Minimum Requirements for Appraisal Management Companies, 32657-32689 [2015-12719]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION
• FEDERAL RESERVE SYSTEM
• Office of the Comptroller of the Currency
• DEPARTMENT OF THE TREASURY
• FEDERAL HOUSING FINANCE AGENCY
• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 80, Number 110 (Tuesday, June 9, 2015)]
[Rules and Regulations]
[Pages 32657-32689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12719]



[[Page 32657]]

Vol. 80

Tuesday,

No. 110

June 9, 2015

Part II





Department of the Treasury





-----------------------------------------------------------------------





Office of the Comptroller of the Currency





-----------------------------------------------------------------------





12 CFR Part 34





Federal Reserve System





-----------------------------------------------------------------------

12 CFR Parts 208 and 225





Federal Deposit Insurance Corporation





-----------------------------------------------------------------------

12 CFR Parts 323 and 390





Bureau of Consumer Financial Protection





-----------------------------------------------------------------------

12 CFR Part 1026





Federal Housing Finance Agency





-----------------------------------------------------------------------

12 CFR Part 1222





Minimum Requirements for Appraisal Management Companies; Final Rule

Federal Register / Vol. 80 , No. 110 / Tuesday, June 9, 2015 / Rules 
and Regulations

[[Page 32658]]


-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 34

[Docket No. OCC-2014-0002]
RIN 1557-AD64

FEDERAL RESERVE SYSTEM

12 CFR Parts 208 and 225

[Docket No. R-1486]
RIN 7100-AE15

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 323 and 390

RIN 3064-AE10

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

RIN 3170-AA44

FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1222

RIN 2590-AA61


Minimum Requirements for Appraisal Management Companies

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); 
Board of Governors of the Federal Reserve System (Board); Federal 
Deposit Insurance Corporation (FDIC); National Credit Union 
Administration (NCUA); Bureau of Consumer Financial Protection 
(Bureau); and Federal Housing Finance Agency (FHFA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The OCC, Board, FDIC, NCUA, Bureau, and FHFA (collectively, 
the Agencies) are adopting a final rule to implement the minimum 
requirements in the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the Dodd-Frank Act) to be applied by participating 
States in the registration and supervision of appraisal management 
companies (AMCs). The final rule also implements the minimum 
requirements in the Dodd-Frank Act for AMCs that are subsidiaries owned 
and controlled by an insured depository institution and regulated by a 
Federal financial institutions regulatory agency (Federally regulated 
AMCs). Under the final rule, these Federally regulated AMCs do not need 
to register with a State, but are subject to the same minimum 
requirements as State-regulated AMCs. The final rule also implements 
the requirement for States to report to the Appraisal Subcommittee 
(ASC) of the Federal Financial Institutions Examination Council (FFIEC) 
the information required by the ASC to administer the new national 
registry of AMCs (AMC National Registry). In conjunction with this 
implementation, the FDIC is integrating its appraisal regulations for 
State nonmember banks and State savings associations.

DATES: Effective date. This final rule will become effective on August 
10, 2015.
    Compliance date: Federally regulated AMCs must comply with the 
minimum requirements for providing appraisal management services under 
12 CFR 34.215(a) no later than 12 months from the effective date of 
this final rule. The participating State or States in which a State-
regulated AMC operates will establish the compliance deadline for 
State-regulated AMCs.

