The institution must directly select and hire appraisers except wherern Agency regulations allow use of an appraisal prepared for another institution.  Independence is compromised when a borrower recommends or loan production staff selects an appraiser. <br / <br /Where an institution establishes an approved appraiser list, it should have appropriate procedures for developing and administering that list including a process of initial qualification, periodic monitoring of performance and accreditations and a periodic internal review of the usern of the list.  For residential work, loan production staff can use a revolving, pre-approved appraiser list as long as the development and maintenance of the list is not under their control.<br / <br /5. Minimum Appraisal Standards<br /       <br /Appraisals must:</p<ul

6. Appraisal Development

Appraisals must comply with the requirements of USPAP and, consistent with the USPAP “Scope of Work Rule) provide credible assignment results including the extent to which the property is identified and inspected, the type and extent of data researched, and the analyses applied to arrive at opinions or conclusions.  The institution itself is responsible for obtaining an appraisal that contains sufficient information and analysis to support its credit decision.

7.  Appraisal Reports

Each institution can selection the appropriate USPAP report option to supportrn its credit decisions, taking into account the risk, size, and complexity of the transaction and the collateral.

8. Transactions that require Evaluations</p

 An institution can obtain an evaluation in lieu of an appraisal for transactions that qualify for certain exemptions including:</p<ul

Although an institution may be allowed, under the regulations, to use an evaluation, the institution should establish policies and procedures opting for an appraisal such as for higher risk transactions like atypical properties or properties outside of the institution’s traditional lending market.

9.   Evaluation Development and Content

The institution should establish policies to determining appropriate collateral valuation methods for a transaction regardless of the cost or turnaround time of the evaluation.  An evaluation must provide a property’s market value and sufficient information and analysis to support that value, address the property’s actual physical condition and characteristics as well as economic and market conditions.  These should include, among other factors:</p<ul

10. Validity of Appraisals and Evaluations

Where an institution uses an existing appraisal or evaluation, it should establish criteria for assessing whether it continues to be valid.  A new appraisal or evaluation will be deemed necessary if the market value has changed due to:</p<ul

11.   Reviewing Appraisals and Evaluations

Prior to making a credit decision, the institution should review appraisals and evaluations to ensure they comply with the Agencies’ appraisal regulations and the institution’s internal policies.  The policies and procedures for reviewing these documents should, at a minimum:</p<ul

12.  Third Party Arrangements</p

An institution that engages a third party to perform collateral valuations on its behalf is responsible for understanding and managing the risks associated with the arrangement.  The institution should have internal controls for such arrangements and should compare the risks, costs and benefits of the proposed relationship with using another vendor or conducting the activity in-house and should exercise due diligence in selecting the vendor.

13.  Program Compliance

In addition to establishing internal controls to promote an effective appraisal and evaluation program the institution should have policies that address the need to understand its collateral position over the life of a credit including criteria for obtaining current valuation information.  Such criteria should address deterioration of the credit or changes in market condition.    If an institution finds it appropriate to modify a loan or engage in a workout the Agencies expect it to consider current collateral valuation information and obtain a new appraisal or evaluation if necessary.  

14.   Referrals</p

An institution is expected to file a complaint with the appropriate state regulatory officials when it suspects that a state certified or licensed appraiser has failed to comply with state laws or engaged in unethical or unprofessional conduct.  The institution also must file a suspicious activity report with the Department of the Treasury when suspecting fraud or identifying other transactions meeting the filing criteria.

The Dodd-Frank Wall Street Financial Reform and Consumer Protection Act of 2010 underscores the importance of sound real estate lending decisions; future revisions to the appraisal guidelines may be necessary after regulations are adopted to implement the Act.

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