All appraisals should be given an administrative review before they are accepted and by someone independent of the loan approval process. My question is: does the independent review need to be done before the credit decision is made? And, does this also apply to evaluations?

OCC 2005-6 "Should all appraisals undergo a compliance review?"

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..."

Review should be required on all appraisals and evals, but the extent of the review should depend on the risk of the transaction.

To clarify, the committment can be extended contingent upon satisfactory review of the appraisal. Very few customers will pay for an appraisal if they don't have the committment letter, or at least not the smart ones.

But should the secondary review (independent) be required before the final credit decision?

Should you close the barn door after the cows have gotten out????

Thanks. Can I quote you on that?

It sounds like they are referring to the final credit decision when the final funds are disbursed. I can't imagine that the OCC would expect an appraisal to be ordered prior to approval (expecially on commercial deals. We alsways have the independed review and evaluation just prior to closing and have never had a problem.

Yes, thank you fellow Okie Banker. We were performing the compliance review of the appraisal before closing; however, our secondary review came later and we wanted to make sure we were okay in doing that.

How many reviews are you doing??? I've always done two reviews....first is for the loan and SLTV purposes. The second is a review of the quality of the appraisal. They were both done prior to closing. This way we could have two sets of eyes look at the appraisal. This helped many times because on the commercial deals the appraiser sometimes neglected to add a certain valuation approaches, that should have been added, which affected the value somewhat.

If the transaction requires an appraisal, you have to have the review done prior to the closing. At the moment I can't remember where it says that...I think SR94-55 speaks to the review. Sorry...I'm a little brain dead right now or I would go digging for the complete answer.

From a compliance perspective, you have to be able to say the value conclusion is reasonable and adequately supported, so how can you do that without doing a comprehensive review? And from a risk perspective, why would you want to close on something and let money out the door before you know whether the appraisal's value is correct? If there are errors that negatively impact value, instead of LTV you have an LTOops. Not pretty.