Broker Ordered Appraisals ok?

Posted By: rachelchri

Broker Ordered Appraisals ok? - 03/04/15 03:36 PM

We currently do Broker loans for customers outside of our lending area. We hold the construction phase on our books and when the construction is complete, the loan Broker takes care of the rest (buys the loan back and sells to secondary market). My question is:

Are we allowed to accept an Appraisal ordered in our name, by a Loan Broker? I reviewed the Interagency Appraisal & Evaluation Guidelines and couldn't fine a definitive answer.
Posted By: HRH Okie Banker

Re: Broker Ordered Appraisals ok? - 03/04/15 07:10 PM

When I look at the guideline's definition I would guess that your broker would be the "Agent" - who would benefit by that transaction, right? If your agent is getting a fee by placing that loan with your F/I that might make the appraisal suspect:

Agent – The Agencies’ appraisal regulations do not specifically define the term “agent.” However, the term is generally intended to refer to one who undertakes to transact business or to manage business affairs for another. According to the Agencies’ appraisal regulations, fee appraisers must be engaged directly by the federally regulated institution or its agent,51 and have no direct or indirect interest, financial or otherwise, in the property or the transactions. The Agencies do not limit the arrangements that federally regulated institutions have with their agents, provided those arrangements do not place the agent in a conflict of interest that prevents the agent from representing the interests of the federally regulated institution.
Posted By: rachelchri

Re: Broker Ordered Appraisals ok? - 03/04/15 09:45 PM

Some of our Loan Broker do get a fee, others don't charge one. By paying our Broker's a fee does that mean they wouldn't be able to order appraisals?
Posted By: OldSchoolBanker

Re: Broker Ordered Appraisals ok? - 03/05/15 12:35 PM

Refer to the Inter-Agency Guidance
• FDIC short version (same regulation, just a short summary version: Note Section V

V. Independence of the Appraisal and Evaluation Program
For both appraisal and evaluation functions, an institution should maintain standards of independence as part of an effective collateral valuation program for all of its real estate lending activity. The collateral valuation program is an integral component of the credit underwriting process and, therefore, should be isolated from influence by the institution's loan production staff. 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.

In my opinion, anyone in the sales or origination function, cannot directly select or place the order with the appraiser. These roles can generate an appraisal request to the "Appraisal Desk" or Appraisal Dept" to order it, but they should not have direct contact. There is too much of a risk that they can influence the selection of the appraiser and the overall outcome.