regulatory Agencies. The proposed rule would codify the existing compliance review process with modifications. The proposed rule would require an analysis to assess program effectiveness, outline requirements for maintaining effective programs, and authorize the ASC to bring enforcement actions against such agencies that fail to maintain effective programs.
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<title>Federal Register, Volume 89 Issue 235 (Friday, December 6, 2024)</title>
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[Federal Register Volume 89, Number 235 (Friday, December 6, 2024)]
[Proposed Rules]
[Pages 96912-96935]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-27698]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 89, No. 235 / Friday, December 6, 2024 /
Proposed Rules
[[Page 96912]]
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
12 CFR Part 1102
[Docket No. AS24-22]
RIN 3139-AA01
Appraisal Subcommittee Enforcement Authority Regarding the
Effectiveness of State Appraiser and Appraisal Management Company
Regulatory Programs
AGENCY: Appraisal Subcommittee, Federal Financial Institutions
Examination Council.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Appraisal Subcommittee (ASC) of the Federal Financial
Institutions Examination Council invites comment on a proposed rule to
implement a framework to govern the ASC's enforcement authority
regarding the effectiveness of Appraiser and Appraisal Management
Company (AMC) Programs overseen by State Appraiser Regulatory Agencies.
The proposed rule would codify the existing compliance review process
with modifications. The proposed rule would require an analysis to
assess program effectiveness, outline requirements for maintaining
effective programs, and authorize the ASC to bring enforcement actions
against such agencies that fail to maintain effective programs.
DATES: Send comments on or before February 4, 2025.
ADDRESSES: Commenters are strongly encouraged to submit comments
through the Federal eRulemaking Portal or by email, if possible. You
may submit comments, identified by Docket Number AS24-22, by any of the
following methods:
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions for submitting comments.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#0e796b6c636f7d7a6b7c4e6f7d6d20696178"><span class="__cf_email__" data-cfemail="80f7e5e2ede1f3f4e5f2c0e1f3e3aee7eff6">[email protected]</span></a>. Include the docket number in the
subject line of the message.
<bullet> Mail: Address to Appraisal Subcommittee--FFIEC, Attn: Lori
Schuster, Management and Program Analyst, 1325 G Street NW, Suite 500,
Washington, DC 20005.
<bullet> Hand Delivery/Courier: Address to Appraisal Subcommittee--
FFIEC, Attn: Lori Schuster, Management and Program Analyst, 1325 G
Street NW, Suite 500, Washington, DC 20005.
Instructions: All submissions must include the agency name and
docket number for this document. All comments and any supporting
materials or attachments received will be posted without change to
<a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any business or personal
information that you provide, such as name and address information,
email addresses, or phone numbers. Commenters should submit only
information that the commenter wishes to make available publicly.
Please do not enclose any information in your comment or supporting
materials that you consider confidential or inappropriate for public
disclosure.
Docket: To read comments regarding this proposed rulemaking, go to:
<a href="https://www.regulations.gov">https://www.regulations.gov</a>, insert docket number AS24-22 in the
``Search'' box, and follow the prompts. You may also personally inspect
comments at the Appraisal Subcommittee's office, 1325 G Street NW,
Suite 500, Washington, DC 20005. To make an appointment, please contact
Lori Schuster at (202) 595-7578 or <a href="/cdn-cgi/l/email-protection#f995968b90b9988a9ad79e968f"><span class="__cf_email__" data-cfemail="224e4d504b624351410c454d54">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: Natalie Lutz, Attorney Advisor, 202-
792-1217, <a href="/cdn-cgi/l/email-protection#5b353a2f3a37323e1b3a2838753c342d"><span class="__cf_email__" data-cfemail="fc929d889d909599bc9d8f9fd29b938a">[email protected]</span></a> or Matt Ponzar, General Counsel, 202-595-
7577, <a href="/cdn-cgi/l/email-protection#deb3bfaaaa9ebfadbdf0b9b1a8"><span class="__cf_email__" data-cfemail="7815190c0c38190b1b561f170e">[email protected]</span></a>, Appraisal Subcommittee, 1325 G Street NW, Suite
500, Washington, DC 20005. The above phone numbers are not toll-free
numbers. Persons with hearing or speech impairments may access these
numbers by dialing 7-1-1 to access telecommunications relay services.
SUPPLEMENTARY INFORMATION:
I. Introduction
The following section discusses the proposed rule's objectives, the
legal basis for this proposed rule, background information, the
reasoning behind issuing this proposed rule, and a summary of the
applicable recommendations made by the Appraisal Subcommittee Advisory
Committee for the Development of Regulations (ASCAC).
A. Proposed Rule's Objectives
The proposed rule (proposal or proposed rulemaking) is intended to
establish an effective and consistent enforcement approach to the
Appraisal Subcommittee's (ASC) oversight of State Appraiser Regulatory
Agencies.\1\ The ASC believes that the proposal would significantly
improve its effectiveness in monitoring and bringing enforcement
actions against State Appraiser Regulatory Agencies that may not have
effective Appraiser and Appraisal Management Company (AMC) Programs.
The ASC also believes that the proposed rulemaking would be beneficial
in clarifying requirements for State Appraiser Regulatory Agencies to
promote the effectiveness of their Appraiser and AMC Programs. Finally,
the proposed rule would provide additional transparency to State
Appraiser Regulatory Agencies and other stakeholders regarding the
ASC's procedures for monitoring Appraiser and AMC Programs and the
potential for enforcement actions against State Appraiser Regulatory
Agencies. In general, the proposed rule would codify the existing ASC
compliance review process consistent with the ASC's current practices
and processes for conducting compliance reviews, with some
modifications and minor corrections.
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\1\ 12 U.S.C. 3332(a)(5), uses the term ``State Appraiser
Regulatory Agencies.'' As discussed further below, for purposes of
the proposed rule, this term is synonymous with ``State appraiser
certifying and licensing agency'' as defined in section 1121(1) of
Title XI (12 U.S.C. 3350(1)).
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B. Statutory Authority
Title XI of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 was amended by the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act) in 2010 (Title
XI).\2\
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\2\ Public Law 111-203, sec. 1473, 124 Stat. 2190-2199 (2010).
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Section 1103(a)(1)(A) \3\ of Title XI requires the ASC to monitor
requirements established by State Appraiser Regulatory Agencies for the
certification and licensing of individuals qualified to perform
appraisals in connection with federally related transactions,\4\
including a code
[[Page 96913]]
of professional responsibility. Section 1103(a)(1)(B) also requires the
ASC to monitor the requirements established by State Appraiser
Regulatory Agencies for the registration and supervision of the
operations and activities of AMCs.\5\
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\3\ 12 U.S.C. 3332(a)(1)(A).
\4\ Federally related transaction refers to any real estate-
related financial transaction which: (a) a Federal financial
institutions regulatory agency engages in, contracts for, or
regulates; and (b) requires the services of an appraiser. See 12
U.S.C. 3350(4).
\5\ 12 U.S.C. 3332(a)(1)(B).
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Additionally, section 1118(a) of Title XI requires the ASC to
monitor State Appraiser Regulatory Agencies to determine whether each
State Appraiser Regulatory Agency:
(1) has policies, practices, funding, staffing, and procedures that
are consistent with Title XI;
(2) processes complaints and completes investigations in a
reasonable time period;
(3) appropriately disciplines sanctioned appraisers and AMCs;
(4) maintains an effective regulatory program; and
(5) reports complaints and disciplinary actions on a timely basis
to the national registries of appraisers and AMCs maintained by the
ASC.\6\
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\6\ 12 U.S.C. 3347(a).
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Section 1118(a) of Title XI further provides that the ASC can
impose certain sanctions against a State Appraiser Regulatory Agency
that fails to have an effective appraiser regulatory program.\7\ For
the purposes of the proposed rule, the term ``enforcement actions''
would be used instead of ``sanctions.'' In determining whether a
program is effective, the ASC must include an analysis of (1) the
licensing and certification of appraisers, (2) the registration of
AMCs, (3) the issuance of temporary licenses and certifications for
appraisers, (4) the receiving and tracking of submitted complaints
against appraisers and AMCs, (5) the investigation of complaints, and
(6) enforcement actions against appraisers and AMCs.\8\ Under the
proposal, the evaluation criteria are referred to as ``program
functions.''
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\7\ Id.
\8\ Id. (numbering of the program functions is added for
emphasis).
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Section 1118(a) of Title XI also specifically authorizes the ASC to
impose interim actions and suspensions against a State Appraiser
Regulatory Agency as an alternative to, or in advance of, the non-
recognition of a State Appraiser Regulatory Agency.\9\ Under the
proposed rule, these ``interim actions and suspensions'' would be known
as ``interim enforcement actions.''
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\9\ Id.
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Consistent with section 1118 of Title XI,\10\ the proposal would
outline three types of enforcement actions: interim actions,
suspensions, and non-recognition. Title XI refers to non-recognition as
derecognition.\11\ Under the proposed rule, the term ``non-
recognition'' would be used instead of ``derecognition'' to be
consistent with subpart B of 12 CFR part 1102, which sets forth the ASC
rules of practice and procedure governing non-recognition proceedings
for State Appraiser Regulatory Agencies.
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\10\ 12 U.S.C. 3347.
\11\ Id.
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Finally, section 1106 of Title XI provides that the ASC has, among
other powers, the authority to promulgate regulations regarding certain
specified areas, one of which is enforcement.\12\ House Report 111-94
indicates that the term ``enforcement'' covers the actions the ASC may
take in evaluating State Appraiser Regulatory Agencies and the gamut of
sanctions that the ASC may impose against such agencies.\13\ For
purposes of prescribing regulations, the ASC must establish an advisory
committee of industry participants, including appraisers, lenders,
consumer advocates, real estate agents, and government agencies, and
hold meetings as necessary to support the development of
regulations.\14\
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\12\ 12 U.S.C. 3335.
\13\ See H. Rept. 111-94, at 96 (2009).
\14\ 12 U.S.C. 3335.
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C. Background
Congress enacted Title XI in response to concerns that problematic
appraisals played a major role in the savings and loan crisis of the
1980s.\15\ The purpose of Title XI is to provide that Federal financial
and public policy interests in real estate transactions will be
protected by requiring that real estate appraisals utilized in
connection with federally related transactions are performed in
writing, in accordance with uniform standards, by individuals whose
competency has been demonstrated and whose professional conduct will be
subject to effective supervision.\16\ To help ensure that the purpose
of Title XI was carried out, Congress established a regulatory
framework to monitor and oversee the real estate appraisal industry,
including establishing the ASC.\17\
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\15\ See Government Accountability Office, GAO-03-404,
Regulatory Programs: Opportunities to Enhance Oversight of the Real
Estate Appraisal Industry, at 1 and 6 (2003).
\16\ 12 U.S.C. 3331.
\17\ The ASC is composed of seven members, each designated by
the head of a Federal agency (the Board of Governors of the Federal
Reserve System (Board), the Consumer Financial Protection Bureau
(CFPB), the Federal Deposit Insurance Corporation (FDIC), the Office
of the Comptroller of the Currency (OCC), the National Credit Union
Administration (NCUA), the Department of Housing and Urban
Development (HUD), and the Federal Housing Finance Agency (FHFA)).
See 12 U.S.C. 3310 and 12 U.S.C. 1708(g)(2).
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Since the enactment of Title XI, one of the ASC's functions has
been to monitor the requirements established by State Appraiser
Regulatory Agencies for the certification and licensing of real estate
appraisers qualified to perform appraisals in connection with federally
related transactions.\18\ The monitoring is accomplished through
periodic or accelerated compliance reviews of Appraiser Programs of
each State \19\ to assess whether the program is operating in a manner
consistent with Title XI and to assess the implementation of minimum
requirements for licensing and certifying appraisers as adopted by the
Appraiser Qualifications Board (AQB) of the Appraisal Foundation \20\
pursuant to section 1116 of Title XI.\21\ The ASC also maintains a
national registry of State licensed and certified appraisers eligible
to perform appraisals in federally related transactions (Appraiser
Registry).\22\
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\18\ 12 U.S.C. 3332(a)(1)(A).
\19\ All 50 States, the District of Columbia, and four U.S.
territories have established Appraiser Programs to ensure the
availability of licensed and certified appraisers and effective
supervision of their activities. The four territories include Guam,
Puerto Rico, the Commonwealth of the Northern Mariana Islands, and
the U.S. Virgin Islands. American Samoa does not have an Appraiser
Program.
\20\ The Appraiser Qualifications Board of the Appraisal
Foundation adopts the ``Real Property Appraiser Qualification
Criteria'' (AQB Criteria), which establishes the minimum education,
experience, and examination requirements for the licensure and
certification of real property appraisers and minimum requirements
for trainee and supervisory appraisers. See AQB Criteria, available
at <a href="https://www.appraisalfoundation.org/imis/TAF/Standards/Qualification_Criteria/Qualification_Criteria__RP_/TAF/AQB_RPAQC.aspx">https://www.appraisalfoundation.org/imis/TAF/Standards/Qualification_Criteria/Qualification_Criteria__RP_/TAF/AQB_RPAQC.aspx</a>.
\21\ 12 U.S.C. 3345.
\22\ 12 U.S.C. 3332(a)(3).
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In 2010, Title XI was amended by the Dodd-Frank Act.\23\ Subsection
1473(f) of the Dodd-Frank Act expanded the ASC's functions to include
monitoring the requirements established by State Appraiser Regulatory
Agencies for the registration and supervision of the operations and
activities of AMCs.\24\
[[Page 96914]]
State Appraiser Regulatory Agencies with an AMC Program are evaluated
through periodic or accelerated compliance reviews to assess whether
the program is operating in a manner consistent with Title XI and to
assess the implementation of the minimum requirements for State
registration and supervision of AMCs.\25\ Subsection 1473(f) also
established a parallel Federal system of oversight for an AMC that
operates as a subsidiary of a financial institution overseen by a
Federal banking regulator.\26\ These entities are referred to as
``federally regulated AMCs'' under this proposal. Federally regulated
AMCs are not required to register with a State Appraiser Regulatory
Agency.\27\ Finally, subsection 1473(f) required the ASC to maintain a
national registry of AMCs that are either registered with and subject
to supervision of a State Appraiser Regulatory Agency or operating
subsidiaries of a federally regulated financial institution (AMC
Registry).\28\
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\23\ See supra note 2.
\24\ Public Law 111-203, sec. 1473(f), 124 Stat. 2191-2192; 12
U.S.C. 3332(a)(1)(B). See supra note 13 at 97. Presently, 50 States
and the District of Columbia have AMC Programs. Hawaii's AMC Program
sunset on June 30, 2023. However, Hawaii House Bill 2641 was signed
into law on June 21, 2024, to reenact the version of the AMC Program
that was originally part of the Hawaii Department of Commerce and
Consumer Affairs. The Hawaii AMC Program established pursuant to
House Bill 2641 commenced on September 1, 2024. American Samoa,
Guam, Puerto Rico, the Commonwealth of the Northern Mariana Islands,
and the U.S. Virgin Islands do not have AMC Programs.
\25\ The Dodd-Frank Act added section 1124 to Title XI,
Appraisal Management Company Minimum Requirements, which required
the OCC, Board, FDIC, NCUA, FHFA, and CFPB to establish, by rule,
minimum requirements for the registration and supervision of AMCs by
State Appraiser Regulatory Agencies that elect to register and
supervise AMCs pursuant to Title XI. See 12 U.S.C. 3353(a). The
related final rule was published in the Federal Register on June 9,
2015, with an effective date of August 10, 2015. See 80 FR 32658
(June 9, 2015).
\26\ Public Law 111-203, sec. 1473(f), 124 Stat. 2192; 12 U.S.C.
3353(c). See supra note 13 at 97.
\27\ Public Law 111-203, sec. 1473(f), 124 Stat. 2192; 12 U.S.C.
3353(c).
\28\ Public Law 111-203, sec. 1473(f), 124 Stat. 2192; 12 U.S.C.
3332(a)(6).
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In addition to authorities related to AMCs, subsection 1473(k) of
the Dodd-Frank Act improved the ASC's ability to oversee State
Appraiser Regulatory Agencies in several important ways.\29\ First,
subsection 1473(k) added funding and staffing to the list of criteria
against which the ASC must evaluate a State Appraiser Regulatory
Agency.\30\ Second, subsection 1473(k) requires the ASC to evaluate
whether a State Appraiser Regulatory Agency processes complaints and
completes its investigations in a reasonable time period, whether a
State Appraiser Regulatory Agency appropriately disciplines sanctioned
appraisers and AMCs, whether a State Appraiser Regulatory Agency
maintains an effective regulatory program, and whether a State
Appraiser Regulatory Agency reports complaints and disciplinary actions
to the Appraiser and AMC Registries on a timely basis.\31\ Third,
subsection 1473(k) permits the ASC to impose interim actions and
suspensions against State Appraiser Regulatory Agencies under certain
circumstances.\32\
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\29\ Public Law 111-203, sec.1473(k), 124 Stat. 2196; 12 U.S.C.
3347. See supra note 13 at 96-97.
\30\ Id.
\31\ Id.
\32\ Id.
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Finally, subsection 1473(d) of the Dodd-Frank Act added the
authority to promulgate regulations concerning ``temporary practice,
national registry, information sharing, and enforcement.'' \33\ If the
ASC decides to undertake rulemaking on any of the four areas identified
above,\34\ subsection 1473(d) further requires the ASC to establish an
advisory committee of industry participants and hold meetings as
necessary to support the development of regulations.\35\
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\33\ Public Law 111-203, sec.1473(d), 124 Stat. 2191; 12 U.S.C.
3335. See supra note 13 at 96.
\34\ See Curtis W. Copeland, Cong. Research Serv., R41472,
Rulemaking Requirements and Authorities in the Dodd-Frank Wall
Street Reform and Consumer Protection Act, at 59 and 87 (Nov. 3,
2010).
\35\ Public Law 111-203, sec.1473(d), 124 Stat. 2191; 12 U.S.C.
3335.
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D. Reasons for Issuing This Proposed Rule
Title XI did not originally provide the ASC with the authority to
issue legislative rulemaking, nor the authority to enforce its own
standards and pursue incremental improvements in the regulatory
performance of State Appraiser Regulatory Agencies through interim
actions and suspensions (interim enforcement actions).\36\
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\36\ See supra note 13 at 58.
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Instead of regulations, the ASC has issued and relied on Policy
Statements with respect to monitoring State Appraiser Regulatory
Agencies.\37\ The Policy Statements address the requirements of Title
XI and offer guidance to State Appraiser Regulatory Agencies regarding
compliance with Title XI and the rules promulgated thereunder.\38\
Additionally, prior to the Dodd-Frank Act, the only enforcement action
that the ASC could take against a State Appraiser Regulatory Agency was
non-recognition, which would prohibit all licensed and certified
appraisers from that State from performing appraisals in connection
with federally related transactions.\39\ Non-recognition is a severe
enforcement action that could affect the real estate markets and
financial institutions within the State. To date, the ASC has not
imposed non-recognition against a State Appraiser Regulatory Agency.
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\37\ Id. See also Government Accountability Office, GAO-12-147,
Real estate Appraisals: Appraisal Subcommittee Needs to Improve
Monitoring Procedures, at 11 and 30 (2012).
\38\ 83 FR 9144 (Mar. 5, 2018). See also Policy Statements,
available at <a href="https://asc.gov/resources/governance">https://asc.gov/resources/governance</a>. (hereinafter
Policy Statements).
\39\ Public Law 101-73, 103 Stat. 511-519 (1989). See supra note
13 at 58.
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As discussed above, the Dodd-Frank Act provided the ASC with
additional enforcement authorities to take against State Appraiser
Regulatory Agencies, when appropriate, along with related rulemaking
authority.\40\ The ASC is now issuing this proposed rule to implement
these additional enforcement authorities included in the Dodd-Frank
Act.
