Dealing with Appraisals
The past few years have seen significant developments in real estate appraisals and evaluation rule and regulations. Revised Interagency Guidelines and new rules under Reg Z have been issued, and we’ve seen additional requirements finalized recently due to Dodd-Frank. In some specific cases (called “flipping transactions”), lenders will even have to obtain two appraisals on the same property for one loan.
As breakdowns in appraisal practices have been partly blamed for the mortgage crisis, regulators have raised their expectations; lenders’ appraisal and evaluation programs must include more elements than ever before. Some of the themes being emphasized by the agencies are independence of the appraiser and evaluator, reviews, and qualifications.
There are also restrictions against using AVMs (automated valuation models), BPOs (broker price opinions), and tax valuations that has upset many in the industry.
Do you know the requirements? We’ll go in-depth on the details of the appraisal and valuation process, from both the lender and appraiser side of the game, to provide a thorough understanding of what is required and what you have to have.
- CFPB mortgage regulations under Reg Z – additional requirements for certain loan types
- Regulations and Interagency Guidelines – requirements for lenders and brokers
- Clarified independence requirements and the importance of this to examiners
- The many forms of appraisals and evaluations – what can you use and when? AVMs and BPOs aren’t what they used to be
- Can we accept a previous appraisal? Dealing with “readdressed” and “transferred” appraisals
- USPAP rules and standards – how do appraiser rules influence what lenders must do?
- How to achieve appraiser independence – you’ve got to prove it
- Anti-coercion and undue influence provisions of Reg Z – what can you NOT do (or say)?
Real estate lenders, compliance officers, auditors, underwriters, appraisers (in-house or external), closing agents, management, and anyone else involved in the real estate or residential lending process with a need to understand the current state of appraisal regulation and requirements.
Carl Pry is a Certified Regulatory Compliance Manager (CRCM) and Certified Risk Professional (CRP) who is a Senior Director for Treliant Risk Advisors in Washington, DC. Through his working career, as well as through his experience as a banking attorney and officer, he has provided a variety of regulatory compliance and financial performance services to financial institutions and other clients throughout the country. He has written extensively regarding consumer and commercial compliance, tax, audit, and financial institution legal issues, and is a frequent contributor to and currently serves on the Editorial Advisory Board for the ABA Bank Compliance magazine. He has spoken at dozens of banking, compliance, and state bar associations, and has conducted training sessions for financial institutions across the country.
Institute of Certified Bankers: Visit http://www.icbmembers.org/login.aspx for instructions regarding self-reporting. Estimated credits: 2.5 CLBB & CRCM credits .
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