Do we need to do an appraisal review and an appraisal compliance review or just an appraisal review? The Fed was here recently for our safety and soundness exam and stated that our form was a compliance review form and not an appraisal review form.

We've been using the same form for years and aren't really sure what they want exactly.

Does anyone know what they want and/or have a sample?

OCC 2005-6a FFIEC 3/21/05
FAQ's on Appraisal Regs

(note when they mention compliance, they are talking compliance with the appraisal rules)
REVIEWING APPRAISALS
19. Should all appraisals undergo a compliance review?
Answer: Yes, prior to a final credit decision, regulated institutions should perform a compliance review on all appraisals to confirm that they comply with the minimum appraisal standards as outlined in the agencies' appraisal regulations, the interagency guidelines, and the independence statement. Loan administration files should document this compliance review, which may be in checklist or narrative format. In addition, certain appraisals should be reviewed more comprehensively to assess the technical quality of the appraiser's analysis prior to making a final credit decision. The regulated institution should establish guidelines for a more detailed, technical review based on transaction risk, transaction size, or other criteria. (See "Program Compliance" in the interagency guidelines.)

20. Can a regulated institution approve a loan subject to receipt and review of an appraisal, or must the appraisal be obtained and reviewed prior to making the final decision?
Answer: A regulated institution may grant conditional approvals to prospective borrowers before obtaining an appraisal. However, a final credit decision or action should only occur after the regulated institution receives, reviews, and accepts the appraisal.

21. What qualifications would constitute a "qualified and adequately trained individual" for the purpose of conducting appraisal reviews?
Answer: Individuals who review appraisals as part of a regulated institution's internal compliance function should be independent of the transaction and possess the requisite education, expertise, and competence to perform the review commensurate with the complexity of the transaction.

We have been doing a compliance review, but they said we should be doing an actual appraisal review or evaluation of the appraisal itself. Though the loan officer looks at it and reviews whether it's in a declining market, et., we don't have a form for that. I think that is what they are asking for.

I guess we need to do both a compliance review and an appraisal review (which we don't have). If anyone has any samples they are willing to share, that would be great.

Thanks!

MH --

Here's a start. Look at page 1 of Fannie's Appraisal Review forms Fannie Mae Forms. The form is intended for an appraiser to review another appraiser's work, but the first page is a good start for a bank employee to document that s/he has reviewed the appraisal and agrees with the conclusions therein. http://www.eFannieMae.com also has a 2-4 family review form.

MarkB

Also, the loan officer cannot review the appraisal for a loan when he is the lender. This must be by someone independent of the transaction.

We don't have a separate underwriter. Our loan officers generate the business, underwrite the loan, forward it for final approval by a senior lender. The loan officer completes the appraisal compliance checklist (and the appraisal review form once we create it), then the senior lender signs off on it as well.

Is this an okay process?

For third party appraisals, that is what we do. For internally prepared evaluations the originating officer is not involved at all.

How big is your bank MH and when was the last time you had an S&S review from your regulator?

We have someone in the loan operations area order and review all appraisals in excess of $250,000 in order to comply with the FIRREA guidelines.