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\40\ See supra note 2.
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E. Recommendations by the ASCAC
On February 18, 2014, following the enactment of the Dodd-Frank
Act, the ASC established the ASCAC in accordance with the Federal
Advisory Committee Act.\41\ The purpose of the ASCAC was to provide
independent advice and recommendations to the ASC regarding the
development of regulations that may be prescribed by the ASC concerning
temporary practice, the Appraiser and AMC Registries, information
sharing, and enforcement.\42\ The ASCAC was comprised of eighteen
members nominated by the ASC Executive Director and approved by the ASC
Chairperson in consultation with the ASC Board members.\43\ The ASCAC
met four times: April 16-17, July 22-23, and October 15-16, 2014, and
February
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\41\ 5 U.S.C. chapter 10. Membership in the ASCAC was determined
in accordance with the Amended Balanced Membership Plan dated June
18, 2014. See Balanced Membership Plan, dated February 18, 2014,
available at <a href="https://www.asc.gov/sites/default/files/documents/GeneralCorrespondence/Balanced%20Membership%20Plan%20-%20Final%202014.02.12.pdf">https://www.asc.gov/sites/default/files/documents/GeneralCorrespondence/Balanced%20Membership%20Plan%20-%20Final%202014.02.12.pdf</a>. See also Amended Balanced Membership
Plan, dated June 18, 2014, available at <a href="https://www.asc.gov/sites/default/files/documents/GeneralCorrespondence/Amended%20Balanced%20Membership%20Plan%202014.06.18.pdf">https://www.asc.gov/sites/default/files/documents/GeneralCorrespondence/Amended%20Balanced%20Membership%20Plan%202014.06.18.pdf</a>.
\42\ 12 U.S.C. 3335.
\43\ See ASCAC Member List, available at <a href="https://www.asc.gov/sites/default/files/2023-03/2014.07.14%20Advisory%20Committee%20Member%20List%20-%20amended%201.21.15.pdf">https://www.asc.gov/sites/default/files/2023-03/2014.07.14%20Advisory%20Committee%20Member%20List%20-%20amended%201.21.15.pdf</a>. The ASCAC members represented a balance of
expertise across a range of industry participants and stakeholders
as contemplated by section 1106 of Title XI, 12 U.S.C. 3335,
including appraisers, AMCs, lenders, consumer advocates, real estate
agents, and government agencies. All ASCAC members had experience
regarding the appraiser regulatory framework for federally related
transactions.
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[[Page 96915]]
12-13, 2015.\44\ The ASCAC completed its recommendation report on April
30, 2015,\45\ and presented its recommendations to the ASC on May 13,
2015.\46\ The ASCAC's recommendation report stated that most members
believed the ASC ``must'' codify the ASC Policy Statements through
rulemaking.\47\
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\44\ See April 16-17, 2014 ASCAC Meeting Minutes, available at
<a href="https://asc.gov/sites/default/files/documents/GeneralCorrespondence/April%202014%20ASCAC%20Meeting%20Minutes.pdf">https://asc.gov/sites/default/files/documents/GeneralCorrespondence/April%202014%20ASCAC%20Meeting%20Minutes.pdf</a>; July 22-23, 2014 ASCAC
Meeting Minutes, available at <a href="https://asc.gov/sites/default/files/documents/GeneralCorrespondence/Meeting%20Minutes%20-%20July%202014.pdf">https://asc.gov/sites/default/files/documents/GeneralCorrespondence/Meeting%20Minutes%20-%20July%202014.pdf</a>; October 15-16, 2014 ASCAC Meeting Minutes,
available at <a href="https://asc.gov/sites/default/files/documents/GeneralCorrespondence/October%202014%20ASCAC%20Meeting%20Minutes.pdf">https://asc.gov/sites/default/files/documents/GeneralCorrespondence/October%202014%20ASCAC%20Meeting%20Minutes.pdf</a>; and February 12-13,
2015 ASCAC Meeting Minutes, available at <a href="https://asc.gov/sites/default/files/documents/OtherCorrespondence/February%202015%20Advisory%20Committee%20Minutes.pdf">https://asc.gov/sites/default/files/documents/OtherCorrespondence/February%202015%20Advisory%20Committee%20Minutes.pdf</a>.
\45\ See ASCAC Final Recommendation Report, available at <a href="https://www.asc.gov/sites/default/files/2023-03/2015.04.30%20-%20ASCAC%20Recommendations%20-%20Final.pdf">https://www.asc.gov/sites/default/files/2023-03/2015.04.30%20-%20ASCAC%20Recommendations%20-%20Final.pdf</a>.
\46\ See May 13, 2015 ASC Meeting Minutes, available at <a href="https://asc.gov/sites/default/files/documents/MeetingMinutes/05.13.15%20-%20Open%20Minutes.pdf">https://asc.gov/sites/default/files/documents/MeetingMinutes/05.13.15%20-%20Open%20Minutes.pdf</a>.
\47\ See ASCAC Final Recommendation Report, supra note 45 at 3.
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Given the ASC's intent to promote effective and consistent
oversight, the ASC is now prepared to implement its statutory authority
to address the effectiveness of Appraiser and AMC Programs through
rulemaking. The ASCAC recommendation report covers matters beyond
enforcement actions against State Appraiser Regulatory Agencies and
discusses the desirability of codifying all the Policy Statements. For
this proposed rulemaking, the ASC is responding to only the ASCAC's
recommendations that apply to its enforcement authority regarding the
effectiveness of Appraiser and AMC Programs administered by State
Appraiser Regulatory Agencies and is proposing to codify only portions
of such Policy Statements pertaining to such enforcement authorities.
The ASC considers the ASCAC's recommendation report regarding these
enforcement authorities to be relevant. Some recommendations address
ongoing issues and problems that the ASC has continued to face since
the report was issued. Many of the report's underlying observations are
concerns in the appraiser regulatory framework today. Thus, the ASC has
considered the ASCAC's recommendations in developing this proposed
rule.
1. ASCAC's Sanction Matrices
The ASCAC developed and recommended three sanction matrices to be
used by the ASC in sanctioning State Appraiser Regulatory Agencies.\48\
The three sanction matrices covered temporary practice, Appraiser and
AMC Registries, and enforcement, and proposed twelve potential types of
enforcement actions.\49\ However, the ASC proposes not to adopt the
three sanction matrices recommended by the ASCAC for the following
reasons.
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\48\ Id. at 24 and 26-30. The sanction matrices start on page
26.
\49\ Id.
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Section 1118(a) of Title XI authorizes the ASC to impose
enforcement actions against a State Appraiser Regulatory Agency that
fails to have an effective regulatory program and includes six program
functions relevant to making this determination.\50\ The six applicable
program functions include (1) the licensing and certification of
appraisers, (2) the registration of AMCs, (3) the issuance of temporary
licenses and certifications for appraisers, (4) the receiving and
tracking of submitted complaints against appraisers and AMCs, (5) the
investigation of complaints, and (6) enforcement actions against
appraisers and AMCs.\51\ The ASC believes that the ASCAC-recommended
sanction matrices do not incorporate all six applicable program
functions, such as the licensing and certification of appraisers and
the registration of AMCs, in determining whether an Appraiser or AMC
Program is effective in accordance with section 1118(a) of Title
XI.\52\ Therefore, the ASC views the matrices as partially incomplete
and not effective in implementing all the program functions in section
1118(a).\53\
---------------------------------------------------------------------------
\50\ 12 U.S.C. 3347(a).
\51\ Id.
\52\ Id.
\53\ Id.
---------------------------------------------------------------------------
2. ASCAC's Method of Addressing Deficiencies
The ASCAC recommended that enforcement actions be brought per
individual deficiency against State Appraiser Regulatory Agencies using
sanction matrices.\54\ Under this ASCAC recommendation, an enforcement
action would be imposed for each deficiency of a State Appraiser
Regulatory Agency. For example, under the ASCAC-recommended temporary
practice sanction matrix, a State Appraiser Regulatory Agency could
receive a warning letter for not issuing temporary licenses or
certifications on an assignment basis and could receive a separate
suspension for not issuing temporary licenses or certifications within
five business days.
---------------------------------------------------------------------------
\54\ See ASCAC Final Recommendation Report, supra note 45 at 26-
30.
---------------------------------------------------------------------------
This enforcement approach recommended by the ASCAC would not permit
the ASC to deviate from the matrices to consider the appropriate
enforcement action based on the underlying facts of each compliance
review. The ASC, however, believes that deficiencies should be
addressed collectively rather than individually to allow for the ASC to
consider significant variations in the underlying facts of each
compliance review.
Therefore, under the proposal, the ASC would bring an enforcement
action based on the aggregation of deficiencies identified during a
compliance review. For example, under the proposed rule, the ASC would
impose only one enforcement action against a State Appraiser Regulatory
Agency for all deficiencies identified during a compliance review. The
number of deficiencies, the State Appraiser Regulatory Agency's
response to the preliminary report, and the presence of any relevant
mitigating and aggravating factors would guide the ASC's consideration
of the appropriate enforcement action.
3. ASCAC's Proposed Enforcement Actions
The ASCAC also recommended twelve potential types of enforcement
actions to be incorporated into the three sanction matrices.\55\ The
twelve potential types of enforcement actions included: (1) a warning
letter, (2) training for State Appraiser Regulatory Agency staff, (3)
training for State Appraiser Regulatory Agency board members, (4)
consultation with other State authorities, (5) meeting with affected
parties, (6) a requirement for a State Appraiser Regulatory Agency to
use a disciplinary sanction matrix for complaints, (7) expedited or
follow-up reviews, (8) continuous monitoring, (9) interim removal of
appraiser(s) from the Appraiser Registry or AMC(s) from the AMC
Registry, (10) other removal of appraiser(s) from the Appraiser
Registry or AMC(s) from the AMC Registry, (11) interim derecognition,
and (12) derecognition.\56\ The proposed rule would directly address
three of the ASCAC's recommended enforcement actions: warning letters,
suspension (interim derecognition), and non-recognition. The proposed
rule would introduce and define a fourth enforcement action: a
negotiated agreement.
---------------------------------------------------------------------------
\55\ Id. at 24.
\56\ Id.
---------------------------------------------------------------------------
[[Page 96916]]
For the reasons stated below, the ASC is not planning to explicitly
include the other nine enforcement actions recommended by the ASCAC.
The ASC believes some potential enforcement actions suggested by the
ASCAC, such as training requirements for State Appraiser Regulatory
Agency staff and board members and the use of a disciplinary sanction
matrix for appraiser and AMC complaints,\57\ would be implemented more
effectively through a negotiated agreement, as appropriate, rather than
as individual enforcement actions. For example, a negotiated agreement
could specify terms and conditions for training State Appraiser
Regulatory Agency staff and board members based on the deficiencies
identified by the ASC.
---------------------------------------------------------------------------
\57\ Id.
---------------------------------------------------------------------------
Additionally, the ASC does not believe there is a need to include
other potential enforcement actions recommended by the ASCAC, such as
expedited reviews or follow-up reviews, continuous monitoring, and
consultation with State officials or other stakeholders,\58\ as
explicit enforcement actions in the proposed rule. The ASC plans to
codify its existing compliance review process consistent with its
current practices and processes for conducting compliance reviews, such
as accelerated reviews, follow-up reviews, and additional monitoring.
Under the proposed rule, the ASC may conduct accelerated reviews,
follow-up reviews within 6-12 months of the previous review, and
additional monitoring as part of the compliance review process.\59\ The
ASC also currently informally consults with State officials and other
stakeholders, when appropriate, to monitor Appraiser and AMC Programs.
---------------------------------------------------------------------------
\58\ Id.
\59\ See Policy Statements, supra note 38 at 9161. The ASC may
conduct accelerated reviews, follow-up reviews, and additional
monitoring. A follow-up review focuses on specific areas identified
during a previous review and typically occurs within 6-12 months of
the previous review.
---------------------------------------------------------------------------
With respect to the ASCAC's recommended enforcement actions of
interim or other removal of an appraiser from the Appraiser Registry or
an AMC from the AMC Registry, section 1118(a) of Title XI provides that
the ASC has the authority to remove a State licensed or certified
appraiser from the Appraiser Registry or a registered AMC from the AMC
Registry on an interim basis, not to exceed 90 days pending State
agency action on licensing, certification, registration, and
disciplinary proceedings.\60\ After careful consideration, the ASC is
not including in this proposed rulemaking the interim removal of an
appraiser from the Appraiser Registry or an AMC from the AMC Registry
as a potential enforcement action as suggested by the ASCAC.\61\
---------------------------------------------------------------------------
\60\ 12 U.S.C. 3347(a). Note, as reflected by the statutory text
found in section 1118(a) of Title XI, 12 U.S.C. 3347(a), the ASC's
authority is limited to removal on an interim basis, not to exceed
90 days, pending State agency action on licensing, certification,
registration, and disciplinary proceedings.
\61\ See ASCAC Final Recommendation Report, supra note 45 at 24.
---------------------------------------------------------------------------
The scope of this proposed rulemaking is limited to the ASCAC's
recommended potential enforcement actions that the ASC may take against
a State Appraiser Regulatory Agency after a compliance review rather
than actions against individual appraisers or AMCs. Therefore, this
proposed rule does not address the ASC's authority under section
1118(a) of Title XI to remove a State licensed or certified appraiser
from the Appraiser Registry or a registered AMC from the AMC Registry
on an interim basis, not to exceed 90 days, pending State agency action
on licensing, certification, registration, and disciplinary
proceedings.\62\
---------------------------------------------------------------------------
\62\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------
4. Policy Statements 7 and 10 Recommendations
The ASCAC also included specific recommendations related to the
Policy Statements. Policy Statements 7 (State Agency Enforcement for
Appraiser Programs) and 10 (State Agency Enforcement for AMC Programs)
state that, absent special documented circumstances, final
administrative decisions by a State Appraiser Regulatory Agency
regarding complaints must occur within one year (twelve months) of the
complaint filing date.\63\ The ASCAC recommended clarifying the
definition of ``complaint filing date'' \64\ because States have
different interpretations of this term. The ASCAC noted that some
States consider the ``complaint filing date'' to be when the State
Appraiser Regulatory Agency receives the original complaint, while
others consider it to be when the complaint has been screened and
approved for investigation.\65\ To address this confusion, the ASCAC
recommended that the term ``complaint filing date'' be defined as the
date the State Appraiser Regulatory Agency receives the original
complaint.\66\ The proposed rule avoids using the term ``complaint
filing date'' to prevent confusion. Instead, to implement the ASCAC's
recommendation, this proposed rule would specify that State Appraiser
Regulatory Agencies must begin the time period for resolving complaints
based on the date the complaint was received.
---------------------------------------------------------------------------
\63\ See Policy Statements, supra note 38 at 9155 and 9158.
\64\ See ASCAC Final Recommendation Report, supra note 45 at 8
and 14.
\65\ Id. at 14.
\66\ Id. at 8 and 14.
---------------------------------------------------------------------------
The ASCAC also recommended that ``special documented
circumstances,'' as used in Policy Statement 7, should be more
specifically defined.\67\ Under this proposal, ``special documented
circumstances'' would mean well-documented and monitored extenuating
circumstances, evaluated by the ASC, that are beyond the control of the
State Appraiser Regulatory Agency and result in a complaint processing
delay. The ASC proposes not to implement a more specific definition of
``special documented circumstances'' as recommended by the ASCAC
because a broad definition is more appropriate considering the
variations in complaint processing among State Appraiser Regulatory
Agencies. For example, some State Appraiser Regulatory Agencies may
involve the State's Office of Attorney General in investigating
complaints, while others may use staff investigators, contractors, or
advisory committees. Therefore, the ASC proposes a definition of
``special documented circumstances'' similar to the one in Policy
Statement 7.\68\ The ASCAC recommended providing more examples of what
constitutes ``special documented circumstances'' for resolving
complaints within one year (12 months).\69\ Specifically, the ASCAC
recommended clarifying the example in Policy Statement 7 that describes
those periods when State rules require referral of a complaint to
another State entity for review, and the State Appraiser Regulatory
Agency is precluded from further processing of the complaint until it
is returned.\70\ The ASCAC recommended that the example should be
clarified to refer to a period of time when a case is referred to a
separate State entity such as the State's Office of Attorney General
for prosecution, or to an administrative law judge for a hearing.\71\
Another example recommended by the ASCAC was the time gap between the
date the complaint was initially received and the receipt of
[[Page 96917]]
all the necessary information to begin processing it.\72\
---------------------------------------------------------------------------
\67\ Id. Policy Statement 7 defines ``special documented
circumstances'' as extenuating circumstances (fully documented)
beyond the control of the State Appraiser Regulatory Agency that
delays normal processing of a complaint. See Policy Statements,
supra note 38 at 9155.
\68\ See Policy Statements, supra note 38 at 9155 and 9158.
\69\ See ASCAC Final Recommendation Report, supra note 45 at 8
and 14.
\70\ Id. at 14.
\71\ Id.
\72\ Id.
---------------------------------------------------------------------------
The ASC does not plan to incorporate the examples recommended by
the ASCAC in this proposal or in any revisions to the Policy
Statements, nor to provide any further examples. The ASC holds the view
that there must be a legitimate practical challenge limiting the State
Appraiser Regulatory Agency's ability to resolve complaints within one
year (12 months) from when the complaint was received, which will be
evaluated on a case-by-case basis, and that further examples are,
therefore, not necessary.
The ASCAC's last recommendation was to clarify what qualifies as an
``investigation'' of the merits of a complaint.\73\ The ASCAC gave two
examples from Policy Statement 7 that provide guidance on what
qualifies as an ``investigation'' of the merits of a complaint.
Consistent with the ASCAC's first referenced example from Policy
Statement 7,\74\ the proposed rule would require State Appraiser
Regulatory Agencies to ensure that individuals analyzing complaints are
knowledgeable about Title XI, the Uniform Standards of Professional
Appraisal Practice (USPAP), and appraisal practices. Under the proposed
rule, these individuals must be qualified and their qualifications must
be documented, which will be evaluated by the ASC. The proposed rule
would have a similar requirement for AMC Programs, where individuals
who analyze complaints against AMCs are required to be knowledgeable
about Title XI, the AMC Rule,\75\ USPAP, and appraisal practices and
their qualifications must be documented, which will be evaluated by the
ASC.
---------------------------------------------------------------------------
\73\ Id. at 8 and 14-15.
\74\ Id. at 14.
\75\ Under the proposed rule, ``AMC Rule'' 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, and the Federal Housing Finance
Agency regarding the minimum requirements for AMCs under section
1124 of Title XI (12 U.S.C. 3353). (12 CFR 34.210 through 34.216; 12
CFR 225.190 through 225.196; 12 CFR 323.8 through 323.14; 12 CFR
1222.20 through 1222.26).
---------------------------------------------------------------------------
The proposed rule would also make some modifications to the ASCAC's
second referenced example from Policy Statement 7.\76\ According to
Policy Statement 7, State Appraiser Regulatory Agencies must analyze
each complaint to determine whether additional violations, especially
those relating to USPAP, should be added to the complaint.\77\ The
proposed rule would require State Appraiser Regulatory Agencies to
consider whether any potential violations of USPAP should be
investigated when examining an appraisal report in connection with a
complaint, including complaints based solely on value.\78\
---------------------------------------------------------------------------
\76\ See ASCAC Final Recommendation Report, supra note 45 at 14.
\77\ See Policy Statements, supra note 38 at 9155.
\78\ The ASCAC also recommended that complaints that only relate
to value should not be dismissed solely on that basis, and State
Appraiser Regulatory Agencies should be obligated to analyze all
complaints for USPAP compliance, even if a USPAP violation is not
explicitly alleged. See ASCAC Final Recommendation Report, supra
note 45 at 14. The ASC believes that this proposal would address the
ASCAC's recommendations described above. The proposed rule would
require State Appraiser Regulatory Agencies to consider whether any
potential violations of USPAP should be investigated when examining
an appraisal report in connection with a complaint, including
complaints based solely on value.