FOR FURTHER INFORMATION CONTACT:
    OCC: Robert L. Parson, Appraisal Policy Specialist, (202) 649-6423, 
G. Kevin Lawton, Appraiser (Real Estate Specialist), (202) 649-7152, 
Mitchell E. Plave, Special Counsel, Legislative and Regulatory 
Activities Division, (202) 649-5490, for persons who are deaf or hard 
of hearing, TTY, (202) 649-5597, or Christopher Manthey, Special 
Counsel, Bank Activities and Structure Division, (202) 649-5500.
    Board: Carmen Holly, Supervisory Financial Analyst, Division of 
Banking Supervision and Regulation, at (202) 973-6122, or Walter 
McEwen, Senior Counsel, Legal Division, at (202) 452-3321, Board of 
Governors of the Federal Reserve System, Washington, DC 20551.
    FDIC: Beverlea S. Gardner, Senior Examination Specialist, Division 
of Risk Management and Supervision, at (202) 898-3640, Sandra S. 
Barker, Senior Policy Analyst, Division of Depository and Consumer 
Protection, at (202) 898-3915, Mark Mellon, Counsel, Legal Division, at 
(202) 898-3884, or Benjamin K. Gibbs, Senior Regional Attorney, at 
(678) 916-2458, Federal Deposit Insurance Corporation, 550 17th Street 
NW., Washington, DC 20429.
    NCUA: John Brolin or Pamela Yu, Staff Attorneys, Office of General 
Counsel, at (703) 518-6540, or Vincent Vieten, Program Officer, Office 
of Examination and Insurance, at (703) 518-6360, or 1775 Duke Street, 
Alexandria, Virginia, 22314.
    Bureau: Owen Bonheimer, Counsel, Office of Regulations, and David 
Friend, Counsel, Office of Regulations, 1700 G Street NW., Washington, 
DC 20552, at (202) 435-7000.
    FHFA: Robert Witt, Senior Policy Analyst, Office of Housing and 
Regulatory Policy, (202) 649-3128, or Ming-Yuen Meyer-Fong, Assistant 
General Counsel, Office of General Counsel, (202) 649-3078, Federal 
Housing Finance Agency, 400 Seventh Street SW., Washington, DC 20024.

SUPPLEMENTARY INFORMATION:

I. Background

AMC Minimum Requirements

    Section 1473 of the Dodd-Frank Act \1\ added a new section 1124 to 
Title XI of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 \2\ (FIRREA) that established minimum 
requirements to be applied by States in the registration and 
supervision of AMCs. An AMC is an entity that serves as an intermediary 
for, and provides certain services to, creditors.\3\ These minimum 
requirements apply to States that have elected to establish, pursuant 
to section 1117 of FIRREA,\4\ an appraiser certifying and licensing 
agency with authority to register and supervise AMCs (participating 
States). Section 1473 of the Dodd-Frank Act \5\ also requires the ASC 
to maintain an AMC National Registry, which will include AMCs that are 
either registered with, and subject to supervision by, a State 
appraiser certifying and licensing agency or are subsidiaries owned and 
controlled by a Federally regulated insured depository institution and 
regulated by a Federal financial institutions regulatory agency.\6\ 
Section 1124(e) further requires the Agencies to promulgate regulations 
for the reporting of the activities of AMCs to the ASC in determining 
the payment of the annual fee for the AMC National Registry.\7\
---------------------------------------------------------------------------

    \1\ Public Law 111-203, 124 Stat. 1376.
    \2\ Public Law 101-73, 103 Stat. 183.
    \3\ The term ``appraisal management company'' is defined in more 
detail in section 1121(11) of Title XI of FIRREA, 12 U.S.C. 
3350(11), and in Sec.  34.211(c) of this final rule.
    \4\ 12 U.S.C. 3346.
    \5\ Hereafter, section references are to Title XI of FIRREA, 
unless otherwise noted.
    \6\ 12 U.S.C. 3332(a)(6).
    \7\ 12 U.S.C. 3353(e). See also FIRREA section 1109(a)(3), 12 
U.S.C. 3338(a)(3) (requiring States to submit reports to the ASC 
concerning supervisory activities involving AMCs). This final rule 
does not implement section 1109(a)(3); this section of FIRREA is 
implemented by the ASC.
---------------------------------------------------------------------------

    Pursuant to FIRREA section 1124, the Agencies must establish, by 
rule, minimum requirements to be imposed by a participating State 
appraiser certifying and licensing agency on

[[Page 32659]]

