Who is responsible for adopting and reviewing appraisal policies and procedures?
The institution’s board of directors or its designated committee holds the responsibility of having compliant appraisal policies and procedures.
Mainly, what should the board of directors or its designated committee consider when establishing policy?
- They should ensure independence in the ordering, performing and reviewing of appraisals and evaluations.
- There should be an appraiser selection process and continued monitoring of the appraisers.
- They should ensure that the reviews of the appraisals are completed by qualified, educated individuals who will ensure the appraisals are compliant with USPAP, Interagency Appraisal Evaluation Guidelines and other appraisal standards. They should consider if the appropriate scope of work was utilized and the appraisal report contains sufficient information and analysis to support the appraised values.
VMG suggestion: The board of directors can have peace of mind knowing an experienced, professional appraisal management company is being utilized. Outsourcing keeps the independence lines very clear and ensures the review process is compliant. Be sure to review VMG information on vendor due diligence.
Who may order an appraisal directly from an appraiser?
The engager of the appraiser must be independent of the loan production staff. Loan production staff is all personnel responsible for generating loan volume or approving loans, as well as their subordinates and supervisors. These individuals would include any employee whose compensation is based on loan volume.
VMG suggestion: The institution can obtain clear lines of independence by outsourcing, without the cost of additional employees.
How do you know if someone is qualified to review appraisals?
The reviewer must be independent of the transaction and “insulated” from any influence by the loan production staff. Reviewers should possess the requisite education, expertise and competence to perform the review commensurate with the complexity of the transaction, type of real property and market.
VMG suggestion: Utilizing appropriately licensed/certified appraisers is the best way to ensure they have appraisal education, appraisal expertise and are competent. Outsourcing the appraisal review ensures the reviewer is insulated from influence by loan production or other affiliated partners.