---------------------------------------------------------------------------
Although the ASCAC interpreted ``additional violations'' to include
violations of Federal and State law,\79\ the proposed rule would only
require State Appraiser Regulatory Agencies to consider whether any
potential violations of USPAP should be investigated. This is because
the ASC is responsible for ensuring that real estate appraisals used in
federally related transactions are performed according to USPAP by
State licensed and certified appraisers.\80\ However, the ASC
encourages State Appraiser Regulatory Agencies to consider whether to
investigate any violations of Federal and State law not explicitly
alleged in the complaint in accordance with State law or regulations.
---------------------------------------------------------------------------
\79\ See ASCAC Final Recommendation Report, supra note 45 at 14.
\80\ See, e.g., 12 U.S.C. 3331 and 12 U.S.C. 3332(a)(1)(A).
---------------------------------------------------------------------------
The ASCAC also provided examples of how State Appraiser Regulatory
Agencies have different definitions of what constitutes an
``investigation.'' For some State Appraiser Regulatory Agencies, the
``investigation'' may consist simply of the screening of a complaint by
a staff member.\81\ If the staff member decides that the complaint has
no merit or that it needs only a telephone call or letter to the
appraiser, it is either not opened or opened and closed
immediately.\82\ For other State Appraiser Regulatory Agencies, a full
field investigation is conducted on all complaints.\83\ As a result of
these different definitions, it is challenging to establish a standard
definition of an investigation because the investigatory process is
typically governed by State law or regulation. Additionally, each
investigation is contingent upon the specific facts of the complaint.
During a compliance review, the ASC examines a sample of complaint
files to assess whether the State Appraiser Regulatory Agency is
following the investigatory process governed by State law to ensure
timely and effective supervision of appraisers. Therefore, the ASC does
not plan to further clarify what qualifies as an ``investigation'' of
the merits of a complaint.
---------------------------------------------------------------------------
\81\ See ASCAC Final Recommendation Report, supra note 45 at 14.
\82\ Id.
\83\ Id.
---------------------------------------------------------------------------
5. ASCAC's Mitigating and Aggravating Factors
The ASCAC also produced a list of mitigating and aggravating
factors for the sanction matrices.\84\ The ASCAC defined ``a mitigating
factor'' as any information or evidence regarding the deficiency that
might result in a decreased sanction.\85\ The ASCAC defined ``an
aggravating factor'' as any information or evidence regarding the
deficiency that might result in an increased sanction.\86\ Except as
discussed below, the ASC has separately included, with some
modifications, all of the mitigating and aggravating factors
recommended by the ASCAC in this proposed rule.
---------------------------------------------------------------------------
\84\ Id. at 25.
\85\ Id. The mitigating factors recommended by the ASCAC include
no prior deficiencies of any type; prior deficiencies of another
type that were minor and have been corrected; understanding and
acknowledging the deficiency; immediate steps taken to correct the
issue; personnel issues such as illness or loss of a key staff
member; change in leadership; the State Appraiser Regulatory Agency
otherwise has an effective and efficient regulatory program; the
occurrence of a natural disaster; and a State Appraiser Regulatory
Agency board member who had a conflict of interest was cleared by a
State ethics agency before participating in a matter (unless the ASC
finds the conflict created a bias that affected the outcome).
\86\ Id. The aggravating factors recommended by the ASCAC
include a pattern of prior deficiencies of another type that have
not been corrected; a pattern of prior deficiencies of the same
type; numerous deficiencies of various types; refusal to acknowledge
the deficiency; lack of cooperation with the ASC staff; a lack of
willingness or lack of efforts to correct deficiencies; deficiencies
are material and, if not corrected in a timely manner, will pose a
potential risk to the program, licensees, financial institutions or
agencies or to the public; submission of false statements or
documents, or other deceptive practices; a State Appraiser
Regulatory Agency board member involved in a decision who had a
conflict of interest or bias that affected the outcome of a matter;
other deficiencies in the program that might indicate systemic
issues; risk of program failure; and systemic failure to exercise
reasonable care toward equitable enforcement.
---------------------------------------------------------------------------
The ASC proposes not to separately include the recommended
mitigating and aggravating factors relating to a State Appraiser
Regulatory Agency board member involved in a disciplinary decision who
had a conflict of interest or bias because the ASC believes such
circumstance would be
[[Page 96918]]
covered under the proposed mitigating or aggravating factor of whether
the State Appraiser Regulatory Agency failed to exercise reasonable
care in equitable, consistent, and timely enforcement. The ASC also
proposes to include other mitigating and aggravating factors, such as
the number of State licensed and certified appraisers or registered
AMCs under the jurisdiction of a State Appraiser Regulatory Agency and
human-made disasters or emergencies or other government-declared
orders.
The ASC believes these factors accurately capture the
considerations that would allow the ASC to increase or decrease its
initial assessment of an Appraiser or AMC Program's level of
effectiveness. These factors would give State Appraiser Regulatory
Agencies incentives to cooperate with the ASC and timely address any
deficiencies while still recognizing that certain situations, outside
of a State Appraiser Regulatory Agency's control, such as a natural
disaster, can sometimes affect the effectiveness of an Appraiser or AMC
Program.
II. Proposed Rule
The ASC is issuing this proposal to implement a framework to govern
the ASC's enforcement authority regarding the effectiveness of
Appraiser and AMC Programs overseen by State Appraiser Regulatory
Agencies. The Dodd-Frank Act strengthened the ASC's oversight of State
Appraiser Regulatory Agencies and authorized the ASC to impose interim
enforcement actions against State Appraiser Regulatory Agencies before
having to impose ``non-recognition.''
Under this proposal, the ASC would conduct an analysis of the
applicable program functions, as required by section 1118(a) of Title
XI,\87\ to assess the effectiveness of an Appraiser or AMC Program. The
proposed rule would outline the specified requirements for each program
function that the ASC will examine for program effectiveness.\88\
Additionally, the proposed rule would require State Appraiser
Regulatory Agencies to demonstrate to the ASC's reasonable satisfaction
that their Appraiser and AMC Programs are operating consistently with
the specified requirements of each program function. If any
deficiencies are identified, the ASC would be required to document them
in both the preliminary and final reports.
---------------------------------------------------------------------------
\87\ 12 U.S.C. 3347(a).
\88\ These requirements are currently outlined in the Policy
Statements. See Policy Statements, supra note 45.
---------------------------------------------------------------------------
Under the proposal, the ASC would assess the initial effectiveness
of an Appraiser or AMC Program based on the number of deficiencies per
program function as identified in the preliminary report. The ASC
proposes using the number of deficiencies for the initial assessment of
effectiveness because this approach would provide transparency into the
ASC's decision-making and help to provide consistent and fair treatment
between similarly situated State Appraiser Regulatory Agencies.
The proposed rule would establish four levels of effectiveness:
effective, moderately effective, slightly effective, and ineffective,
each specifying the allowable number of deficiencies per program
function. The effectiveness of Appraiser and AMC Programs would be
assessed through the four levels mentioned above, which the ASC plans
to incorporate into the ASC's overall rating criteria to emphasize
further that a State Appraiser Regulatory Agency is maintaining an
effective Appraiser or AMC Program.\89\
---------------------------------------------------------------------------
\89\ See Policy Statements, supra note 38 at 9160-9161.
Currently, the ASC evaluates overall Title XI compliance of a State
Appraiser Regulatory Agency's Appraiser or AMC Program by assigning
one of five ASC Findings at the end of the compliance review
process. \89\ The ratings, known as ASC Findings, are classified as
follows: Excellent, Good, Needs Improvement, Not Satisfactory, or
Poor.
---------------------------------------------------------------------------
Under the proposed rule, the ASC would consider whether the State
Appraiser Regulatory Agency's response to the preliminary report and
any relevant mitigating and aggravating factors justify an increase or
decrease in the level of the regulatory program's effectiveness
identified in the preliminary report for the final report.
If a State Appraiser Regulatory Agency fails to have an effective
Appraiser or AMC Program, the ASC would have the authority, under the
proposed rule, to impose an enforcement action. This approach would
enable the ASC to evaluate the underlying facts of each compliance
review and take appropriate enforcement action against the State
Appraiser Regulatory Agency for not maintaining an effective Appraiser
or AMC Program. The proposed rule would set forth four enforcement
actions: warning letters, negotiated agreements, suspensions, and non-
recognition. This section provides a section-by-section analysis of the
proposed rule.
A. Key Definitions
This proposal would define several terms consistent with their use
in Title XI, Federal regulations promulgated thereunder, or the Policy
Statements. For example, the proposed rule would include definitions
from the AMC Rule in their entirety for the following terms: AMC,
appraisal management services, appraiser panel, consumer credit,
covered transaction, dwelling, federally regulated AMC, person, and
USPAP. Therefore, this section highlights key definitions included in
the proposal. AQB Criteria. Pursuant to section 1116 of Title XI,\90\
the AQB establishes the minimum requirements for real estate appraisers
to obtain a State license or certification as well as ``Trainee
Appraiser'' and ``Supervisory Appraiser'' requirements. The proposed
rule would define ``AQB Criteria'' as the minimum requirements for the
licensure and certification of real estate appraisers and the minimum
requirements for trainee and supervisory appraisers established by the
AQB. The proposed definition is consistent with section 1116 of Title
XI,\91\ as well as substantively similar to the AQB's Real Property
Appraiser Qualification Criteria, which set forth the minimum
education, experience, and examination requirements for real property
appraisers.\92\
---------------------------------------------------------------------------
\90\ 12 U.S.C. 3345.
\91\ Id.
\92\ See AQB Criteria, supra note 20.
---------------------------------------------------------------------------
Assignment. Section 1106 of Title XI confers rulemaking authority
to the ASC in the area of temporary practice.\93\ For purposes of
issuing a temporary license or certification,\94\ the proposal would
define ``assignment'' as one or more real estate appraisals and written
appraisal report(s) covered by a single contract. The proposed
definition here is intended to be consistent with the use of the term
``assignment'' in the statutory definition of ``AMC'' but solely in the
context of temporary practice.\95\
---------------------------------------------------------------------------
\93\ 12 U.S.C. 3335.
\94\ The term ``license'' as defined under the Administrative
Procedure Act, 5 U.S.C. 551(8), encompasses a wide range of forms of
permission, including agency permits, certificates, approvals,
registrations, charters, memberships, statutory exemptions, and
others. This definition under the Administrative Procedure Act, 5
U.S.C. 551(8), is consistent with many State Administrative
Procedure Acts, such as the State Administrative Procedure Acts of
Arizona (Ariz. Rev. Stat. Ann. Sec. 41-1001(13) (2024)), Arkansas
(Ark. Code Ann. Sec. 25-15-202(4) (2024)), Colorado (Colo. Rev.
Stat. Sec. 24-4-102(7) (2024)), Delaware (Del. Code Ann. 29 Sec.
10102(5) (2023), District of Columbia (D.C. Code Sec. 2-502(12)
(2024)), Indiana (Ind. CodeSec. 4-21.5-1-8 (2024)), Iowa (Iowa
Code. Sec. 17A.2(6) (2024)), Kansas (Kan. Stat. Ann. Sec. 77-
502(c) (2024)), Maine (Me. Rev. Stat. 5 Sec. 8002(5) (2023)), and
Massachusetts (Mass. Gen. Laws. 30A Sec. 13) (2024)). Furthermore,
most State Appraiser Regulatory Agencies issue temporary practice
permits.
\95\ 12 U.S.C. 3350(11)(B) (defining AMC as any ``external third
party . . . [that, in part,] contract[s] with licensed and certified
appraisers to perform appraisal assignments'').
---------------------------------------------------------------------------
[[Page 96919]]
Deficiency. A State Appraiser Regulatory Agency would be deemed to
have a deficiency if the State Appraiser Regulatory Agency's Appraiser
or AMC Program is not in compliance with any specified requirements of
the applicable program functions required by section 1118(a) of Title
XI.\96\ The ASC would analyze and consider the initial effectiveness of
Appraiser or AMC Programs based on the number of deficiencies per
program function as identified in the preliminary report to provide for
a consistent and transparent enforcement approach. The ASC then would
have the option to impose an enforcement action, such as a warning
letter that describes the deficiency or deficiencies, or enter into a
negotiated agreement with a State Appraiser Regulatory Agency if the
agency fails to address the deficiency or deficiencies identified in a
previously issued warning letter or the final report indicates that the
regulatory program is slightly effective or ineffective.
---------------------------------------------------------------------------
\96\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------
Final order. The proposed rule would require the ASC to issue a
final order to suspend a State Appraiser Regulatory Agency. The
proposed definition of ``final order'' would include findings of fact,
conclusions of law, and, if applicable, the terms of the enforcement
action imposed against a State Appraiser Regulatory Agency for failing
to have an effective Appraiser or AMC Program. A ``final order'' is one
type of document that the ASC is required to make public via computer
telecommunications.\97\
---------------------------------------------------------------------------
\97\ 12 CFR 1102.305(a)(2)(i)(A).
---------------------------------------------------------------------------
Final report. After the State Appraiser Regulatory Agency has had
an opportunity to respond to the preliminary report, it is current
practice that the ASC prepares and issues a final report on its
monitoring findings. The ``final report'' would, under the proposed
rule, include the ASC's final analysis of the regulatory program's
effectiveness, identifying any deficiencies. In preparing the final
report, the ASC would consider whether the State Appraiser Regulatory
Agency's response to the preliminary report and any relevant mitigating
or aggravating factors support a change to the level of the regulatory
program's effectiveness. A ``final report'' is considered one type of
record \98\ that must be made publicly available.\99\
---------------------------------------------------------------------------
\98\ 12 CFR 1102.301(i). A ``record'' includes ``records, files,
documents . . . or any portion thereof, in any form the ASC
regularly maintains them.''
\99\ 12 CFR 1102.305(a)(2)(i)(D). One type of document that must
be made publicly available is a copy of ``all records (regardless of
form or format), such as correspondence relating to field reviews or
other regulatory subjects, released to any person under Sec.
1102.306 [(``Procedures for requesting records'')] that, because of
the nature of their subject matter, the ASC has determined are
likely to be subject of subsequent requests.'' Under this proposal,
field reviews are referred to as ``compliance reviews.''
---------------------------------------------------------------------------
Negotiated agreement. The proposal defines ``negotiated agreement''
to mean a written agreement signed between the ASC and a State
Appraiser Regulatory Agency to correct deficiencies that negatively
impact the regulatory program's effectiveness. The proposed definition
would specify that the agreement may provide that the State Appraiser
Regulatory Agency commits to taking a certain action or actions or
refraining from a certain action or actions by a specified time. For
example, these agreements could require mandatory training of State
Appraiser Regulatory Agency staff and/or board members to address
certain findings, weaknesses, and deficiencies or submission of a
commitment letter or board resolution to take corrective action in
response to the State Appraiser Regulatory Agency's deficiencies. A
``negotiated agreement'' is considered one type of record \100\ that
must be made publicly available.'' \101\
---------------------------------------------------------------------------
\100\ See supra note 98.
\101\ See supra note 99.
---------------------------------------------------------------------------
Non-recognition. Section 1118 of Title XI authorizes the ASC to
impose non-recognition on a State Appraiser Regulatory Agency.\102\
Subpart B of 12 CFR part 1102 prescribes rules of practice and
procedure governing non-recognition proceedings under section 1118 of
Title XI.\103\ The proposed definition of ``non-recognition'' reflects
the statutory text of section 1118 of Title XI,\104\ which states that
the ASC and all agencies, instrumentalities, and federally recognized
entities under Title XI shall not recognize appraiser certifications
and licenses from States whose appraisal policies, practices, funding,
staffing, or procedures are found to be inconsistent with Title XI. The
proposed rule would define ``non-recognition'' as the ASC and all
agencies, instrumentalities, and federally recognized entities under
Title XI shall not recognize or accept appraiser licenses and
certifications issued by a State Appraiser Regulatory Agency whose
policies, practices, funding, staffing, or procedures are found to be
inconsistent with Title XI and Federal regulations promulgated
thereunder. ``Non-recognition'' is synonymous with ``derecognition,''
which is referenced in section 1118 of Title XI.\105\ Under the
proposed rule, ``non-recognition'' would be used instead of
``derecognition'' to be consistent with the language of subpart B of 12
CFR part 1102.
---------------------------------------------------------------------------
\102\ 12 U.S.C. 3347.
\103\ Id.
\104\ Id.
\105\ Id.
---------------------------------------------------------------------------
Preliminary report.\106\ After the examination of records and
interviews with State Appraiser Regulatory Agency representatives, it
is the current practice that the ASC provides a staff report or
preliminary report to the State Appraiser Regulatory Agency detailing
the initial monitoring findings. Under the proposed definition, the
preliminary report would also include an initial analysis of the
regulatory program's effectiveness, identifying any deficiencies, and
the ASC's initial assessment of the level of effectiveness of the
regulatory program.
---------------------------------------------------------------------------
\106\ Note, section 1104(b) of Title XI, 12 U.S.C. 3333(b),
refers to ``preliminary State audit reports,'' which is synonymous
with the term ``preliminary report'' under this proposal.
---------------------------------------------------------------------------
Program functions. As previously discussed, section 1118(a) of
Title XI specifies a list of criteria that the ASC must include in its
analysis of a regulatory program's effectiveness.\107\ The proposal
would define ``program functions'' as those responsibilities of a State
Appraiser Regulatory Agency that the ASC will examine and include in
its analysis of the effectiveness of a State Appraiser Regulatory
Agency's regulatory program consistent with section 1118(a) of Title XI
(12 U.S.C. 3347(a)). The proposed rule would outline five program
functions for Appraiser Programs that will be considered in the ASC's
analysis: (1) licensing and certification of appraisers, (2) issuance
of temporary licenses and certifications for appraisers, (3) receiving
and tracking of submitted complaints against appraisers, (4)
investigation of complaints against appraisers, and (5) enforcement
actions against appraisers. For AMC Programs, the proposed rule would
outline four program functions that will be considered in the ASC's
analysis: (1) registration of AMCs, (2) receiving and tracking of
submitted complaints against AMCs, (3) investigation of complaints
against AMCs, and (4) enforcement actions against AMCs.
---------------------------------------------------------------------------
\107\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------
Special documented circumstances. The proposed rule would define
[[Page 96920]]
``special documented circumstances'' as well-documented and monitored
extenuating circumstances, evaluated by the ASC, that are beyond the
control of the State Appraiser Regulatory Agency and result in a
complaint processing delay. Special documented circumstances are
relevant when considering the effectiveness of State Appraiser
Regulatory Agencies' supervision in resolving complaints filed against
trainee appraisers, State licensed appraisers, State certified
appraisers, and AMCs within one year from the date the complaint was
received.
State Appraiser Regulatory Agency. Section 1103(a)(5) of Title XI
uses the term ``State Appraiser Regulatory Agencies.'' \108\ The
proposed rule would define ``State Appraiser Regulatory Agency'' as a
State agency that certifies and licenses real estate appraisers and
registers and supervises AMCs or otherwise regulates real estate
appraisers and AMCs who operate in that State, consistent with section
1121(1) of Title XI (12 U.S.C. 3350(1)). ``State Appraiser Regulatory
Agency'' is synonymous with ``State appraiser certifying and licensing
agency'' as defined in section 1121(1) of Title XI.\109\ To the extent
that the registration and supervision of AMCs is carried out by a
separate and distinct agency or agencies within a State, each such
agency is also a State Appraiser Regulatory Agency. For example, the
District of Columbia has two separate and distinct agencies that
administer the Appraiser and AMC Programs. The Department of Licensing
and Consumer Protection administers the Appraiser Program, and the
Department of Insurance, Securities and Banking administers the AMC
Program. The Department of Licensing and Consumer Protection and the
Department of Insurance, Securities and Banking in the District of
Columbia would each be considered a State Appraiser Regulatory Agency
under the proposed rule, and the ASC would monitor each of their
respective regulatory programs.
