Appraiser for the LE

We do not allow our customers to shop for their appraiser, we bid them out during the transaction process. We understand the LE requires a service provider to be listed for items you can't shop for. How should be list this, we have about 10 different Appraisers we could possibily use, and they all run about the same amount (which is what we currently list on the GFE). Anyone else facing this issue? Any Suggestions?

No, service provider lists are provided for services you require that the borrower CAN shop for. You won't be giving them a provider list for appraisers.

Out of curiosity - who wins the appraisal bid?

Right, so if we don't let them shop, do we have to show them on the LE which service provider we will be using?

No, you don't show the provider on the LE. You'll show who ultimately received the appraisal fee on your Closing Disclosure.

Our underwriters chose it, I am not sure. We have a list of approved appraisers.

Thank you.

Our underwriters chose it, I am not sure.

If you're not sure then you need to become sure how the appraisers are chosen.

From the Interagency Guidelines:

. . . An institution should establish reporting lines independent of loan production for staff who administer the institution’s collateral valuation program, including the ordering, reviewing, and acceptance of appraisals and evaluations. . . .

For a small or rural institution or branch, it may not always be possible or practical to separate the collateral valuation program from the loan production process. If absolute lines of independence cannot be achieved, an institution should be able to demonstrate clearly that it has prudent safeguards to isolate its collateral valuation program from influence or interference from the loan production process. In such cases, another loan officer, other officer, or director of the institution may be the only person qualified to analyze the real estate collateral. To ensure their independence, such lending officials, officers, or directors must abstain from any vote or approval involving loans on which they ordered, performed, or reviewed the appraisal or evaluation.


Underwriters are part of the loan production staff. IMO they should not be taking part in choosing the appraiser. If they are then the underwriter choosing the appraiser should not be touching the file other than choosing the appraiser and their independence of the transaction should be well documented.

I read the commentary 1026.42(d)(5)(i)-1 to lump underwriting as part of credit administration and risk management which is not part of the loan production function.

Since every bank may assigns duties a little differently it's important to be aware of other duties an underwriter may perform, before you would allow one to order an appraisal.

From the Reg:

(5) Definitions. For purposes of this paragraph (d), the following definitions apply:

(i) Loan production function. The term “loan production function” means an employee, officer, director, department, division, or other unit of a creditor with responsibility for generating covered transactions, approving covered transactions, or both.

From the Commentary B'viles cites:

. . . . Credit administration and risk management includes, for example, loan underwriting, loan closing functions (e.g., loan documentation), disbursing funds, collecting mortgage payments and otherwise servicing the loan (e.g., escrow management and payment of taxes), monitoring loan performance, and foreclosure processing.


In my world our underwriter approves the loan. In other FIs I've seen where their underwriter was the person that reviewed the file to insure all the secondary market conditions were met before the loan closed. So based on what you define as an underwriter I see a possible conflict between the Reg. and the Commentary. But the Reg is specific that a person approving the covered transaction is part of the loan production function.

So, the name of the appraiser who is receiving the appraisal fee is not listed on the loan estimate, but must be named on the closing disclosure? I just wanted to make sure I understand that. We had that question come up recently. Is that true of all fees? The names of the recipients paid must be listed on the closing disclosure, but not the loan estimate?

There is no change in this regard between the use of a GFE/ HUD-1 and LE/CloD. You have never had to identify the specific provider on the GFE. The same is true with the LE.

I have a question pertaining to appraisal fee on the LE. We won't know who the appraiser is when we send the early disclosures and the intent to proceed so we use the higher appraisal fee- our list of approved appraisers vary $50 to $75- we won't know who the appraiser is until we put a request in for one when we get the intent from the applicant. We couldn't even figure the right lender credit for the difference on the LE because it wouldn't be accurate. Does anyone else deal with this? Or should we request an appraiser first and send out early disclosures etc? That might make a mess for the individual who selects the appraisers. Before we would credit the HUD with a lender credit. Any suggestions, please? Thanks.

If you have variances in the charges you receive from appraisers in your area then you have a couple of options. You can either negotiate a standard fee that you will pay your appraisers. Or you can assign the appraiser off of your rotating list at the time of application and quote that appraiser's price and if the applicant doesn't go through, that appraiser just happens to not receive that assignment.

Thanks so much for your answer. I appreciate it.

Clarification please! In a rural community we have 2-3 appraisers who are very close in charges. But we do not always know who will get the assignment until later in the transaction. What do we list for appraisal fee? Do we list the highest of the 3? I understand what happens if the appraisal charge comes in higher than estimate on the LE, but what if it comes in lower?

If it comes in lower all the time, examiners might figure you were padding your LE appraisal estimate. That's not going to sit well with them. If you have reliable numbers for each of the three, using the highest of the three would, I think, be acceptable, unless you know you'll be using one of the lower-cost providers that early in the game.

The other possibility is to average the three prices and accept the fact that you'll be low once in a while, requiring a "cure" payment.