Loan Officers Prohibited from Ordering Appraisals?

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Question:

We have recently hired some new loan officers and they have always been told that they cannot order their own appraisals. Is there anything in the regs that prohibits a loan officer from ordering appraisals?

Answer:

This question was also asked and answered in the Lending forum on 8/16/06. The FDIC FIL link is key as it denotes the answer in No. 3, where the Q&A states:

Who should be considered the loan production staff for purposes of achieving appraiser independence? Could loan production staff select an appraiser?

Answer: The loan production staff consists of those responsible for generating loan volume or approving loans, as well as their subordinates. This would include any employee whose compensation is based on loan volume. Employees responsible for the credit administration function or credit risk management are not considered loan production staff.Loan production staff should not select appraisers. However, in a small or rural institution or branch, the only individual qualified to analyze the real estate collateral may also be a loan officer, other officer, or director of the institution. To ensure their independence, such lending officials, officers, and directors should abstain from any vote or approval involving loans for which they engaged the appraiser, reviewed the appraisal, or performed an evaluation.

First published on BankersOnline.com 9/11/06