---------------------------------------------------------------------------
\108\ 12 U.S.C. 3332(a)(5).
\109\ 12 U.S.C. 3350(1).
---------------------------------------------------------------------------
Suspension. The proposed definition of ``suspension'' is that the
State Appraiser Regulatory Agency would be prohibited from performing
certain task(s) as part of the State Appraiser Regulatory Agency's
responsibilities under Title XI for a specified period of time. This
definition is consistent with section 1118(a) of Title XI, which
authorizes the ASC to impose ``interim actions and suspensions,''
against a State Appraiser Regulatory Agency as an alternative to, or in
advance of, the non-recognition of a State Appraiser Regulatory
Agency.\110\ Some examples of possible prohibited tasks include adding
appraisers to the Appraiser Registry or AMCs to the AMC Registry,
renewing licenses or certifications, and issuing temporary licenses or
certifications to appraisers. The proposed rule would provide that a
suspension would be effective until the ASC lifts the suspension.
---------------------------------------------------------------------------
\110\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------
Warning letter. Section 1118(a)(4) of Title XI requires the ASC to
monitor State Appraiser Regulatory Agencies to determine whether each
State Appraiser Regulatory Agency maintains an effective regulatory
program.\111\ If a State Appraiser Regulatory Agency fails to have an
effective appraiser regulatory program, section 1118(a) authorizes the
ASC to impose enforcement actions.\112\ One example of an enforcement
action is a ``warning letter,'' which the proposed rule would define as
a letter issued by the ASC informing a State Appraiser Regulatory
Agency of a deficiency or deficiencies relating to its regulatory
program. The proposed definition also provides that if the deficiency
is not addressed, it could negatively impact the effectiveness of the
State Appraiser Regulatory Agency's regulatory program.
---------------------------------------------------------------------------
\111\ 12 U.S.C. 3347(a)(4).
\112\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------
B. Compliance Reviews
One of the ASC's functions is to monitor State Appraiser Regulatory
Agencies' Appraiser and AMC Programs for compliance with Title XI.\113\
Monitoring these programs is accomplished through periodic or
accelerated compliance reviews of each State Appraiser Regulatory
Agency's Appraiser and AMC Programs.\114\ Proposed Sec. 1102.602 would
codify the existing compliance review process consistent with the ASC's
current practices and processes for conducting compliance reviews but
would propose a few changes that are discussed below.
---------------------------------------------------------------------------
\113\ 12 U.S.C. 3332(a)(1) and 3347(a)(1)-(5).
\114\ Compliance reviews are conducted by the ASC, on a periodic
or accelerated basis, to determine whether an Appraiser or AMC
Program administered by a State Appraiser Regulatory Agency is
operating in a manner consistent with Title XI and Federal
regulations promulgated thereunder. The proposed rule does not
specify that compliance reviews must occur on-site. Instead, the
proposed rule would provide flexibility to the ASC to determine the
most appropriate means of conducting a compliance review.
---------------------------------------------------------------------------
The ASC is proposing this approach because the ASC has generally
found in its supervisory experience that these practices for conducting
compliance reviews are effective and efficient. Currently, the
compliance review process is outlined in the Policy Statements.\115\
The ASC intends to revise the Policy Statements before the proposed
implementation period, discussed in section III below, ends. These
revisions would address any potential inconsistencies between the
Policy Statements and any final rule based on this proposal.
---------------------------------------------------------------------------
\115\ See Policy Statements, supra note 38 at 9160-9161.
---------------------------------------------------------------------------
1. Compliance Review Cycles
The proposal would provide that the ASC has two primary review
cycles: two-year and one-year. This is the same standard frequency as
the ASC's current practice outlined in the Policy Statements.\116\ Most
State Appraiser Regulatory Agencies are scheduled on a two-year review
cycle, but some may be moved to a one-year review cycle if the ASC
determines more frequent reviews are needed to ensure that the State
Appraiser Regulatory Agency maintains an effective Appraiser or AMC
Program. The ASC is proposing this frequency for compliance reviews
because, based on its supervisory experience, the ASC has generally
found that these two primary review cycles provide sufficient
monitoring. The two review cycles would allow for early identification
of deficiencies to prevent or minimize their impact on the
effectiveness of Appraiser and AMC Programs. Additionally, the ASC has
generally found that the two review cycles are not burdensome and do
not strain the resources of the ASC or State Appraiser Regulatory
Agencies. The proposed rule would also allow the ASC to use alternate
compliance review cycles at its sole discretion. This discretion would
allow the ASC to monitor the performance and effectiveness of the
frequency of compliance reviews. After evaluation, the ASC could, for
example, modify the standard frequency of the primary two review cycles
to three years and two years.
---------------------------------------------------------------------------
\116\ Id.
---------------------------------------------------------------------------
In addition to the two primary review cycles, the proposal would
provide that the ASC may conduct follow-up reviews and additional
monitoring. Consistent with the ASC's current practice, a follow-up
review would focus only on specific areas identified during the
previous review and would occur within 6 to 12 months of the previous
review. Under the proposed rule, the ASC may also conduct accelerated
compliance reviews when there are indications that an Appraiser or AMC
Program might not be operating
[[Page 96921]]
consistently with Title XI or Federal regulations promulgated
thereunder. For example, an accelerated compliance review could be
warranted when the ASC receives multiple complaints alleging inadequate
enforcement by a State Appraiser Regulatory Agency. This is consistent
with the ASC's current practice which is to identify potential Title XI
compliance concerns before they occur and take appropriate action to
prevent the occurrence or minimize the impact on the effectiveness of
an Appraiser or AMC Program. The proposed rule would also provide that
if a single State Appraiser Regulatory Agency oversees both Appraiser
and AMC Programs, the compliance reviews for each regulatory program
may have the same or different review cycles. This is also consistent
with current practice, which has been proven to be effective based on
the ASC's supervisory experience.
2. Compliance Review Process
Paragraph (c) of proposed Sec. 1102.602 would set forth the
general process of a compliance review. Similar to current practice,
compliance reviews would consist of an examination of records and
interviews with State Appraiser Regulatory Agency representatives.
After completing the examination, the ASC would prepare a preliminary
report that includes the initial monitoring findings, which is
consistent with current practice.
However, the preliminary report would, under the proposed rule,
include an initial analysis of the effectiveness of the regulatory
program, as required in proposed Sec. 1102.603, identifying any
deficiencies. The preliminary report would also, under the proposed
rule, include the ASC's initial assessment of the level of
effectiveness of the regulatory program. This would be a modification
of the ASC's current practice; under Policy Statement 12, this analysis
of the regulatory program's effectiveness occurs after the ASC
concludes the compliance review and issues an overall ASC Finding of
Poor.\117\ The ASC believes that analyzing the effectiveness of the
regulatory program earlier during the compliance review process would
improve efficiency and streamline the process, so the ASC proposes to
utilize this approach instead. Additionally, the proposed rule would
include new interim enforcement actions that can be used if the ASC
makes the assessment that an Appraiser or AMC Program is not effective.
These interim enforcement actions are an additional tool that can be
used in conjunction with more frequent compliance reviews or additional
monitoring.
---------------------------------------------------------------------------
\117\ Id. at 9159. See also supra note 89.
---------------------------------------------------------------------------
Under the proposed rule, a State Appraiser Regulatory Agency may
respond within 60 business days from the date of the preliminary
report. This is consistent with the current practice, which has been
proven to be effective, based on the ASC's supervisory experience, to
give State Appraiser Regulatory Agencies adequate time to consider and
respond with any relevant information showing the State Appraiser
Regulatory Agency's efforts to remedy any deficiencies. After
considering the State Appraiser Regulatory Agency's response along with
any mitigating and aggravating factors, the final report would, under
the proposed rule, include the final analysis of the effectiveness of
the regulatory program, as required in proposed Sec. 1102.603,
identifying any deficiencies. The final report would also, under the
proposed rule, include the ASC's final assessment of the level of
effectiveness of the regulatory program in accordance with paragraph
(b)(2) of proposed Sec. 1102.603.
Similar to the current compliance review process, under the
proposed rule, State Appraiser Regulatory Agencies would be required to
maintain sufficient documentation to demonstrate that their Appraiser
and AMC Programs operate consistently with Title XI. ASC staff reviews
a representative sampling of documentation in each of the compliance
areas to assess the efficiency of the State Appraiser Regulatory
Agency's Appraiser or AMC Program. The proposed rule would further
provide that documentation must be made available for inspection, as
requested by the ASC, including access to the information stored in any
electronic system or providing access to the electronic system itself.
The electronic access requirement is not included in the Policy
Statements, but it is consistent with current ASC practice.
C. Analysis of the Effectiveness of Appraiser and AMC Programs
To determine whether an Appraiser or AMC Program is effective, the
amendments to section 1118(a) of Title XI by the Dodd-Frank Act require
the ASC to perform an analysis of previously specified key program
functions.\118\ The proposed rule would incorporate the analysis, as
required by section 1118(a) of Title XI,\119\ earlier in the compliance
review process and provide the analysis in the preliminary and final
reports. Under paragraph (a) of proposed Sec. 1102.603, the ASC would
examine whether the State Appraiser Regulatory Agency is complying with
all specified requirements of each program function and, if not,
document any identified deficiencies in the preliminary and final
reports.
---------------------------------------------------------------------------
\118\ 12 U.S.C. 3347(a).
\119\ Id.
---------------------------------------------------------------------------
1. Assessment of Program Effectiveness
The deficiencies identified in the preliminary report would serve
as the starting point for the ASC's initial assessment of the
regulatory program's effectiveness. Under paragraph (b)(1) of proposed
Sec. 1102.603, the ASC would assess the regulatory program's initial
effectiveness based on the corresponding number of deficiencies per
program function identified in the preliminary report. The ASC proposes
using the number of deficiencies for the initial assessment of
effectiveness because this approach would provide transparency into the
ASC's decision-making and help to provide consistent and fair treatment
between similarly situated State Appraiser Regulatory Agencies.
Paragraph (b)(1) of proposed Sec. 1102.603 would establish four
levels of effectiveness: effective, moderately effective, slightly
effective, and ineffective, each specifying the allowable number of
deficiencies per program function. The effectiveness of Appraiser and
AMC Programs will be assessed through the four levels mentioned above.
Currently, the ASC evaluates overall Title XI compliance of a State
Appraiser Regulatory Agency's Appraiser or AMC Program by assigning one
of five ASC Findings at the end of the compliance review process.\120\
The ratings, known as ASC Findings, are classified as follows:
Excellent, Good, Needs Improvement, Not Satisfactory, or Poor.\121\ The
ASC plans to incorporate the four levels of program effectiveness into
the ASC's overall rating criteria of the ASC Findings to emphasize
further that a State Appraiser Regulatory Agency is maintaining an
effective Appraiser or AMC Program.
---------------------------------------------------------------------------
\120\ See Policy Statements, supra note 38 at 9160-9161.
\121\ Id.
---------------------------------------------------------------------------
The following example illustrates how this approach would work. The
ASC might identify three deficiencies under the same program function
of licensing and certification of appraisers. The first deficiency
could be that the licensing and certification requirements do not meet
the minimum requirements in Title XI. The second deficiency could be
that the State Appraiser Regulatory
[[Page 96922]]
Agency does not have a reciprocity policy. The third deficiency could
be that the State Appraiser Regulatory Agency fails to ensure that
approved applicants meet the applicable minimum requirements of the AQB
Criteria. The initial assessment of the Appraiser Program's level of
effectiveness would be deemed ``slightly effective'' in the preliminary
report under proposed Sec. 1102.603(b)(1)(iii)(A) because the ASC
found three deficiencies in one program function.
Due to the difference in the number of program functions between
Appraiser and AMC Programs, the allowable number of deficiencies per
program function for each level of effectiveness would be different for
the Appraiser and AMC Programs under the proposed rule. However, this
initial assessment would be performed in an equivalent manner for both
program types.
Under paragraph (b)(2) of proposed Sec. 1102.603, the ASC would
consider whether the State Appraiser Regulatory Agency's response to
the preliminary report and any relevant mitigating and aggravating
factors in proposed Sec. 1102.604 justify an increase or decrease in
the level of the regulatory program's effectiveness for the final
report. This analysis would allow the ASC to consider the totality of
the circumstances for its final assessment of the regulatory program's
level of effectiveness. The ASC has generally found from its
supervisory experience that mitigating and aggravating factors could
arise in each compliance review because there can be significant
variations in the underlying facts of each compliance review. The ASC
is proposing this approach because it would allow the ASC flexibility
to ensure that the level of effectiveness is truly representative of
the State Appraiser Regulatory Agency's regulatory program. If the ASC
considers the regulatory program's level of effectiveness to be
appropriately mitigated or aggravated, the relevant factors, including
a description of how the factors were applied, will be documented in
the final report.
2. Program Functions for Appraiser and AMC Programs
Paragraphs (c)(1) and (2) of proposed Sec. 1102.603 would outline
the specified requirements for each program function that the ASC will
examine to assess the effectiveness of an Appraiser or AMC Program. The
ASC proposes these requirements under paragraphs (c)(1) and (2) of
proposed Sec. 1102.603 because they are currently included in the
Policy Statements and provide guidance to State Appraiser Regulatory
Agencies in complying with Title XI and the rules promulgated
thereunder.\122\ The ASC believes that these requirements are fair and
manageable because State Appraiser Regulatory Agencies are familiar
with these requirements already and have been implementing them.
Additionally, the ASC believes this approach should reduce any
challenges that State Appraiser Regulatory Agencies may face in
implementing any final rule based on this proposal. These requirements
under paragraphs (c)(1) and (2) of proposed Sec. 1102.603 are listed
below, starting with the Appraiser Program under paragraph (c)(1) of
proposed Sec. 1102.603.
---------------------------------------------------------------------------
\122\ See Policy Statements, supra note 38.
---------------------------------------------------------------------------
3. Specified Requirements for an Appraiser Program
Under paragraph (c)(1) of proposed Sec. 1102.603, a State
Appraiser Regulatory Agency must demonstrate to the ASC's reasonable
satisfaction that its Appraiser Program is operating consistently with
the specified requirements of each program function as listed below.
Paragraph (c)(1)(i) of proposed Sec. 1102.603 would specify eleven
requirements for the program function of licensing and certification of
appraisers. These eleven requirements are:
(1) the State Appraiser Regulatory Agency's licensing and
certification requirements must meet the minimum requirements set forth
in section 1116 of Title XI (12 U.S.C. 3345); \123\
---------------------------------------------------------------------------
\123\ See Policy Statement 1, supra note 38 at 9147-9149.
---------------------------------------------------------------------------
(2) the State Appraiser Regulatory Agency's trainee and supervisory
appraiser requirements, if applicable, must meet the minimum
requirements set forth in section 1116 of Title XI (12 U.S.C. 3345);
\124\
---------------------------------------------------------------------------
\124\ Id. at 9148-9149.
---------------------------------------------------------------------------
(3) the State Appraiser Regulatory Agency must use the designations
for trainee appraisers, State licensed appraisers, and State certified
appraisers in accordance with section 1116 of Title XI (12 U.S.C.
3345); \125\
---------------------------------------------------------------------------
\125\ Id. at 9147-9149.
---------------------------------------------------------------------------
(4) the State Appraiser Regulatory Agency must use permitted scopes
of practice for State licensed and certified appraisers in accordance
with sections 1113 and 1114 of Title XI (12 U.S.C. 3342 and 3343);
\126\
---------------------------------------------------------------------------
\126\ Id.
---------------------------------------------------------------------------
(5) the State Appraiser Regulatory Agency must process applications
in a timely, consistent, equitable, and well-documented manner in
accordance with Title XI; \127\
---------------------------------------------------------------------------
\127\ See Policy Statement 4, supra note 38 at 9151 and 9153.
---------------------------------------------------------------------------
(6) the State Appraiser Regulatory Agency must ensure that
individuals who process applications are knowledgeable about section
1116 of Title XI (12 U.S.C. 3345) as evaluated by the ASC; \128\
---------------------------------------------------------------------------
\128\ Id. at 9152-9153.
---------------------------------------------------------------------------
(7) the State Appraiser Regulatory Agency must have a reciprocity
policy for issuing a reciprocal license or certification for an
individual from another State in accordance with section 1122(b) of
Title XI (12 U.S.C. 3351(b)); \129\
---------------------------------------------------------------------------
\129\ See Policy Statement 5, supra note 38 at 9153-9154.
---------------------------------------------------------------------------
(8) the State Appraiser Regulatory Agency must ensure that all
approved applicants meet the applicable minimum requirements of the AQB
Criteria; \130\
---------------------------------------------------------------------------
\130\ See Policy Statements 4 and 6, supra note 38 at 9151-9153
and 9154.
---------------------------------------------------------------------------
(9) the State Appraiser Regulatory Agency must ensure that
appraiser education courses are consistent with the AQB Criteria; \131\
---------------------------------------------------------------------------
\131\ See Policy Statement 6, supra note 38 at 9154.
---------------------------------------------------------------------------
(10) the State Appraiser Regulatory Agency must obtain and maintain
sufficient documentation pertaining to all applications, including
initial licenses or certifications, upgrades, renewals, reinstatements,
and supervisory approvals, to create a record of facts and
determinations and the reasons for those determinations made by the
State Appraiser Regulatory Agency; \132\ and
---------------------------------------------------------------------------
\132\ See Policy Statements 4, 5 and 6, supra note 38 at 9151-
9154.
---------------------------------------------------------------------------
(11) the State Appraiser Regulatory Agency must report appraiser
data on the issuance and renewal of licenses and certifications on a
timely basis to the Appraiser Registry in accordance with section
1109(a)(2) of Title XI (12 U.S.C. 3338(a)(2)).\133\
---------------------------------------------------------------------------
\133\ See Policy Statement 3, supra note 38 at 9150-9151.
---------------------------------------------------------------------------
Paragraph (c)(1)(ii) of proposed Sec. 1102.603 would specify nine
requirements for the issuance of temporary licenses and certifications
for appraisers. These nine requirements are:
(1) the State Appraiser Regulatory Agency must recognize the
license or certification of an appraiser issued by another State
Appraiser Regulatory Agency on a temporary basis in accordance with
section 1122(a)(1) of Title XI (12 U.S.C. 3351(a)(1)); \134\
---------------------------------------------------------------------------
\134\ See Policy Statement 2, supra note 38 at 9149.
---------------------------------------------------------------------------
(2) the State Appraiser Regulatory Agency must not impose excessive
fees for a temporary license or certification in accordance with
section 1122(a)(2) of Title XI (12 U.S.C. 3351(a)(2)); \135\
---------------------------------------------------------------------------
\135\ Id.
---------------------------------------------------------------------------
[[Page 96923]]
(3) the State Appraiser Regulatory Agency must not impose
burdensome requirements, as determined by the ASC, for temporary
practice in accordance with section 1122(a)(2) of Title XI (12 U.S.C.
3351(a)(2)); \136\
---------------------------------------------------------------------------
\136\ Id.
---------------------------------------------------------------------------
(4) the State Appraiser Regulatory Agency must issue temporary
licenses or certifications within five business days after receiving a
complete application for such issuance in accordance with section
1122(a) of Title XI (12 U.S.C. 3351(a)); \137\
---------------------------------------------------------------------------
\137\ Id. The requirement for temporary licenses or
certifications to be issued within five business days was determined
based on the ASC's supervisory experience. This timeframe has been
in place under Policy Statement 2, and the ASC has generally found
the requirement to be a fair balance. The requirement allows
appraisers to quickly obtain temporary licenses or certifications
for temporary assignments related to federally related transactions
while also giving the State Appraiser Regulatory Agency sufficient
time to review and process these temporary practice applications.
