Risk Assessment of Appraisals
When the new appraisal rules were first put into place, appraisal practices were given a great deal of attention. As with every requirement, when new developments don't keep our attention focused on the issue, we tend to become relaxed over compliance. We give careful attention to certification and licensing limits but may get careless in other aspects of appraisals.
This relaxing of compliance with appraisals has been noticed by the regulators with great concern. Weaknesses and outright fraud in appraisals contributed to the failure of institutions in the last several decades. The regulators do not want that to happen again. This most recent issuance on appraisal practices stresses much more than making sure that a licensed appraiser is used when the amount and type of loan trigger the requirement. The Q&As direct attention to appraiser independence from the transaction as well as independence from the lender and any influence the loan officer may exert.
In the risk chart below, we have identified the specific concerns covered in the agencies' Q&A publication and matched those with controls that should be in place. This represents a minimum level of compliance. Feel free do to more.
ca_v10n04_chart.pdf
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 4, 4/05
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