I know that we are required not to "steer" customers into a specific type of loan and that we are required to give them options. Does the same thing apply for appraisals? Do we need to provide the customers with a list of appraisers and let them pick one?

Our mortgage loan processor (who has no customer contact) has always picked the appraiser at random. If we are required to give them this option, do you know which Reg or law states this? I am updating our loan policy and this is one question that I came across. Thanks!

Your customer can have nothing to do with who appraises a property...not at all.

That's what I thought!! But, my silly loan officer said otherwise.

Show your silly loan officer the following from page 6 of the Interagency Appraisal guidelines.

An institution or its agent must directly select and engage appraisers. The only exception to this requirement is that the Agencies’ appraisal regulations allow an institution to use an appraisal prepared for another financial services institution provided certain conditions are met. An institution or its agents also should directly select and engage persons who perform evaluations. Independence is compromised when a borrower recommends an appraiser or a person to perform an evaluation. Independence is also compromised when loan production staff selects a person to perform an appraisal or evaluation for a specific transaction. For certain transactions, an institution also must comply with the provisions addressing valuation independence in Regulation Z (Truth in Lending).

Here is the link to the 2010 Guidelines. Keep it handy to show your lenders:

http://www.fdic.gov/news/news/financial/2010/fil10082a.pdf