---------------------------------------------------------------------------
(5) the State Appraiser Regulatory Agency must issue temporary
licenses or certifications on an assignment basis and must allow for at
least one extension through a streamlined process in accordance with
section 1122(a) of Title XI (12 U.S.C. 3351(a)); \138\
---------------------------------------------------------------------------
\138\ Id. Title XI prohibits State Appraiser Regulatory Agencies
from imposing excessive fees or burdensome requirements for
temporary practice, as determined by the ASC. 12 U.S.C. 3351(a)(2).
These practices for issuing temporary licenses or certifications are
based on the ASC's supervisory experience and have been in place
under Policy Statement 2. The ASC has generally found that when
State Appraiser Regulatory Agencies adhere to these practices, it
helps to avoid placing burdensome requirements on applicants for
temporary practice.
---------------------------------------------------------------------------
(6) the State Appraiser Regulatory Agency must issue temporary
licenses or certifications designating the effective date in accordance
with section 1122(a) of Title XI (12 U.S.C. 3351(a)); \139\
---------------------------------------------------------------------------
\139\ Id. Title XI requires that appraisers obtain a temporary
license or certification from the State Appraiser Regulatory Agency
in the State where they will temporarily conduct appraisal
assignments related to federally related transactions. This
requirement for issuing temporary licenses or certifications with an
effective date was established based on the ASC's supervisory
experience and has been in place under Policy Statement 2. The ASC
considers this requirement to be a fair balance between the need for
public protection from unauthorized appraisal practices and the
necessity for appraisers to be aware of the validity period of their
temporary licenses or certifications.
---------------------------------------------------------------------------
(7) the State Appraiser Regulatory Agency must track all temporary
licenses or certifications using a permit log or system; \140\
---------------------------------------------------------------------------
\140\ Id.
---------------------------------------------------------------------------
(8) the State Appraiser Regulatory Agency must supervise all
individuals to whom the State Appraiser Regulatory Agency issues a
temporary license or certification while performing assignments in its
State, must discipline such individuals, when appropriate, for
misconduct or wrongdoing, and must report each disciplinary action to
the ASC and other appropriate State Appraiser Regulatory Agencies to
ensure effective supervision in accordance with sections 1117, 1118,
and 1122(a) of Title XI (12 U.S.C. 3346, 3347, and 3351(a)); \141\ and
---------------------------------------------------------------------------
\141\ Id.
---------------------------------------------------------------------------
(9) the State Appraiser Regulatory Agency must obtain and maintain
documentation sufficient to create a record of the basis for the
determinations made by the State Appraiser Regulatory Agency in
processing and issuing temporary licenses or certifications.\142\
---------------------------------------------------------------------------
\142\ Id.
---------------------------------------------------------------------------
Paragraph (c)(1)(iii) of proposed Sec. 1102.603 would specify two
requirements for the program function of receiving and tracking of
submitted complaints against appraisers as follows:
(1) the State Appraiser Regulatory Agency must have a system for
processing and investigating complaints and sanctioning trainee
appraisers, State licensed appraisers, and State certified appraisers
in a timely, effective, consistent, equitable, and well-documented
manner; \143\ and
---------------------------------------------------------------------------
\143\ See Policy Statement 7, supra note 38 at 9155.
---------------------------------------------------------------------------
(2) the State Appraiser Regulatory Agency must track and monitor
all complaints using a complaint log or system.\144\
---------------------------------------------------------------------------
\144\ Id.
---------------------------------------------------------------------------
Paragraph (c)(1)(iv) of proposed Sec. 1102.603 would specify five
requirements for the program function of investigations of complaints
against appraisers. These five requirements are:
(1) the State Appraiser Regulatory Agency must require appraisals
to be performed in accordance with the latest version of USPAP in
accordance with sections 1101 and 1103(a)(1)(A) of Title XI (12 U.S.C.
3331 and 3332(a)(1)(A)); \145\
---------------------------------------------------------------------------
\145\ See Policy Statement 1, supra note 38 at 9148.
---------------------------------------------------------------------------
(2) when examining an appraisal report in connection with a
complaint, including complaints based solely on value, the State
Appraiser Regulatory Agency must consider whether any potential
violations of USPAP should be investigated; \146\
---------------------------------------------------------------------------
\146\ See Policy Statement 7, supra note 38 at 9155.
---------------------------------------------------------------------------
(3) to ensure effective supervision, the State Appraiser Regulatory
Agency must resolve all complaints filed against trainee appraisers,
State licensed appraisers, and State certified appraisers within one
year (12 months) from the date the complaint was received except in
special documented circumstances; \147\
---------------------------------------------------------------------------
\147\ Id. The requirement that all complaints be resolved within
12 months was determined based on the ASC's supervisory experience.
This timeframe has been in place under Policy Statement 7. The ASC
has generally found that the 12-month limit has provided adequate
time for State Appraiser Regulatory Agencies to investigate and
adjudicate complaints while still ensuring that appraisers are
timely disciplined for misconduct or wrongdoing. Maintaining this
12-month requirement would help reduce the burden on State Appraiser
Regulatory Agencies.
---------------------------------------------------------------------------
(4) the State Appraiser Regulatory Agency must ensure that
individuals who analyze complaints are knowledgeable about Title XI,
USPAP, and appraisal practices and must document how such individuals
are qualified, which will be evaluated by the ASC; \148\ and
---------------------------------------------------------------------------
\148\ Id. at 9155-9156.
---------------------------------------------------------------------------
(5) the State Appraiser Regulatory Agency must obtain and maintain
documentation sufficient to create a record of the facts and
determinations made by the State Appraiser Regulatory Agency in
processing and investigating a complaint and the reasons for its final
disposition.\149\
---------------------------------------------------------------------------
\149\ Id. at 9155.
---------------------------------------------------------------------------
Paragraph (c)(1)(v) of proposed Sec. 1102.603 would specify two
requirements for the program function of enforcement actions against
appraisers as follows:
(1) the State Appraiser Regulatory Agency must supervise trainee
appraisers, State licensed appraisers, and State certified appraisers
and must discipline such individuals, when appropriate, for misconduct
and wrongdoing; \150\ and
---------------------------------------------------------------------------
\150\ Id. at 9155-9156.
---------------------------------------------------------------------------
(2) the State Appraiser Regulatory Agency must report all
disciplinary actions against State licensed and certified appraisers to
the ASC within five business days after the disciplinary action is
final as determined by State law.\151\
---------------------------------------------------------------------------
\151\ See Policy Statement 3, supra note 38 at 9150-9151.
---------------------------------------------------------------------------
4. Specified Requirements for an AMC Program
Under paragraph (c)(2) of proposed Sec. 1102.603, a State
Appraiser Regulatory Agency must demonstrate to the ASC's reasonable
satisfaction that its AMC Program is operating consistently with the
specified requirements of each program function as listed below.
Paragraph (c)(2)(i) of proposed Sec. 1102.603 would specify seven
requirements for the program function of registration of AMCs. These
seven requirements are:
(1) the State Appraiser Regulatory Agency must establish and
maintain an
[[Page 96924]]
AMC regulatory program with legal authority and mechanisms consistent
with Title XI, the AMC Rule, and the AMC Registry Fee Rule; \152\
---------------------------------------------------------------------------
\152\ See Policy Statement 8, supra note 38 at 9156-9157. Under
the proposed rule, ``AMC Registry Fee Rule'' means the ASC's
regulations on the collection and transmission of AMC Registry fees
as codified in subpart E of this part.
---------------------------------------------------------------------------
(2) the State Appraiser Regulatory Agency must impose requirements
on AMCs that are consistent with Title XI and the AMC Rule; \153\
---------------------------------------------------------------------------
\153\ Id.
---------------------------------------------------------------------------
(3) the State Appraiser Regulatory Agency must enforce and document
ownership limitations for AMCs in a manner consistent with Title XI and
the AMC Rule; \154\
---------------------------------------------------------------------------
\154\ Id.
---------------------------------------------------------------------------
(4) the State Appraiser Regulatory Agency must process AMC
applications in a timely, consistent, equitable, and well-documented
manner in accordance with Title XI, the AMC Rule, and the AMC Registry
Fee Rule;
(5) the State Appraiser Regulatory Agency must ensure that
individuals who process applications are knowledgeable about Title XI
and the AMC Rule as evaluated by the ASC;
(6) the State Appraiser Regulatory Agency must obtain and maintain
documentation sufficient to create a record of the basis for its
determinations for AMC eligibility for the AMC Registry, including the
appraiser panel requirements, ownership limitations, and AMC Registry
fee collection and submission to the ASC; and
(7) the State Appraiser Regulatory Agency must report AMCs eligible
for the AMC Registry on a timely basis in accordance with section
1109(a)(3) of Title XI (12 U.S.C. 3338(a)(3)) and the AMC Registry Fee
Rule.\155\
---------------------------------------------------------------------------
\155\ See Policy Statement 9, supra note 38 at 9157-9158.
---------------------------------------------------------------------------
Paragraph (c)(2)(ii) of proposed Sec. 1102.603 would specify two
requirements for the program function of receiving and tracking of
submitted complaints against AMCs as follows:
(1) the State Appraiser Regulatory Agency must have a system for
processing and investigating complaints and sanctioning AMCs (other
than federally regulated AMCs) in a timely, effective, consistent,
equitable, and well-documented manner; \156\ and
---------------------------------------------------------------------------
\156\ See Policy Statement 10, supra note 38 at 9158.
---------------------------------------------------------------------------
(2) the State Appraiser Regulatory Agency must track and monitor
all complaints against AMCs using a complaint log or system.\157\
---------------------------------------------------------------------------
\157\ Id.
---------------------------------------------------------------------------
Paragraph (c)(2)(iii) of proposed Sec. 1102.603 would specify
three requirements for the program function of investigation of
complaints against AMCs. These three requirements are:
(1) to ensure effective supervision, the State Appraiser Regulatory
Agency must resolve all complaints filed against AMCs (other than
federally regulated AMCs) within one year (12 months) from the date the
complaint was received except in special documented circumstances;
\158\
---------------------------------------------------------------------------
\158\ Id. The requirement that all complaints be resolved within
12 months was determined based on the ASC's supervisory experience.
This timeframe has been in place under Policy Statement 10. The ASC
has generally found that the 12-month limit has provided adequate
time for State Appraiser Regulatory Agencies to investigate and
adjudicate complaints while still ensuring that AMCs are timely
disciplined for misconduct or wrongdoing. Maintaining this 12-month
requirement would help reduce the burden on State Appraiser
Regulatory Agencies.
---------------------------------------------------------------------------
(2) the State Appraiser Regulatory Agency must ensure that
individuals who analyze complaints are knowledgeable about Title XI,
the AMC Rule, USPAP, and appraisal practices and must document how such
individuals are qualified, which will be evaluated by the ASC; and
(3) the State Appraiser Regulatory Agency must obtain and maintain
documentation sufficient to create a record of the facts and
determinations made by the State Appraiser Regulatory Agency in
processing and investigating a complaint and the reasons for its final
disposition.\159\
---------------------------------------------------------------------------
\159\ Id.
---------------------------------------------------------------------------
Paragraph (c)(2)(iv) of proposed Sec. 1102.603 would specify two
requirements for the program function of enforcement actions against
AMCs as follows:
(1) the State Appraiser Regulatory Agency must supervise AMCs
(other than federally regulated AMCs) and must discipline such
entities, when appropriate, for misconduct and wrongdoing; \160\ and
---------------------------------------------------------------------------
\160\ Id.
---------------------------------------------------------------------------
(2) the State Appraiser Regulatory Agency must report all
disciplinary actions against AMCs (other than federally regulated AMCs)
to the ASC within five business days after the disciplinary action is
final as determined by State law.\161\
---------------------------------------------------------------------------
\161\ See Policy Statement 9, supra note 38 at 9157-9158.
---------------------------------------------------------------------------
D. Mitigating and Aggravating Factors
Under proposed Sec. 1102.604, the ASC would consider mitigating
and aggravating factors as appropriate in adjusting the ASC's initial
assessment of the regulatory program's level of effectiveness
identified in the preliminary report for a State Appraiser Regulatory
Agency. Proposed Sec. 1102.604 would allow the ASC to increase or
decrease its initial assessment of the level of effectiveness depending
upon the presence of these individualized factors in this section.
As previously mentioned, the ASC believes it is not feasible to
predetermine all the mitigating and aggravating factors that could
arise in each compliance review because there can be significant
variations in the underlying facts of each compliance review.
Therefore, proposed Sec. 1102.604 would include common factors to be
considered when adjusting a regulatory program's level of
effectiveness. The ASCAC recommended categorizing the factors as either
solely mitigating or aggravating. The ASC believes from its supervisory
experience that these factors should be classified into categories
because they could have different effects depending on the specific
circumstances, either mitigating or aggravating. Under proposed Sec.
1102.604, the mitigating and aggravating factors would be classified
together into four categories: (1) the nature and extent of the
deficiency; (2) prior compliance history by the State Appraiser
Regulatory Agency; (3) the structure, stability, and responsiveness of
the State Appraiser Regulatory Agency; and (4) other situations or
circumstances such as natural or human-made disasters or emergencies or
other government-declared orders. The ASC has found in conducting
compliance reviews, based on its supervisory experience, that most
mitigating and aggravating factors could fit into one of the four
categories under proposed Sec. 1102.604.
Except as discussed below, the four categories would encompass
almost all of the ASCAC's recommendations regarding mitigating and
aggravating factors.\162\ Some changes would be made to the wording of
certain mitigating and aggravating factors to enhance clarity and style
and to avoid duplication. Further, the ASC proposes not to include the
recommended mitigating and aggravating factors relating to a State
Appraiser Regulatory Agency board member involved in a disciplinary
decision who had a conflict of interest or bias because the ASC
believes such circumstance would be covered under the proposed
mitigating or aggravating factor of whether the State Appraiser
Regulatory Agency failed to exercise reasonable care toward equitable,
consistent, and timely enforcement.\163\
---------------------------------------------------------------------------
\162\ See ASCAC Final Recommendation Report, supra note 45 at
25.
\163\ Id.
---------------------------------------------------------------------------
[[Page 96925]]
Given the complexity of some events and significant variations in
the underlying facts of each compliance review, it is not feasible to
predetermine the outcome or the relative weights of potential
mitigating and aggravating factors for every compliance review. The
presence of mitigating or aggravating factors does not automatically
lead to the conclusion that a departure from the ASC's initial
assessment of the regulatory program's level of effectiveness
identified in the preliminary report is justified. The factors must be
weighed against each other and the facts and circumstances of the
deficiency itself. The presence of one or more mitigating
circumstances, along with one or more aggravating circumstances, may or
may not offset each other. Where mitigating factors predominate, the
ASC may consider increasing the regulatory program's level of
effectiveness. Conversely, where aggravating factors predominate, the
ASC may consider decreasing the regulatory program's level of
effectiveness.
If the ASC considers the regulatory program's level of
effectiveness to be appropriately mitigated or aggravated, the relevant
factors, including a description of how the factors were applied, would
be documented in the final report.
E. Enforcement Actions
As stated earlier, section 1118(a) of Title XI authorizes the ASC
to impose certain specified enforcement actions against a State
Appraiser Regulatory Agency that fails to have an effective appraiser
regulatory program.\164\ Proposed Sec. 1102.605 would specify the
enforcement actions that could be taken against State Appraiser
Regulatory Agencies to establish an effective and consistent
enforcement approach.
---------------------------------------------------------------------------
\164\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------
1. Interim Enforcement Actions
Section 1118(a) of Title XI specifically authorizes the ASC to
impose interim actions and suspensions against a State Appraiser
Regulatory Agency as an alternative to, or in advance of, the non-
recognition of a State Appraiser Regulatory Agency.\165\ Under
paragraph (a) of proposed Sec. 1102.605, the ASC would include three
types of potential interim enforcement actions against State Appraiser
Regulatory Agencies when the final report indicates that the level of
the regulatory program is less than effective: warning letters,
negotiated agreements, and suspensions.
---------------------------------------------------------------------------
\165\ Id.
---------------------------------------------------------------------------
Paragraph (a)(1) of proposed Sec. 1102.605 would include a warning
letter as a potential interim enforcement action against State
Appraiser Regulatory Agencies. A warning letter would be the least
severe form of an interim enforcement action and would communicate to a
State Appraiser Regulatory Agency any deficiencies in its regulatory
program. If the deficiencies are not addressed, the regulatory
program's effectiveness could be negatively impacted. Under paragraph
(a)(1) of proposed Sec. 1102.605, the ASC could consider issuing a
warning letter to a State Appraiser Regulatory Agency when the final
report indicates that the level of the regulatory program's
effectiveness is moderately effective or slightly effective.
The ASC would also include a negotiated agreement, under paragraph
(a)(2) of proposed Sec. 1102.605, as a potential interim enforcement
action. A negotiated agreement would involve a State Appraiser
Regulatory Agency agreeing to address deficiencies that hinder the
effectiveness of the regulatory program by taking certain actions or
refraining from certain actions within a specified timeframe. For
example, a negotiated agreement could involve the State Appraiser
Regulatory Agency preparing and submitting compliance plans, approved
by the ASC, outlining the corrective actions to be taken, specifying
the individuals responsible for the actions, and setting a timeframe
for completion. Under paragraph (a)(2) of proposed Sec. 1102.605, a
negotiated agreement could be employed when the final report indicates
that the regulatory program is slightly effective or ineffective. A
negotiated agreement could also be employed, under paragraph (a)(2) of
proposed Sec. 1102.605, when the State Appraiser Regulatory Agency
fails to rectify the identified deficiencies outlined in a previously
issued warning letter. The ASC believes a negotiated agreement would
provide the ASC with the flexibility to address and correct
deficiencies while working cooperatively with the State Appraiser
Regulatory Agency to rectify any deficiencies.
The last potential interim enforcement action included under
paragraph (a)(3) of proposed Sec. 1102.605 would be suspension, which
would be the most severe form of an interim enforcement action. Under
paragraph (a)(3) of proposed Sec. 1102.605, the ASC could potentially
prohibit a State Appraiser Regulatory Agency from performing certain
task(s) as part of its responsibilities under Title XI for a specified
time period. The tasks may involve, but are not limited to: (1) the
addition of State licensed or certified appraisers to the Appraiser
Registry or AMCs to the AMC Registry; (2) the issuance of upgrades of
individuals' level of licensure or certification to perform appraisals
in connection with federally related transactions; (3) renewal of
licenses or certifications of State licensed or certified appraisers
for the performance of appraisals in connection with federally related
transactions; or (4) the issuance of temporary licenses or
certifications to individuals who are licensed or certified in another
State to perform appraisals in connection with federally related
transactions in the suspended State Appraiser Regulatory Agency's
State, as set forth in section 1122(a) of Title XI (12 U.S.C. 3351(a)).
Under paragraph (a)(3) of proposed Sec. 1102.605, the ASC could apply
a suspension when the final report indicates that the regulatory
program is ineffective. The ASC could also apply a suspension, under
proposed Sec. 1102.605(a)(3), when a State Appraiser Regulatory Agency
refuses to enter into a negotiated agreement or a State Appraiser
Regulatory Agency fails to meet its obligations under the negotiated
agreement. This interim enforcement action is supported by the
statutory text found in section 1118(a) of Title XI that the ASC has
the authority to impose suspensions of a State Appraiser Regulatory
Agency as an alternative to, or in advance of, the non-recognition of a
State Appraiser Regulatory Agency.\166\ The proposed rule would also
provide a cross-reference to the procedures governing suspension
proceedings found at proposed Sec. 1102.606.
---------------------------------------------------------------------------
\166\ Id.
