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FDIC Approves Final Rule on Minimum AMC Requirements

FDIC-Office

 

Photo credit: Tony Webster

 

The Federal Deposit Insurance Corporation (FDIC) approved the publication of Final Rule, Minimum Requirements for Appraisal Management Companies (AMC) in the Federal Register on April 21. Along with the FDIC, the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), the Consumer Financial Protection Bureau (CFPB), the Federal Housing Finance Agency (FHFA), the Board of Governors of the Federal Reserve System are all expected to jointly issue the Final Rule after the approval process is completed by all of the agencies.

This Final Rule outlines minimal requirements for state registration and management of AMCs as noted in section 1473 of the Dodd-Frank Act. One of the requirements implemented by the Final Rule is that states report information to the Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council (FFIEC) and for the ASC to manage the new national registry.

Under the FDIC-approved minimum requirements, states that are participating will have 36 months from the time the agencies issue the Final Rule to set up AMC registration and management systems that are consistent with the minimum standards set forth by the Final Rule. While states are not required to establish an AMC registration and management system, after the effective date, no entity that meets the definition of an AMC can provide appraisal management services with a federally-related transaction in a state that has decided not to participate. This also applies to a participating state that has not set up a compliant AMC registration and supervision system. Federally regulated AMCs would have to be compliant within 12 months of the Final Rule’s effective date.

Highlights of the Minimum Requirements approved by the FDIC include:

  • Threshold Size of the AMC Panel: The count will be based on the number of appraisers that are listed on the roster who are available to perform appraisals rather than the number of appraisers actually actively conducting appraisals.
  • Distinguishing between an AMC and Appraisal Firm: An employee of an appraisal firm and a fee appraiser are defined by the requirements. Each employee must pay a registration fee to the state(s) they practice in while AMCs are subject only to a registration fee after state registration and management regulations become effective pursuant to Dodd-Frank. Hybrid firms, which are entities that hire both independent contractors that perform appraisals in addition to appraisers as employees.
  • The rule also provides coverage for “hybrid” firms, meaning entities that both hire appraisers as employees to perform appraisals and engage independent contractors to perform appraisals.
  • Defining Independent Contractors: The standards which are used to determine appraiser independent status have been revised; whether determining if an appraiser is treated as an independent contractor by the AMC for the purposes of federal income taxation.
  • Trainee Appraisers Are Allowed: The Final Rule clarifies that AMCs may engage trainee appraisers to assist on assignments.

    • The Final Rule covers much ground in nationally solidifying how AMCs are expected to operate. While many AMCs may scramble to comply with this Final Rule, others will simply continue doing what they’ve been doing all along. Cindy Thomas, Senior Managing Appraiser for PEMCO Limited, say they’ve always been compliant with all AMC laws and regulations, and that the Final Rule doesn’t affect her AMC. Thomas further adds that only the most qualified appraiser- those with great score cards- and high geographical competency for the particular area, are utilized.

     

    Resources:

    Board of Governors of the Federal Reserve System. Joint Press Release:  Agencies Issue Proposed Rule on Minimum Requirements for Appraisal Management Companies

    Final Rule for Appraisal Management Companies (Different Agencies) Minimum Requirements for Appraisal Management Companies

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