Okay, I have been under the impression that if the bank selects the appraiser and the customer pays for the appraisal, then the appraiser would go on the GFE as a required service provider and that we regularly use their services. I have been told internally and by another banker I know that the rotation of appraisals is used, but I am thinking that the rotation issue would be a method of preserving safety and soundness in the loan portfolio by having a mix of appraisers doing appraisals and not just putting all of your eggs (loans) into one basket (using one appraiser all the time). What does rotating the appraiser have to do with disclosing them as a required service provider? Is it okay to let the customer select from the bank's list of approved appraisers and then not have to disclose them since the customer picked them out? I don't want to split hairs, but I am still under the impression after staring at 24 CFR 3500.7(e) that we should be disclosing them. Oh yeah, this is on the mortgage side, not the bank side, but isn't RESPA the same for all of us! Doh! Yes, I understand that last statement could open up a whole other issue!!

The appraisal rule changes that occurred in October 2003 restrict the borrowers from participating or steering the bank toward a particular appraiser.

Depending on your loan operation software (LOS), the form may look different but our Mortgage division uses Calyx. Calyx point has a GFE Required Provider Relationship form. The bank uses a list that the appraiser will be chosen. Non-loan production staff make the appraiser choice based on the loan situation.

On the Provider Relationship form, there is a statement as "lender-approved list of appraisers available upon request". This practice was allowed by regulator because the exact appraiser will not have been chosen from the lender approved list at the time of the GFE, but the fact list is maintained is disclosed to the applicant(s)and the nature of the relationship between the bank and the settlement service provider.

I agree with your comments and am familiar with the variations of the format of the required service provider or addendums, and your response tells me that the mortgage side does know what should be done, but this "appraisal rotating" for the sake of not disclosing is not what should be done (politically correct way of saying we are doing it wrong!! ). Thanks.

If the appraiser has not yet been selected at the time you must do the GFE you can state that the appraiser will be selected from a list and provide a range for the fee. You then put the actual appraiser and final cost on the HUD 1/1A. This is in accordance with RESPA. It is not always possible to have the appraiser selected by the time the GFE is prepared. Refer to Respa 3005.7(3)(4):

(4) If the lender maintains a controlled list of required providers (five or more for each discrete service) or relies on a list maintained by others, and at the time of application the lender has not yet decided which provider will be selected from that list, then the lender may satisfy the requirements of this section if the lender:

(i) Provides the borrower with a written statement that the lender will require a particular provider from a lender-controlled or -approved list; and
(ii) Provides the borrower in the Good Faith Estimate the range of costs for the required provider(s), and provides the name of the specific provider and the actual cost on the HUD-1 or HUD-1A.

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On the Provider Relationship form, there is a statement as "lender-approved list of appraisers available upon request".

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You can do so if you choose, but RESPA does not require that you share the approved list with the applicant.