---------------------------------------------------------------------------
2. Non-Recognition
As referenced above, prior to the Dodd-Frank Act, Title XI
authorized the ASC to take only one enforcement action--non-
recognition--against a State Appraiser Regulatory Agency not operating
its Appraiser Program in a manner consistent with Title XI.\167\ Non-
recognition is the most severe enforcement action that the ASC could
impose against a State Appraiser Regulatory Agency. As noted in the
ASCAC meeting minutes dated April 17, 2014, the ASC should carefully
consider the economic impact of non-recognition before imposing such
action.\168\ To date, the ASC has not imposed non-recognition against a
State Appraiser Regulatory Agency.
---------------------------------------------------------------------------
\167\ See supra note 39.
\168\ See supra note 44.
---------------------------------------------------------------------------
[[Page 96926]]
Under paragraph (b) of proposed Sec. 1102.605, the ASC could
impose non-recognition when the ASC issues a written finding under
section 1118(b) of Title XI (12 U.S.C. 3347(b)) and a State Appraiser
Regulatory Agency fails to comply with the final order of suspension.
The ASC could also impose non-recognition under paragraph (b) of
proposed Sec. 1102.605 when the ASC issues a written finding pursuant
to section 1118(b) of Title XI (12 U.S.C. 3347(b)) and the final report
indicates that the regulatory program is ineffective.
F. Procedures Governing Suspension Proceedings
Proposed Sec. 1102.606 would codify, with some modifications and
minor non-substantive corrections, the procedures found in Policy
Statement 12 for the procedures governing suspension proceedings.\169\
Policy Statement 12 states the due process procedures that the ASC must
follow to exercise its authority to impose interim sanctions on State
Appraiser Regulatory Agencies.\170\ Consistent with the ASC's current
procedures in Policy Statement 12, the proposal would provide a written
notice of intention to suspend that is published in the Federal
Register and give the State Appraiser Regulatory Agency the opportunity
to respond to the notice.\171\ Under paragraph (a) of proposed Sec.
1102.606, the ASC would issue a written notice of intention (Notice) to
suspend the State Appraiser Regulatory Agency, which would be published
in the Federal Register. Policy Statement 12 states that the ASC would
verify the State Appraiser Regulatory Agency's date of receipt of the
Notice and publish the Notice in the Federal Register along with the
State Appraiser Regulatory Agency's date of receipt of the Notice.\172\
The ASC recognizes that verifying a State Appraiser Regulatory Agency's
date of receipt of the Notice could be problematic if a State Appraiser
Regulatory Agency refuses to acknowledge receipt of the Notice.
Therefore, paragraph (a)(2) of proposed Sec. 1102.606 would alleviate
this potential problem by requiring the ASC to serve notice upon the
State Appraiser Regulatory Agency by sending a copy of the Notice to
either the last known email or mailing address of the State Appraiser
Regulatory Agency's office and deeming the service complete upon
sending.
---------------------------------------------------------------------------
\169\ See Policy Statement 12, supra note 38 at 9159-9160.
\170\ Id.
\171\ Id. at 9159.
\172\ Id.
---------------------------------------------------------------------------
To ensure timely enforcement decisions, proposed Sec. 1102.606
would modify the procedural timeframes and deadlines applicable to a
State Appraiser Regulatory Agency or the ASC in Policy Statement 12
\173\ for a suspension proceeding. The ASC believes the procedural
timeframes and deadlines in proposed Sec. 1102.606 are reasonable for
several reasons. The proposal would permit the State Appraiser
Regulatory Agency to receive advance notice of the deficiencies through
the issuance of both preliminary and final reports. The proposed
timeframes would also allow the State Appraiser Regulatory Agency to
have approximately one month for each information-gathering phase of a
suspension proceeding, based on an estimated 20 business days in a
month. Finally, the proposed rule would authorize the ASC to grant a
waiver extending any time limit in connection with a suspension
proceeding on its own or for good cause shown.
---------------------------------------------------------------------------
\173\ Id. at 9159-9160.
---------------------------------------------------------------------------
Furthermore, the ASC believes that timely enforcement decisions
will help build and maintain public confidence in the appraiser
regulatory framework while promoting transparency and accountability.
This approach would also enhance the ASC's reputation by fostering
trust and credibility among State Appraiser Regulatory Agencies,
appraisers, AMCs, financial institutions, and the public.
Under paragraph (b) of proposed Sec. 1102.606, the State Appraiser
Regulatory Agency would have the opportunity to respond to the Notice
by submitting a response or a notice not to contest within 20 business
days after publication of the Notice in the Federal Register.
Currently, Policy Statement 12 states the State Appraiser Regulatory
Agency may submit a response within 15 business days of receipt of the
Notice.\174\ The ASC is proposing to extend the response timeframe by
an additional five business days, so the State Appraiser Regulatory
Agency would effectively have a month to reply to the Notice.
Consistent with the ASC's current procedures in Policy Statement 12,
the ASC may consider the facts presented in the Notice to be true and
issue a final order if a State Appraiser Regulatory Agency does not
submit a response or a notice not to contest.\175\
---------------------------------------------------------------------------
\174\ Id. at 9159.
\175\ Id.
---------------------------------------------------------------------------
Under paragraph (c) of proposed Sec. 1102.606, the State Appraiser
Regulatory Agency may file a written brief, memorandum, or other
statement presenting factual data, as well as policy and legal
arguments related to the matters outlined in the Notice. This
submission, under the proposed rule, must occur within 40 business days
following the publication of the Notice in the Federal Register.
According to Policy Statement 12, the State Appraiser Regulatory Agency
may file this documentation within 45 days after the date of receipt by
the State Appraiser Regulatory Agency of the Notice as published in the
Federal Register.\176\ The ASC is proposing to shorten the timeframe
for the reasons stated above.
---------------------------------------------------------------------------
\176\ Id.
---------------------------------------------------------------------------
The State Appraiser Regulatory Agency could also, under paragraph
(d) of proposed Sec. 1102.606, request an oral presentation to further
present, emphasize, and clarify the facts, policies, and laws regarding
the issues outlined in the Notice. Such a request must be made within
40 business days after publication of the Notice in the Federal
Register. Policy Statement 12 states that a State Appraiser Regulatory
Agency may request an oral presentation 45 business days after the date
of receipt by the State Appraiser Regulatory Agency of the Notice as
published in the Federal Register.\177\ The ASC is proposing to shorten
the timeframe for the reasons stated above.
---------------------------------------------------------------------------
\177\ Id.
---------------------------------------------------------------------------
Under paragraph (d) of proposed Sec. 1102.606, if a State
Appraiser Regulatory Agency requests an oral presentation, the ASC must
hear the matter within 20 business days of receiving the request.
Policy Statement 12 states the ASC must hear the matter within 45
business days of receiving the request.\178\ However, the ASC believes
that enforcement decisions should be made expeditiously to ensure the
soundness and effectiveness of the appraiser regulatory framework, so
the ASC is proposing a shorter 20-day timeframe to hear the oral
presentation.
---------------------------------------------------------------------------
\178\ Id.
---------------------------------------------------------------------------
Under paragraph (f) of proposed Sec. 1102.606, the ASC must make a
final decision on the matter by issuing a final order, within 80
business days after publication of the Notice in the Federal Register
or within 100 business days after publication of the Notice in the
Federal Register if the ASC receives a timely request for an oral
presentation. Policy Statement 12 states that the ASC must issue a
final order within 90 business days after the date of receipt by the
State Appraiser Regulatory Agency of the Notice as published in the
Federal Register or in the case of oral presentation having been
granted,
[[Page 96927]]
within 30 days after presentation.\179\ However, the ASC believes that
enforcement decisions should be made expeditiously to ensure the
soundness and effectiveness of the appraiser regulatory framework, so
the ASC is proposing a shorter general 80-day timeframe. The ASC also
believes a 100-day timeframe in the event of a timely submitted request
for an oral presentation is reasonable because the timeframe would
allow the ASC additional time to consider the State Appraiser
Regulatory Agency's oral presentation in its deliberations.
---------------------------------------------------------------------------
\179\ Id. at 9160.
---------------------------------------------------------------------------
Finally, paragraph (e)(3) of proposed Sec. 1102.606 would
authorize the ASC to grant a waiver extending any time limit in
connection with a suspension proceeding if the ASC deems such a waiver
to be appropriate. According to Policy Statement 12, the ASC may allow
the filing of a response by the State Appraiser Regulatory Agency after
the designated deadline for good cause shown.\180\ The ASC believes
that extending the timeframe for any part of a suspension proceeding--
beyond just the State Appraiser Regulatory Agency's response
timeframe--is fair and reasonable. The ASC would consider extensions
justified in cases that are unanticipated, unforeseeable, and beyond
the control of the State Appraiser Regulatory Agency or the ASC.
---------------------------------------------------------------------------
\180\ Id. at 9159.
---------------------------------------------------------------------------
G. Procedures Governing Non-Recognition Proceedings
Proposed Sec. 1102.607 would cross-reference the existing
procedures governing non-recognition proceedings as set forth in
subpart B of 12 CFR part 1102 to impose the enforcement action of non-
recognition against a State Appraiser Regulatory Agency.
III. Proposed Implementation Period
The ASC proposes a 12-month implementation period from the
effective date of any final rule based on this proposal. The ASC
understands that, if finalized, the proposed rule would impact the
Policy Statements. Accordingly, the ASC plans to revise the Policy
Statements to be consistent with any final rule based on this proposal
before the expiration of the proposed implementation period. However,
during the proposed implementation period, the existing Policy
Statements would continue to apply until revised. This compliance
period would also give State Appraiser Regulatory Agencies time to
comply with the rule.
IV. Request for Comment
The ASC is requesting comments on all aspects of this proposal. In
addition, the ASC requests comments on the following questions:
Question 1. What are the advantages and disadvantages of the ASC's
plan to extend the review cycle for Appraiser or AMC Programs overseen
by State Appraiser Regulatory Agencies from a two-year cycle to a
three-year cycle, particularly for those State Appraiser Regulatory
Agencies with an overall ASC Finding of Good or Excellent? What factors
should the ASC consider when deciding whether to extend the review
cycle to three years for Appraiser or AMC Programs overseen by State
Appraiser Regulatory Agencies, particularly when there is an overall
ASC Finding of Good or Excellent?
Question 2. Section 1118(a)(2) of Title XI \181\ requires the ASC
to monitor State Appraiser Regulatory Agencies to ensure that the
processing of complaints and completing investigations occurs in a
reasonable time period. The proposed rule would require that State
Appraiser Regulatory Agencies resolve all complaints against appraisers
and AMCs within one year (12 months) from the date the complaint is
received, except in special documented circumstances. What are the
benefits and challenges of the ASC's plan to reduce the complaint
resolution timeframe for State Appraiser Regulatory Agencies to a
period of time between 8 and 11 months? What factors should the ASC
consider when deciding whether to implement this reduction in the
complaint resolution timeframe?
---------------------------------------------------------------------------
\181\ 12 U.S.C. 3347(a)(2).
---------------------------------------------------------------------------
Question 3. Are there other mitigating or aggravating factors, such
as a legitimate threat to the integrity of the appraiser regulatory
framework, intentionally-caused unreasonable delays, or reasonable
reliance on competent legal advice, that the ASC should consider when
deciding whether to adjust the initial level of effectiveness of
Appraiser and AMC Programs as determined by the number of deficiencies
identified in the preliminary report?
Question 4. What barriers, if any, might prevent a State Appraiser
Regulatory Agency from responding to a written notice of intention to
suspend within 20 business days after its publication in the Federal
Register? If such barriers exist, what benefits or challenges could
arise from extending the response timeframe to a period of time between
30 and 60 business days?
Question 5. What barriers, if any, might prevent a State Appraiser
Regulatory Agency from submitting a written brief, memorandum, or other
statement within 40 business days after the written notice of intention
to suspend is published in the Federal Register? If such barriers
exist, what benefits or challenges could result from extending the
timeframe for filing a written brief, memorandum, or other statement to
a period of time between 50 and 100 business days?
Question 6. What barriers, if any, might prevent a State Appraiser
Regulatory Agency from requesting an oral presentation within 40
business days after the written notice of intention to suspend is
published in the Federal Register? If such barriers exist, what
benefits or challenges could result from extending the timeframe to a
period of time between 50 and 100 business days?
Question 7. What factors should the ASC consider when deciding
whether to extend the timeframe for issuing the final order from within
80 business days after the written notice of intention to suspend is
published in the Federal Register? Additionally, what are the
advantages and disadvantages of the ASC's plan to extend this timeframe
to a period of time between 90 and 180 business days?
Question 8. What factors should the ASC consider when deciding
whether to extend the timeframe for issuing the final order in response
to a request for an oral presentation within 100 business days after
the written notice of intention to suspend is published in the Federal
Register? Additionally, what are the advantages and disadvantages of
extending this timeframe to a period of time between 120 and 200
business days?
Question 9. What aspects of the proposed rule, if any, will be
challenging for State Appraiser Regulatory Agencies to implement within
12 months? To the extent such challenges exist, what benefits or
obstacles could result from extending the implementation period to a
period of time between 15 and 18 months? What factors should the ASC
consider when deciding whether to extend the implementation period to a
period of time greater than 12 months?
[[Page 96928]]
Question 10. In addition to providing time for implementation, in
what other ways should the ASC facilitate implementation for State
Appraiser Regulatory Agencies?
IV. Regulatory Requirements
A. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 \182\
requires that a notice of proposed rulemaking include the internet
address of a summary of not more than 100 words in length of a proposed
rule, in plain language, that shall be posted on the internet website
under section 206(d) of the E-Government Act of 2002 \183\ (commonly
known as <a href="http://regulations.gov">regulations.gov</a>).
---------------------------------------------------------------------------
\182\ 5 U.S.C. 553(b)(4).
\183\ 44 U.S.C. 3501 note.
---------------------------------------------------------------------------
The Appraisal Subcommittee (ASC) of the Federal Financial
Institutions Examination Council invites comment on a proposed rule to
implement a framework to govern the ASC's enforcement authority
regarding the effectiveness of Appraiser and Appraisal Management
Company (AMC) Programs overseen by State Appraiser Regulatory Agencies.
The proposed rule would codify the existing compliance review process
with modifications. The proposed rule would require an analysis to
assess program effectiveness, outline requirements for maintaining
effective programs, and authorize the ASC to bring enforcement actions
against such agencies that fail to maintain effective programs. The
proposed rule and summary are available at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
B. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (PRA),\184\
and its implementing regulations,\185\ the ASC has reviewed this
proposed rule and has determined that the information collection
required by this proposed rule is exempt from the coverage of the PRA.
Each compliance review is an audit dependent on the specific facts
involved because each State Appraiser Regulatory Agency has the
flexibility to design its Appraiser or AMC Programs to meet its Title
XI responsibilities. Each State Appraiser Regulatory Agency may face
different legal, fiscal, regulatory, or other factors that can
influence its governance structure. Under the proposed rule, the
collection of information would occur during the performance of an
audit involving the ASC against specific entities.\186\
---------------------------------------------------------------------------
\184\ 44 U.S.C. 3501 et seq.
\185\ 5 CFR part 1320.
\186\ 5 CFR 1320.4(a)(2).
---------------------------------------------------------------------------
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency,
in connection with a proposed rule, to prepare and make available for
public comment an initial regulatory flexibility analysis that
describes the impact of a proposed rule on small entities.\187\
However, the regulatory flexibility analysis is not required if an
agency certifies that the proposed rule would not, if adopted, have a
significant economic impact on a substantial number of small entities
and publishes its certification and a brief explanatory statement in
the Federal Register with the proposed rule.\188\ For the reasons
stated below, the ASC believes that the proposed rule, if adopted,
would not have a significant economic impact on a substantial number of
small entities.
---------------------------------------------------------------------------
\187\ 5 U.S.C. 601 et seq.
\188\ Id.
---------------------------------------------------------------------------
Title XI requires the ASC to monitor the requirements established
by States that (1) license, certify, and supervise appraisers qualified
to perform appraisals in connection with federally related transactions
and (2) register and supervise the operations and activities of
AMCs.\189\ The ASC monitors States that have established Appraiser and
AMC Programs through periodic or accelerated compliance reviews. Under
the proposal, the ASC would conduct an analysis as part of its
compliance review process to assess the effectiveness of Appraiser and
AMC Programs administered by State Appraiser Regulatory Agencies. The
ASC would be authorized to bring an enforcement action against a State
Appraiser Regulatory Agency if the agency fails to have an effective
Appraiser or AMC Program.
---------------------------------------------------------------------------
\189\ See, e.g., 12 U.S.C. 3331, 3332(a)(1), 3346 and 3347(a).
---------------------------------------------------------------------------
This proposed rule would apply to all States that have established
Appraiser and AMC Programs under Title XI. All 50 States and the
District of Columbia have Appraiser and AMC Programs.\190\ The District
of Columbia has two separate and distinct agencies--the Department of
Licensing and Consumer Protection and the Department of Insurance,
Securities and Banking--that administer the Appraiser and AMC Programs.
The Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, Guam, and the U.S. Virgin Islands only have Appraiser
Programs and not AMC Programs. American Samoa does not have a
regulatory oversight structure for appraisers because real estate can
only be inherited.\191\ As a result, 56 State Appraiser Regulatory
Agencies would be subject to this proposed rule.
---------------------------------------------------------------------------
\190\ Hawaii's AMC Program sunset on June 30, 2023. However,
House Bill 2641 was signed into law on June 21, 2024, to reenact the
version of the AMC Program that was originally part of the Hawaii
Department of Commerce and Consumer Affairs. The AMC Program
established pursuant to House Bill 2641 commenced September 1, 2024.
\191\ Government Accountability Office, GAO-03-404, Regulatory
Programs: Opportunities to Enhance Oversight of the Real Estate
Appraisal Industry, at 2 (2003).
---------------------------------------------------------------------------
Given the definition of ``small entities'' under the RFA,\192\ the
ASC analyzed the population data from the U.S. Census Bureau \193\ for
all 50 States, the District of Columbia, and the Commonwealth of Puerto
Rico to determine whether any State Appraiser Regulatory Agencies could
be considered ``small governmental jurisdictions.'' Wyoming was the
least populated.\194\ Wyoming's population was estimated to be 576,850
on April 1, 2020, and has increased to 584,057 on July 1, 2023.\195\
The ASC also analyzed the population data from the Central Intelligence
Agency's (CIA) World Factbook website \196\ for the U.S. territories of
American Samoa,\197\ Guam,\198\ the Commonwealth of the Northern
Mariana Islands,\199\ and the U.S. Virgin Islands.\200\ American Samoa
and the Commonwealth of the Northern Mariana Islands were the least
populated. According to the CIA's World Factbook website, American
Samoa's total population was 43,895, and the Commonwealth of the
Northern
[[Page 96929]]
Mariana Islands' total population was 51,118.\201\ Only American Samoa
meets the definition of a ``small governmental jurisdiction'' under the
RFA, with a population of less than 50,000.\202\ However, American
Samoa is not subject to the proposed rule because American Samoa has
not established Appraiser and AMC Programs for the reasons stated
above.\203\ Therefore, an analysis under the RFA is not required
because the 56 State Appraiser Regulatory Agencies are not considered
small entities \204\ under RFA.
---------------------------------------------------------------------------
\192\ The RFA defines ``small entities'' as small businesses,
small not-for-profit organizations, and small government
jurisdictions. See 5 U.S.C. 601(6). A ``small business'' is
determined by applying Small Business Administration regulations and
referencing the North American Industry Classification System
(NAICS) classifications and size standards. See 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.''
See 5 U.S.C. 601(4). A ``small governmental jurisdiction'' means
``governments of a city, county, town, township, village, school
district, or special district with a population of less than
50,000.'' See 5 U.S.C. 601(5).
\193\ U.S. Census Bureau, Population Division, Annual Estimates
of the Resident Population for the United States, Regions, States,
District of Columbia, and Puerto Rico: Apr. 1, 2020, to July 1, 2023
(NST-EST2023-POP) (December 2023).
