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28 | TH E M R EP O RT FEATURE supervision by state appraiser regulatory agencies; • Verify that only licensed and certified appraisers are used for federally related transactions; • Require that appraisals comply with USPAP; and • Require that appraisals are conducted independently and otherwise adhere to the TILA appraisal independence stan - dards. Section 1124 of FIRREA went into effect on January 21, 2013. To date 38 states have enacted some type of AMC registration legislation. Another game changer is found in Section 1126 containing a general prohibition relating to the use of BPOs as the primary basis to determine the value of property to be secured for mort - gage origination in conjunction with the purchase of a consum- er's principle dwelling. The Interagency Appraisal and Evaluation Guidelines were published by the federal regula- tors in December 2010, providing clarification to compliance require- ments relating to appraisals and evaluations, when an appraisal is required, when an evaluation may be used in lieu of an appraisal, the content of an evaluation which now includes knowledge of the property condition and a statement of most probable market value. One of the more significant clarifications by the agencies is found in the Chapter XVI (Third Party Arrangements) where the agencies made it crystal clear that a lender outsourcing any part of the collateral valuation function should exercise due diligence in the selection of a third party and that the institution should be able to demonstrate that its policies and procedures establish effective internal controls to monitor and periodically assess the collateral valuation functions performed by a third party. The Guidelines also state that an institution is responsible for ensuring that a third party selects an appraiser or person to perform an evaluation who is competent and independent, has the requisite experience and training for the assignment, and thorough knowledge of the sub - ject property's market. GSE Involvement: The Unofficial Regulators I ronically, although not con- sidered law or regulation, the guidelines published by the GSEs, and most notably Fan- nie Mae, have a major impact on the acceptability of appraisal reports generated for mortgage lending and at the present time have as much impact on the development of appraisals as the Uniform Standards and state regulations. In 2009, Fannie Mae published the first set of Unacceptable Appraisal Practices, which have since been modified, expanded, and included in the current Fannie Mae Selling Guide avail - able on their website. In September 2011, Fannie Mae implemented the Uniform Collateral Data Portal and Uniform Appraisal Dataset (UAD) intending to standard - ize data contained in appraisal reports electronically submit- ted through their data portal. GREG STEPHENS, SRA is a recognized subject matter expert in appraisal regulations and standards whose 37 years in the industry include owning a regional appraisal firm in Northern California, national lender QC/compliance and most recently as Chief Appraiser, SVP Compliance for Metro-West Appraisal Company LLC. According to individuals at Fannie Mae, so far over 14 mil - lion appraisal reports have been transmitted through the data portal, allowing the analysts to slice and dice the data. Using advanced technology, the ana- lysts at Fannie Mae have been able to develop a comprehensive risk management tool, and on January 26, 2015, Fannie Mae re- leased the Collateral Underwriter making it available to Fannie Mae's Corresponding Lenders. It is the opinion of many in the industry that Collateral Underwriter is the next para- digm in the industry. Lenders now have access to massive amounts of data and analytics to assess risk in the valuation re- ports being electronically submit- ted through the data portals. The data, analysis and conclusions of an appraiser are being captured in real time and compared to the selection and analysis, of that same data used by their peers through the application of proprietary analytical models to analyze key components of the appraisal including data integrity, comparable selection, the adjust- ments, and reconciliation. The communications from the lenders and their review staff back to the appraisers are not about whether they are in compliance with a federal or state law, or in compliance with USPAP, but rather whether the data in the appraisal report is consistent or inconsistent with Fannie Mae's proprietary data- base information and consistent or inconsistent with the way in which the appraiser's peers used and analyzed the same data. It is about degree of risk, not compli- ance with laws and regulation, yet CU will have more impact upon the development of apprais- als than any other law or regula- tion since creation of appraiser state regulatory agencies. A Look Ahead: The Next Wave of Appraisal Regulations W hile the appraisal in- dustry has come a long way from its Wild West roots of little oversight, this does not mean that further regula- tions won't continue to shape the industry. The regulators are currently finalizing the Rule- making pertaining to appraisal management companies, which was a requirement included in the Dodd-Frank Act. In addition, the Appraisal Standards Board published the most recent version of USPAP in January 2014, with the next revi- sion to become effective January 1, 2016. Additionally, the Appraiser Qualifications Board implemented a college degree requirement for certified appraisers effective January 1, 2015 and moved back the requirement for background checks to January 1, 2017. While the appraisal industry has come a long way from its Wild West roots of little oversight, this does not mean that further regulations won't continue to shape the industry.

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