Final Rules for AMC Supervision Released by Regulators

Six federal regulators recently issued a final rule setting requirements for state registration and supervision of appraisal management companies (AMCs).  AMCs are entities that contract with and manage licensed and certified appraisers to provide appraisal services to lenders, underwriters, or other principals in the secondary mortgage markets. 

AMCs may be independent entities or subsidiaries of federal financial institutions.  If the latter, the AMC must meet the same minimum requirements as state-regulated AMCs but are not required to register with a state.

The new rule, which will go into effect in about 60 days, finalizes regulations proposed for public comment in March 2014.  The rule implements changes to the Financial Institution Reform, Recovery, and Enforcement Act (FIRREA) by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The rule applies to an AMC which oversees a panel of more than 15 licensed or certified appraisers in a single state or 25 or more in two or more states.  Members of these panels perform appraisals as independent contractors.  Panels are considered to be the number of appraisers available to an AMC to perform appraisals rather than those that are actually contracted to perform them.

States that elect to register and supervise AMCs must meet minimum requirements set out in the final rule.  These include insuring that AMCs register with the state subject themselves to supervision; that they contract only with state licensed or certified appraisers for federal transactions and insure that these appraisers have the qualifications and independence to competently complete appraisals within the market area that comply with the Uniform Standards of Professional Appraisal Practice, and that the AMC ensure and ensures appraiser independence complies with mandates of the Truth in Lending Act.  

A state is not required to establish AMC registration but in those states that do not within 36 months of the rule going into effect AMC not affiliated with federal financial institutions may not provide services to those institutions. Federal regulators will also not act as regulators for those non-affiliated AMCs in states without AMC regulations.  States are allowed to establish a regulatory structure at any time, before or after the 36 month deadline.

The final rule was issued by the Federal Housing Finance Agency, the Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Federal Reserve Board, and the National Credit Union Administration.  

According to information posted by the law firm of Ballard and Spahr, as of last November 2014, 38 states had passed an AMC licensing and registration law.  "Thus, with the issuance of the final rule, the federal agencies are stepping up the pressure on the remaining states to adopt a regulatory structure for AMCs."