\194\ Id.
\195\ Id.
\196\ Central Intelligence Agency, The World Factbook, available
at <a href="https://www.cia.gov/the-world-factbook">https://www.cia.gov/the-world-factbook</a> (visited on Nov. 4, 2024).
\197\ Id. American Samoa's total population was 43,895.
\198\ Id. Guam's total population was 169,532.
\199\ Id. The Commonwealth of the Northern Mariana Islands'
total population was 51,118.
\200\ Id. The U.S. Virgin Island's total population was 104,377.
\201\ Id.
\202\ See supra note 192.
\203\ See supra note 191.
\204\ See supra note 192.
---------------------------------------------------------------------------
Any economic impact of the proposed rule, if adopted, on State
licensed and certified appraisers and registered AMCs would be indirect
because real estate appraisers and AMCs are not subject to the proposed
rule. The ASC does not also directly oversee or regulate the 91,670
State licensed and certified real estate appraisers listed on the
Appraiser Registry \205\ reporting from 55 State Appraiser Regulatory
Agencies, or 4,943 AMCs listed on the AMC Registry \206\ reporting from
50 State Appraiser Regulatory Agencies.\207\ California issues the most
licenses and certifications for real estate appraisers (7,803), and the
Commonwealth of the Northern Mariana Islands issues the fewest
(5).\208\ As for AMC registrations, Florida registers the most (198),
and Kentucky registers the fewest (28).\209\
---------------------------------------------------------------------------
\205\ The actual number of State licensed or certified real
appraisers is probably less because it is not uncommon for the same
appraiser to hold multiple licenses or certifications from the same
State or different States. The total number of State licensed and
certified appraisers was current as of November 1, 2024.
\206\ The actual number of AMCs is probably significantly less
because most AMCs are registered in multiple States. The total
number of registered AMCs was current as of November 1, 2024.
\207\ Since Hawaii's AMC Program sunset on June 30, 2023, Hawaii
has not submitted data to the AMC Registry. The ASC anticipates that
Hawaii will begin collecting registry fees and submitting data to
the AMC Registry once Hawaii has completed its implementation phase
to re-establish the process for collecting AMC registry fees and
submitting data to the AMC Registry.
\208\ This data was current as of November 1, 2024.
\209\ Id.
---------------------------------------------------------------------------
Additionally, this proposed rule would not create additional
recordkeeping, reporting, and compliance requirements on State licensed
and certified appraisers and registered AMCs. Any recordkeeping,
reporting, and compliance requirements are imposed by State law, not
this proposed rule. The ASC regulates State licensed and certified
appraisers and registered AMCs only indirectly by monitoring and
enforcing the requirements and practices of State Appraiser Regulatory
Agencies.\210\ In American Trucking Associations, Inc., v. the United
States Environmental Protection Agency, the United States Court of
Appeals stated, ``[w]e have consistently interpreted the RFA, [. . .],
to impose no obligation upon an agency [`]to conduct a small entity
impact analysis of effects on entities which it does not regulate.[']''
\211\ The United States Court of Appeals further stated, ``an agency
may justify its certification under the RFA upon the [`]factual
basis[']that the rule does not directly regulate any small entities.''
\212\
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\210\ The ASC's authority under 12 U.S.C. 3347(a) regarding the
interim removal of an appraiser or AMC from their respective
registry is distinguishable because the ASC is only authorized to do
so pending State agency action and State Appraiser Regulatory
Agencies directly oversee and regulate such appraisers and AMCs. In
addition, that authority is outside of the scope of this rulemaking.
\211\ American Trucking Associations, Inc. v. U.S. E.P.A., 175
F.3d 1027, 1044 (1999) (quoting Motor & Equipment Manufacturers.
Association v. Nichols, 142 F.3d 449, 467 & n. 18 (1998)).
\212\ Id. at 1045.
---------------------------------------------------------------------------
Based on this analysis, the ASC believes that the proposed rule, if
adopted, would not have a significant economic impact on a substantial
number of small entities. Therefore, the ASC certifies that the
proposed rule, if adopted, would not have a significant economic impact
on a substantial number of small entities. Accordingly, an initial
regulatory flexibility analysis is not required. The ASC requests
comment on all aspects of this analysis.
D. The Unfunded Mandates Reform Act of 1995 Determination
Although the Unfunded Mandates Reform Act of 1995 (UMRA) \213\ does
not apply to independent agencies, the ASC voluntarily analyzed the
proposed rule under the factors in the UMRA. Under this analysis, the
ASC considered whether the proposed rule includes a Federal mandate
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 reason, the ASC finds that the proposed rule does not
trigger the $100 million UMRA thresholds. First, the costs specifically
related to requirements set forth in law are excluded from expenditures
under the UMRA. Given that the proposed rule reflects requirements
arising from section 1118 of Title XI,\214\ the UMRA cost estimate for
the proposal, if implemented, is zero. Second, such costs to State,
local, and Tribal governments may be paid with Federal financial
assistance. Section 1109(b)(5) of Title XI \215\ allows the ASC to make
grants to State Appraiser Regulatory Agencies to support the efforts of
such agencies to comply with Title XI, such as the complaint process,
complaint investigations, appraiser enforcement activities, and the
submission of data on State licensed and certified appraisers to the
Appraiser Registry or AMCs to the AMC Registry. For these reasons, the
ASC has determined that this proposed 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
proposal is not subject to section 202 of the UMRA.
---------------------------------------------------------------------------
\213\ 2 U.S.C. 1532.
\214\ 12 U.S.C. 3347.
\215\ 12 U.S.C. 3338(b)(5).
---------------------------------------------------------------------------
List of Subjects in 12 CFR Part 1102
Administrative practice and procedure, Appraisal management
companies, Appraisal management company registry fees, Appraisers,
Banks, banking, Enforcement actions, Freedom of information,
Investigations, Licensing and registration, Mortgages, Organization and
functions (Government agencies), Privacy, Reporting and recordkeeping
requirements, and State and local governments.
Authority and Issuance
For the reasons set forth in the preamble, the Federal Financial
Institutions Examination Council proposes to amend 12 CFR part 1102 as
follows:
PART 1102--APPRAISER REGULATION
0
1. The authority citation for part 1102 is revised to read as follows:
Authority: 12 U.S.C. 3332, 3335, 3338(a)(4)(B), 3347, 3348(a),
3348(b), 3348(c), 5 U.S.C. 552a, 553(e); E.O. 12600, 52 FR 23781, 3
CFR, 1987 Comp., p. 235.
0
2. Subpart F to part 1102 is added to read as follows:
Subpart F--Appraisal Subcommittee Enforcement Authority Regarding
the Effectiveness of State Appraiser and Appraisal Management
Company Regulatory Programs
Sec.
1102.600 Authority, purpose, and scope.
1102.601 Definitions.
1102.602 Compliance reviews.
1102.603 Analysis of a regulatory program's effectiveness.
1102.604 Mitigating and aggravating factors.
1102.605 Enforcement actions.
[[Page 96930]]
1102.606 Procedures governing suspension proceedings.
1102.607 Procedures governing non-recognition proceedings.
Sec. 1102.600 Authority, purpose, and scope.
(a) Authority. This subpart is issued by the Appraisal Subcommittee
(ASC) under sections 1103, 1106, and 1118 of Title XI of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (Pub. L.
101-73, 103 Stat. 183 (1989)), as amended by the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act) (Pub. L. 111-203,
124 Stat. 1376 (2010)), 12 U.S.C. 3332, 3335, and 3347 (Title XI).
(b) Purpose and scope. The purpose of this subpart is to implement
the ASC's monitoring and enforcement authority pursuant to section 1118
of Title XI (12 U.S.C. 3347) regarding the effectiveness of appraiser
and appraisal management company regulatory programs administered by
State Appraiser Regulatory Agencies. This subpart applies to all State
Appraiser Regulatory Agencies.
Sec. 1102.601 Definitions.
For the purposes of this subpart:
AMC Registry means the national registry maintained by the ASC of
entities that meet the Federal definition of an AMC, as defined in 12
U.S.C. 3350(11), are either registered by a State or are federally
regulated AMCs and have paid the annual AMC registry fee.
AMC Registry Fee Rule means the ASC's regulations on the collection
and transmission of AMC Registry fees as codified in subpart E of this
part.
AMC Rule 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, and the
Federal Housing Finance Agency regarding the minimum requirements for
AMCs under section 1124 of Title XI (12 U.S.C. 3353). (12 CFR 34.210
through 34.216; 12 CFR 225.190 through 225.196; 12 CFR 323.8 through
323.14; 12 CFR 1222.20 through 1222.26).
Appraisal management company (AMC) means:
(1) A person that:
(i) Provides appraisal management services to creditors or to
secondary mortgage market participants, including affiliates as defined
in 12 U.S.C. 1841;
(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, 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.
(2) An AMC does not include a department or division of an entity
that provides appraisal management services only to that entity.
Appraisal management services 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 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.
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 subpart 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.
Appraisal Subcommittee (ASC) means the Appraisal Subcommittee of
the Federal Financial Institutions Examination Council established
under the Federal Financial Institutions Examination Council Act of
1978 (12 U.S.C. 3301 et seq.) as amended by section 1102 of Title XI
(12 U.S.C. 3310).
Appraiser Registry means the national registry maintained by the
ASC of State licensed and certified appraisers, as defined in 12 U.S.C.
3345, who are eligible to perform appraisals in federally related
transactions and have paid the annual appraiser registry fee.
AQB Criteria means the minimum requirements for the licensure and
certification of real estate appraisers and the minimum requirements
for trainee and supervisory appraisers established by the Appraiser
Qualifications Board of the Appraisal Foundation as contemplated by 12
U.S.C. 3345.
Assignment means, for purposes of this subpart with respect to
temporary practice, one or more real estate appraisals and written
appraisal report(s) covered by a single contractual agreement.
Consumer credit means credit offered or extended to a consumer
primarily for personal, family, or household purposes.
Covered transaction means any consumer credit transaction secured
by the consumer's principal dwelling.
Days means business days. The date of the act, event, or default
from which the designated period begins to run is omitted, and the last
day is included.
Deficiency means the ASC's determination that a State Appraiser
Regulatory Agency has not demonstrated to the ASC's reasonable
satisfaction that its regulatory program is operating consistently with
the specified requirements of a program function as set forth in Sec.
1102.603(c).
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 subpart.
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.
Federally related transaction means any real estate-related
financial transaction which:
(1) A Federal financial institutions regulatory agency engages in,
contracts for, or regulates; and
(2) Requires the services of an appraiser under the appraisal rules
(Title XI, section 1121(4), 12 U.S.C. 3350(4), implemented by the
Office of the Comptroller of the Currency: 12 CFR part 34; Federal
Reserve Board: 12 CFR
[[Page 96931]]
part 225; Federal Deposit Insurance Corporation: 12 CFR part 323; and
National Credit Union Administration: 12 CFR part 722).
Final order means an order issued by the ASC that includes findings
of fact, conclusions of law, and, if applicable, the terms of a related
enforcement action imposed against a State Appraiser Regulatory Agency
for failing to have an effective regulatory program.
Final report means a document that records the ASC's final
monitoring findings and analysis of the regulatory program's
effectiveness, as required in Sec. 1102.603, identifying any
deficiencies. The final report also includes the ASC's final assessment
of the regulatory program's level of effectiveness, adjusted for the
State Appraiser Regulatory Agency's response to the preliminary report
and relevant mitigating and aggravating factors in Sec. 1102.604.
Financial institution means an insured depository institution as
defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C.
1813) or an insured credit union as defined in section 101 of the
Federal Credit Union Act (12 U.S.C. 1752).
Negotiated agreement means a written agreement signed between the
ASC and a State Appraiser Regulatory Agency to correct deficiencies
that negatively impact the regulatory program's effectiveness. The
agreement may provide that the State Appraiser Regulatory Agency
commits to taking a certain action or actions or to refraining from a
certain action or actions by a specified time.
Non-recognition means the ASC and all agencies, instrumentalities,
and federally recognized entities under Title XI shall not recognize or
accept appraiser licenses and certifications issued by a State
Appraiser Regulatory Agency whose policies, practices, funding,
staffing, or procedures are found to be inconsistent with Title XI and
Federal regulations promulgated thereunder. ``Non-recognition'' is
synonymous with ``derecognition,'' which is referenced in section 1118
of Title XI (12 U.S.C. 3347).
Person means a natural person or an organization, including a
corporation, partnership, proprietorship, association, cooperative,
estate, trust, or government unit.
Preliminary report means a document that records the initial
monitoring findings and analysis of the regulatory program's
effectiveness, as required in Sec. 1102.603, identifying any
deficiencies. The preliminary report also includes the ASC's initial
assessment of the program's level of effectiveness.
Program functions mean those responsibilities of a State Appraiser
Regulatory Agency that the ASC will examine and include in its analysis
of the effectiveness of a State Appraiser Regulatory Agency's
regulatory program, consistent with section 1118(a) of Title XI (12
U.S.C. 3347(a)).
(1) There are five program functions for State appraiser regulatory
programs:
(i) Licensing and certification of appraisers;
(ii) Issuance of temporary licenses and certifications for
appraisers;
(iii) Receiving and tracking of submitted complaints against
appraisers;
(iv) Investigation of complaints against appraisers; and
(v) Enforcement actions against appraisers.
(2) There are four program functions for State AMC regulatory
programs:
(i) Registration of AMCs;
(ii) Receiving and tracking of submitted complaints against AMCs;
(iii) Investigation of complaints against AMCs; and
(iv) Enforcement actions against AMCs.
Secretary means the Secretary of the ASC under its Rules of
Operation.
Special documented circumstances mean well-documented and monitored
extenuating circumstances, evaluated by the ASC, that are beyond the
control of the State Appraiser Regulatory Agency and result in a
complaint processing delay.
State means any State of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the
Northern Mariana Islands, Guam, the U.S. Virgin Islands, and American
Samoa.
State Appraiser Regulatory Agency means a State agency that
certifies and licenses real estate appraisers and registers and
supervises AMCs or otherwise regulates real estate appraisers and AMCs
who operate in that State consistent with section 1121(1) of Title XI
(12 U.S.C. 3350(1)). ``State Appraiser Regulatory Agency'' is
synonymous with ``State appraiser certifying and licensing agency'' as
defined in section 1121(1) of Title XI (12 U.S.C. 3350(1)). To the
extent that the registration and supervision of AMCs is carried out by
a separate and distinct agency or agencies within a State, each such
agency is also a State Appraiser Regulatory Agency.
State certified appraiser means an individual who has satisfied the
requirements for certification in a State whose criteria for
certification as a real estate appraiser meet or exceed the applicable
minimum AQB Criteria as prescribed in section 1116(a) and (b) of Title
XI (12 U.S.C. 3345(a) and (b)).
State licensed appraiser means an individual who has satisfied the
requirements for licensing in a State whose criteria for the licensing
of a real estate appraiser meet or exceed the applicable minimum AQB
Criteria as prescribed in section 1116(c) of Title XI (12 U.S.C.
3345(c)).
Supervisory appraiser means an individual who has satisfied the
requirements in a State whose applicable requirements for supervision
of a trainee appraiser meet or exceed the applicable minimum AQB
Criteria as prescribed in section 1116(e) of Title XI (12 U.S.C.
3345(e)).
Suspension means the State Appraiser Regulatory Agency is
prohibited from performing a certain task or certain tasks as part of
the State Appraiser Regulatory Agency's responsibilities under Title XI
for a specified period of time as stated in the final order. The
suspension remains in effect until the suspension is lifted by the ASC.
The ASC may lift the suspension on the finding that the terms and
conditions of the final order are satisfied.
Trainee appraiser means an individual who has satisfied the
requirements in a State whose applicable requirements meet or exceed
the applicable minimum AQB Criteria as prescribed in section 1116(e) of
Title XI (12 U.S.C. 3345(e)).
Uniform Standards of Professional Appraisal Practice (USPAP) means
the appraisal standards promulgated by the Appraisal Standards Board of
the Appraisal Foundation.
Warning letter means a letter issued by the ASC informing a State
Appraiser Regulatory Agency of a deficiency or deficiencies relating to
its regulatory program that, if not addressed, could negatively impact
the regulatory program's effectiveness.
Sec. 1102.602 Compliance reviews.
(a) Monitoring of State appraiser and AMC regulatory programs. The
ASC shall monitor appraiser and AMC regulatory programs administered by
State Appraiser Regulatory Agencies in accordance with sections
1103(a)(1) and 1118(a) of Title XI (12 U.S.C. 3332(a)(1) and 3347(a)).
(b) Frequency of compliance reviews. (1) The ASC will conduct
compliance reviews on either a two-year cycle or one-year cycle as part
of its routine monitoring but may use an alternate review schedule at
its sole discretion.
(2) The ASC may conduct follow-up reviews and additional monitoring
on specific areas identified during a compliance review. The ASC may
[[Page 96932]]
schedule a follow-up review within 6 to 12 months after the previous
compliance review or at a time deemed appropriate by the ASC.
(3) The ASC may conduct accelerated compliance reviews when there
are indications that a regulatory program might not be operating
consistently with Title XI or Federal regulations promulgated
thereunder.
(4) When a State Appraiser Regulatory Agency oversees both
appraiser and AMC regulatory programs, the ASC may assign each
regulatory program the same or different review cycles.
(c) Performance of compliance reviews. (1) During compliance
reviews, the ASC will examine records and may conduct interviews with
State Appraiser Regulatory Agency representatives.
(2) After completing the examination of records and interviews, the
ASC will prepare the preliminary report that includes the ASC's initial
determination of the level of effectiveness of the regulatory program
as outlined in Sec. 1102.603(b).
(3) A State Appraiser Regulatory Agency may respond within 60 days
from the date of the preliminary report. The response may include
additional documentation showing the State Appraiser Regulatory
Agency's efforts to remedy any findings or deficiencies identified in
the preliminary report. The ASC may, on its own initiative or for good
cause shown, issue a waiver extending the 60-day time limit in
connection with a State Appraiser Regulatory Agency's response to the
preliminary report under this section.
(4) After receiving the State Appraiser Regulatory Agency's
response to the preliminary report, the ASC will prepare a final report
that includes the ASC's final determination of the level of
effectiveness of the regulatory program as outlined in Sec.
1102.603(b).
(d) Responsibilities of State Appraiser Regulatory Agencies. State
Appraiser Regulatory Agencies must maintain sufficient documentation to
demonstrate that their appraiser and AMC regulatory programs operate
consistently with Title XI and Federal regulations promulgated
thereunder. Documentation must be made available for inspection, as
requested by the ASC, including access to the information stored in any
electronic system or providing access to the electronic system itself.
Sec. 1102.603 Analysis of a regulatory program's effectiveness.
(a) Analysis of the regulatory program's effectiveness. The ASC
will assess the effectiveness of a regulatory program, as required by
section 1118 of Title XI (12 U.S.C. 3347), by conducting an analysis of
the applicable program functions. The ASC will examine whether the
State Appraiser Regulatory Agency's regulatory program is operating
consistently with the specified requirements of each program function
in paragraph (c) of this section. If any deficiencies are found, the
ASC will document the deficiencies in both the preliminary and final
reports consistent with this subpart.
(b) Assessment of the regulatory program's effectiveness--(1)
Initial assessment of the regulatory program's effectiveness. The ASC
will assess the initial effectiveness of a State appraiser or AMC
regulatory program on the basis of the number of deficiencies per
program function as identified in the preliminary report as follows:
(i) Effective regulatory program. (A) A State appraiser regulatory
program is considered ``effective'' if there is no more than one
deficiency in each of not more than two separate program functions.
(B) A State AMC regulatory program is considered ``effective'' if
there is no more than one deficiency in any single program function.
(ii) Moderately effective regulatory program. (A) A State appraiser
regulatory program is considered ``moderately effective'' if there is
no more than one deficiency in each of not more than three separate
program functions or no more than two deficiencies in one program
function.
(B) A State AMC regulatory program is considered ``moderately
effective'' if there is no more than one deficiency in each of not more
than two separate program functions.
(iii) Slightly effective regulatory program. (A) A State appraiser
regulatory program is considered ``slightly effective'' if there is no
more than one deficiency in each of not more than four separate program
functions, no more than two deficiencies in each of two separate
program functions, or no more than three deficiencies in one program
function.
(B) A State AMC regulatory program is considered ``slightly
effective'' if there is no more than one deficiency in each of not more
than three separate program functions or no more than two deficiencies
in one program function.
(iv) Ineffective regulatory program. (A) A State appraiser
regulatory program is considered ``ineffective'' if there are one or
more deficiencies in each of five separate program functions, two or
more deficiencies in each of three or more separate program functions,
or four or more deficiencies in one or more program functions.
(B) A State AMC regulatory program is considered ``ineffective'' if
there are one or more deficiencies in each of four separate program
functions, two or more deficiencies in each of two or more separate
program functions, or three or more deficiencies in one or more program
functions.
(2) Final assessment of the regulatory program's effectiveness. The
ASC will consider whether the State Appraiser Regulatory Agency's
response to the preliminary report and any relevant mitigating and
aggravating factors in Sec. 1102.604 justify an increase or decrease
in the level of the regulatory program's effectiveness for the final
report.
(c) Specified requirements of the applicable program functions for
State appraiser and AMC regulatory programs--(1) State appraiser
regulatory program. A State Appraiser Regulatory Agency must
demonstrate to the ASC's reasonable satisfaction that its appraiser
regulatory program is operating consistently with the specified
requirements of each program function:
(i) Licensing and certification of appraisers. (A) The State
Appraiser Regulatory Agency's licensing and certification requirements
must meet the minimum requirements set forth in section 1116 of Title
XI (12 U.S.C. 3345).
(B) The State Appraiser Regulatory Agency's trainee and supervisory
appraiser requirements, if applicable, must meet the minimum
requirements set forth in section 1116 of Title XI (12 U.S.C. 3345).
(C) The State Appraiser Regulatory Agency must use the designations
for trainee appraisers, State licensed appraisers, and State certified
appraisers in accordance with section 1116 of Title XI (12 U.S.C.
3345).
(D) The State Appraiser Regulatory Agency must use permitted scopes
of practice for State licensed and certified appraisers in accordance
with sections 1113 and 1114 of Title XI (12 U.S.C. 3342 and 3343).
(E) The State Appraiser Regulatory Agency must process applications
in a timely, consistent, equitable, and well-documented manner in
accordance with Title XI.
(F) The State Appraiser Regulatory Agency must ensure that
individuals who process applications are knowledgeable about section
1116 of Title XI (12 U.S.C. 3345) as evaluated by the ASC.
(G) The State Appraiser Regulatory Agency must have a reciprocity
policy for issuing a reciprocal license or certification for an
individual from
[[Page 96933]]
another State in accordance with section 1122(b) of Title XI (12 U.S.C.
3351(b)).
(H) The State Appraiser Regulatory Agency must ensure that all
approved applicants meet the applicable minimum requirements of the AQB
Criteria.
(I) The State Appraiser Regulatory Agency must ensure that
appraiser education courses are consistent with the AQB Criteria.
(J) The State Appraiser Regulatory Agency must obtain and maintain
sufficient documentation pertaining to all applications, including
initial licenses or certifications, upgrades, renewals, reinstatements,
and supervisory approvals, to create a record of facts and
determinations and the reasons for those determinations made by the
State Appraiser Regulatory Agency.
(K) The State Appraiser Regulatory Agency must report appraiser
data on the issuance and renewal of licenses and certifications on a
timely basis to the Appraiser Registry in accordance with section
1109(a)(2) of Title XI (12 U.S.C. 3338(a)(2)).
(ii) Issuance of temporary licenses and certifications for
appraisers. (A) The State Appraiser Regulatory Agency must recognize
the license or certification of an appraiser issued by another State
Appraiser Regulatory Agency on a temporary basis in accordance with
section 1122(a)(1) of Title XI (12 U.S.C. 3351(a)(1)).
(B) The State Appraiser Regulatory Agency must not impose excessive
fees for a temporary license or certification in accordance with
section 1122(a)(2) of Title XI (12 U.S.C. 3351(a)(2)).
(C) The State Appraiser Regulatory Agency must not impose
burdensome requirements, as determined by the ASC, for temporary
practice in accordance with section 1122(a)(2) of Title XI (12 U.S.C.
3351(a)(2)).
(D) The State Appraiser Regulatory Agency must issue temporary
licenses or certifications within five days after receiving a complete
application for such issuance in accordance with section 1122(a) of
Title XI (12 U.S.C. 3351(a)).
(E) The State Appraiser Regulatory Agency must issue temporary
licenses or certifications on an assignment basis and must allow for at
least one extension through a streamlined process in accordance with
section 1122(a) of Title XI (12 U.S.C. 3351(a)).
(F) The State Appraiser Regulatory Agency must issue temporary
licenses or certifications designating the effective date in accordance
with section 1122(a) of Title XI (12 U.S.C. 3351(a)).
(G) The State Appraiser Regulatory Agency must track all temporary
licenses or certifications using a permit log or system.
(H) The State Appraiser Regulatory Agency must supervise all
individuals to whom the State Appraiser Regulatory Agency issues a
temporary license or certification while performing assignments in its
State, must discipline such individuals, when appropriate, for
misconduct or wrongdoing, and must report each disciplinary action to
the ASC and other appropriate State Appraiser Regulatory Agencies to
ensure effective supervision in accordance with sections 1117, 1118,
and 1122(a) of Title XI (12 U.S.C. 3346, 3347, and 3351(a)).
(I) The State Appraiser Regulatory Agency must obtain and maintain
documentation sufficient to create a record of the basis for the
determinations made by the State Appraiser Regulatory Agency in
processing and issuing temporary licenses or certifications.
(iii) Receiving and tracking of submitted complaints against
appraisers. (A) The State Appraiser Regulatory Agency must have a
system for processing and investigating complaints and sanctioning
trainee appraisers, State licensed appraisers, and State certified
appraisers in a timely, effective, consistent, equitable, and well-
documented manner.
(B) The State Appraiser Regulatory Agency must track and monitor
all complaints using a complaint log or system.
(iv) Investigation of complaints against appraisers. (A) The State
Appraiser Regulatory Agency must require appraisals to be performed in
accordance with the latest version of USPAP in accordance with sections
1101 and 1103(a)(1)(A) of Title XI (12 U.S.C. 3331 and 3332(a)(1)(A)).
(B) When examining an appraisal report in connection with a
complaint, including complaints based solely on value, the State
Appraiser Regulatory Agency must consider whether any potential
violations of USPAP should be investigated.
(C) To ensure effective supervision, the State Appraiser Regulatory
Agency must resolve all complaints filed against trainee appraisers,
State licensed appraisers, and State certified appraisers within one
year (12 months) from the date the complaint was received except in
special documented circumstances.
(D) The State Appraiser Regulatory Agency must ensure that
individuals who analyze complaints are knowledgeable about Title XI,
USPAP, and appraisal practices and must document how such individuals
are qualified, which will be evaluated by the ASC.
(E) The State Appraiser Regulatory Agency must obtain and maintain
documentation sufficient to create a record of the facts and
determinations made by the State Appraiser Regulatory Agency in
processing and investigating a complaint and the reasons for its final
disposition.
(v) Enforcement actions against appraisers. (A) The State Appraiser
Regulatory Agency must supervise trainee appraisers, State licensed
appraisers, and State certified appraisers and must discipline such
individuals, when appropriate, for misconduct and wrongdoing.
(B) The State Appraiser Regulatory Agency must report all
disciplinary actions against State licensed and certified appraisers to
the ASC within five days after the disciplinary action is final as
determined by State law.
(2) State AMC regulatory program. A State Appraiser Regulatory
Agency must demonstrate to the ASC's reasonable satisfaction that its
AMC regulatory program is operating consistently with the stated
requirements of each program function:
(i) Registration of AMCs. (A) The State Appraiser Regulatory Agency
must establish and maintain an AMC regulatory program with legal
authority and mechanisms consistent with Title XI, the AMC Rule, and
the AMC Registry Fee Rule.
(B) The State Appraiser Regulatory Agency must impose requirements
on AMCs that are consistent with Title XI and the AMC Rule.
(C) The State Appraiser Regulatory Agency must enforce and document
ownership limitations for AMCs in a manner consistent with Title XI and
the AMC Rule.
(D) The State Appraiser Regulatory Agency must process AMC
applications in a timely, consistent, equitable, and well-documented
manner in accordance with Title XI, the AMC Rule, and the AMC Registry
Fee Rule.
(E) The State Appraiser Regulatory Agency must ensure that
individuals who process applications are knowledgeable about Title XI
and the AMC Rule as evaluated by the ASC.
(F) The State Appraiser Regulatory Agency must obtain and maintain
documentation sufficient to create a record of the basis for its
determinations for AMC eligibility for the AMC Registry, including the
appraiser panel requirements, ownership limitations, and AMC Registry
fee collection and submission to the ASC.
[[Page 96934]]
(G) The State Appraiser Regulatory Agency must report AMCs eligible
for the AMC Registry on a timely basis to the ASC in accordance with
section 1109(a)(3) of Title XI (12 U.S.C. 3338(a)(3)) and the AMC
Registry Fee Rule.
(ii) Receiving and tracking of submitted complaints against AMCs.
(A) The State Appraiser Regulatory Agency must have a system for
processing and investigating complaints and sanctioning AMCs (other
than federally regulated AMCs) in a timely, effective, consistent,
equitable, and well-documented manner.
(B) The State Appraiser Regulatory Agency must track and monitor
all complaints against AMCs using a complaint log or system.
(iii) Investigation of complaints against AMCs. (A) To ensure
effective supervision, the State Appraiser Regulatory Agency must
resolve all complaints filed against AMCs (other than federally
regulated AMCs) within one year (12 months) from the date the complaint
was received except in special documented circumstances.
(B) The State Appraiser Regulatory Agency must ensure that
individuals who analyze complaints are knowledgeable about Title XI,
the AMC Rule, USPAP, and appraisal practices and must document how such
individuals are qualified, which will be evaluated by the ASC.
(C) The State Appraiser Regulatory Agency must obtain and maintain
documentation sufficient to create a record of the facts and
determinations made by the State Appraiser Regulatory Agency in
processing and investigating a complaint and the reasons for its final
disposition.
(iv) Enforcement actions against AMCs. (A) The State Appraiser
Regulatory Agency must supervise AMCs (other than federally regulated
AMCs) and must discipline such entities, when appropriate, for
misconduct and wrongdoing.
(B) The State Appraiser Regulatory Agency must report all
disciplinary actions against AMCs (other than federally regulated AMCs)
to the ASC within five days after the disciplinary action is final as
determined by State law.
Sec. 1102.604 Mitigating and aggravating factors.
The ASC will consider the following factors, which may be
mitigating or aggravating as appropriate, in adjusting the ASC's
initial assessment of the level of effectiveness of the regulatory
program identified in the preliminary report. The mitigating or
aggravating factors include:
(a) The nature and extent of the deficiency, which includes:
(1) The type of deficiency;
(2) Whether any deficiencies indicate systemic issues in the
regulatory program; and
(3) The severity of the deficiency, and the extent to which the
deficiency can be corrected or, if not corrected in a timely manner,
whether the deficiency poses a potential risk to the regulatory
program, appraisers, AMCs, financial institutions, or the public.
(b) Prior compliance history by the State Appraiser Regulatory
Agency, which includes:
(1) Whether the regulatory program has had any prior deficiencies;
(2) Whether the deficiency is the same as or similar to prior
deficiencies;
(3) Whether the State Appraiser Regulatory Agency's practices or
actions indicate a pattern of similar prior deficiencies or a
fundamental failure to understand the risks and controls that underlie
a program function; and
(4) Whether, and to what extent, the State Appraiser Regulatory
Agency attempted to correct prior deficiencies.
(c) The structure, stability, and responsiveness of the State
Appraiser Regulatory Agency, which include:
(1) The level of cooperation with the ASC staff during a compliance
review;
(2) The extent of understanding and acknowledgment of the
deficiency;
(3) The level of responsiveness and willingness to correct the
deficiency;
(4) Whether the regulatory program has undergone significant
staffing or leadership changes;
(5) Any submission of false statements or documents, or deceptive
practices by the State Appraiser Regulatory Agency;
(6) Whether the State Appraiser Regulatory Agency failed to
exercise reasonable care toward equitable, consistent, and timely
enforcement; and
(7) The number of State licensed and certified appraisers or
registered AMCs under the jurisdiction of the State Appraiser
Regulatory Agency; and
(8) The risk of program failure.
(d) Other situations or circumstances may include natural or human-
made disasters or emergencies or other government-declared orders.
Sec. 1102.605 Enforcement actions.
(a) Interim enforcement actions. The ASC may undertake an interim
enforcement action against a State Appraiser Regulatory Agency that
fails to have an effective regulatory program as determined by the ASC
as set forth in Sec. 1102.603(b). Interim enforcement actions may
consist of the following actions:
(1) Warning letter. The ASC may issue a warning letter to a State
Appraiser Regulatory Agency when the final report indicates that the
regulatory program is moderately effective or slightly effective.
(2) Negotiated agreement. The ASC may enter into a negotiated
agreement with a State Appraiser Regulatory Agency if the State
Appraiser Regulatory Agency fails to address the deficiency or
deficiencies identified in a previously issued warning letter, or the
final report indicates that the regulatory program is slightly
effective or ineffective.
(3) Suspension. The ASC may suspend a State Appraiser Regulatory
Agency for an interim period, as outlined in the procedures within
Sec. 1102.606, if the State Appraiser Regulatory Agency refuses to
enter into a negotiated agreement, the State Appraiser Regulatory
Agency fails to comply with the terms and conditions of a negotiated
agreement, or the final report indicates that the regulatory program is
ineffective. The suspension may involve, but is not limited to, the
State Appraiser Regulatory Agency's ability to perform one or more of
the following tasks:
(i) Addition of State licensed or certified appraisers to the
Appraiser Registry or AMCs to the AMC Registry;
(ii) Issuance of upgrades of individuals' level of licensure or
certification to perform appraisals in connection with federally
related transactions;
(iii) Renewal of licenses or certifications of State licensed or
certified appraisers for the performance of appraisals in connection
with federally related transactions; or
(iv) Issuance of temporary licenses or certifications to
individuals who are licensed or certified in another State to perform
appraisals in connection with federally related transactions in the
suspended State Appraiser Regulatory Agency's State, as set forth in
section 1122(a) of Title XI (12 U.S.C. 3351(a)).
(b) Non-recognition. The ASC may undertake non-recognition, as
prescribed in the procedures within subpart B of this part, if the ASC
issues a written finding pursuant to section 1118(b) of Title XI (12
U.S.C. 3347(b)) that the State Appraiser Regulatory Agency's policies,
practices, funding, staffing, or procedures are inconsistent with Title
XI and Federal regulations promulgated thereunder and:
(1) a State Appraiser Regulatory Agency fails to comply with a
final order of suspension; or
(2) the final report indicates the regulatory program is
ineffective.
[[Page 96935]]
Sec. 1102.606 Procedures governing suspension proceedings.
The ASC must adhere to the following procedures to suspend a State
Appraiser Regulatory Agency.
(a) Notice. (1) The ASC must provide the State Appraiser Regulatory
Agency with a written notice of intention to suspend the State
Appraiser Regulatory Agency from a task or tasks as provided in Sec.
1102.605(a)(3). The notice must contain the ASC's final report.
(2) The Secretary must publish the notice in the Federal Register
and must provide notice to the State Appraiser Regulatory Agency by
sending a copy to the State Appraiser Regulatory Agency's last known
email or mailing address. Service is complete upon sending.
(b) State Appraiser Regulatory Agency's response. (1) Within 20
days after publication of the notice in the Federal Register, the State
Appraiser Regulatory Agency may submit a response or a notice not to
contest to the Secretary.
(2) If a State Appraiser Regulatory Agency submits a notice not to
contest, the ASC must issue the final order within 80 days after
publication of the notice in the Federal Register as set forth in
paragraph (f) of this section.
(3) If a State Appraiser Regulatory Agency does not submit a
response or a notice not to contest within 20 days after publication of
the notice in the Federal Register, the ASC may consider the facts
presented in the notice to be true. The ASC must then issue the final
order within 80 days after publication of the notice in the Federal
Register as set forth in paragraph (f) of this section.
(c) Briefs, memoranda, and statements. After (or contemporaneously
with) the State Appraiser Regulatory Agency's filing of its response,
but in no event more than 40 days after publication of the notice in
the Federal Register, the State Appraiser Regulatory Agency may file
with the Secretary a written brief, memorandum, or other statement
providing factual data and policy and legal arguments regarding the
matters set out in the notice.
(d) Oral presentations to the ASC. After (or contemporaneously
with) the State Appraiser Regulatory Agency's filing of its response,
but in no event more than 40 days after publication of the notice in
the Federal Register, a State Appraiser Regulatory Agency may also
request to make an oral presentation to the ASC. If a State Appraiser
Regulatory Agency files a request for an oral presentation, the ASC
must hear the matter within 20 days after the date the ASC received the
request for an oral presentation. An oral presentation is an
opportunity for the State Appraiser Regulatory Agency to offer,
emphasize, and clarify the facts, policies, and laws concerning the
matters set forth in the notice. The State Appraiser Regulatory Agency
will make its oral presentation to the ASC on the date and time
designated by the ASC. The ASC may ask questions relating to the
contents of the notice, the response, the oral presentation, or any
written briefs, memoranda, or statements submitted.
(e) Conduct of suspension proceedings--(1) Written submissions. All
aspects of suspension proceedings will be conducted by written
submissions, except for oral presentations allowed under paragraph (d)
of this section.
(2) Rules of evidence. Except as is otherwise set forth in this
section, relevant material and reliable evidence that is not unduly
repetitive will be admissible to the fullest extent authorized by the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and other
applicable laws.
(3) Extensions of time. The ASC may, on its own initiative or for
good cause shown, issue a waiver extending any time limit in connection
with a suspension proceeding under this section.
(f) Decision of the ASC. Within 80 days after publication of the
notice in the Federal Register, or, in the case of the ASC's receipt of
a timely request for an oral presentation within 100 days after
publication of the notice in the Federal Register, the ASC must make a
final decision on the matter by issuing a final order. The final order
will be final and effective upon signature of the ASC Chairperson or
their designee. The Secretary must promptly disseminate the final order
to the State Appraiser Regulatory Agency and publish the final order in
the Federal Register.
(g) Documents and exhibits. Unless otherwise provided by law, the
Secretary must place all documents, papers, and exhibits submitted in
connection with the suspension proceeding in the proceeding's file and
make them available for public inspection, except those that may be
withheld from disclosure under applicable law.
(h) Opportunity for informal settlement. The State Appraiser
Regulatory Agency may submit written offers or proposals for settlement
of the proceeding to the Secretary at any time for consideration by the
ASC. This paragraph (h) shall not preclude settlement of any suspension
proceeding by the filing of a notice not to contest as provided in
paragraph (b)(1) of this section.
Sec. 1102.607 Procedures governing non-recognition proceedings.
To impose non-recognition against a State Appraiser Regulatory
Agency, the ASC must adhere to the procedures governing a non-
recognition proceeding, as set forth in subpart B of this part.
By the Appraisal Subcommittee.
Dated: November 21, 2024.
Zixta Martinez,
Chairperson.
[FR Doc. 2024-27698 Filed 12-5-24; 8:45 am]
BILLING CODE 6700-01-P
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</html>Indexed from Federal Register on December 6, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.