AMCs doing business in the State.\8\ Specifically, pursuant to section 
1124(a), participating States must require that AMCs: (1) Register 
with, and be subject to supervision by, the State appraiser certifying 
and licensing agency in the State or States in which the company 
operates; (2) verify that only State-certified or State-licensed 
appraisers are used for Federally related transactions; \9\ (3) require 
that appraisals comply with the Uniform Standards of Professional 
Appraisal Practice (USPAP); and (4) require that appraisals are 
conducted in accordance with the statutory valuation independence 
standards pursuant to the Truth in Lending Act (TILA) (15 U.S.C. 1639e) 
and its implementing regulations.\10\ An AMC that is a subsidiary owned 
and controlled by an insured depository institution and regulated by a 
Federal financial institutions regulatory agency is subject to all of 
the minimum requirements, except the requirement to register with a 
State.\11\
---------------------------------------------------------------------------

    \8\ 12 U.S.C. 3353(a).
    \9\ Under FIRREA, a Federally related transaction is a real 
estate related financial transaction that involves an insured 
depository institution regulated by the OCC, Board, FDIC, or NCUA 
and that requires the services of an appraiser under the interagency 
appraisal rules. See 12 U.S.C. 3350(4), implemented by the OCC: 12 
CFR 34.42(f) and 34.43(a); Board: 12 CFR 225.62(f) and 225.63(a); 
FDIC: 12 CFR 323.2(f) and 323.3(a); and NCUA: 12 CFR 722.2(f) and 
722.3(a).
    \10\ 12 U.S.C. 3353(a). For regulations implementing TILA 
section 129E, 15 U.S.C. 1639e, see 12 CFR 226.42 (Board) and 12 CFR 
1026.42 (Bureau).
    \11\ 12 U.S.C. 3353(c).
---------------------------------------------------------------------------

    In participating States, the minimum requirements apply to any AMC 
that provides appraisal management services, as defined in the final 
rule, and meets the statutory panel size threshold, which is that the 
AMC oversees an appraiser panel of more than 15 State-certified or 
State-licensed appraisers in a State or 25 or more appraisers in two or 
more States in a calendar year or 12-month period under State law. 
States may establish requirements for AMC registration and supervision 
that are in addition to these minimum requirements.\12\
---------------------------------------------------------------------------

    \12\ 12 U.S.C. 3353(b).
---------------------------------------------------------------------------

    Pursuant to section 1124(f), beginning 36 months from the effective 
date of this final rule, an AMC that meets the statutory size threshold 
may not provide services for a Federally related transaction in a State 
unless the AMC is registered with the State or is subject to oversight 
by a Federal financial institutions regulatory agency.\13\ This 
provision effectively allows each State up to three years to establish 
registration and supervision systems that meet the requirements of the 
final rule before AMCs in the State will be subject to the 
aforementioned restriction in the absence of such a regime. The ASC, 
with the approval of the FFIEC, may delay the restriction for an 
additional year if the ASC makes a written finding that a State has 
made substantial progress toward implementation of a system that meets 
the criteria in Title XI of FIRREA.\14\ Even after the three-year 
implementation period has passed, a State may still elect to establish 
a regime, at which point AMCs operating in the State would be able to 
provide appraisal management services for Federally related 
transactions.
---------------------------------------------------------------------------

    \13\ 12 U.S.C. 3353(f)(1).
    \14\ 12 U.S.C. 3353(f)(2).
---------------------------------------------------------------------------

    Section 1124 does not compel a State to establish an AMC 
registration and supervision program, nor is a penalty imposed on a 
State that does not establish a regulatory structure for AMCs within 36 
months of issuance of this final rule.\15\ However, in a State that has 
not adopted the AMC minimum requirements established by this rule, AMCs 
are barred by section 1124 from providing appraisal management services 
for Federally related transactions, unless they are owned and 
controlled by a Federally regulated depository institution.\16\ Thus, 
appraisal management services may still be provided for Federally 
related transactions in non-participating States by individual 
appraisers, by AMCs that are below the minimum statutory panel size 
threshold, and as noted previously, by Federally regulated AMCs.\17\
---------------------------------------------------------------------------

    \15\ 12 U.S.C. 3353.
    \16\ See FIRREA section 1124(f)(1), 12 U.S.C. 3353(f)(1). Under 
section 1124(c), this restriction will not apply to AMCs that are 
subsidiaries owned and controlled by an insured depository 
institution and regulated by a Federal financial institutions 
regulatory agency. 12 U.S.C. 3353(c). Such AMCs are subject to all 
the requirements of section 1124, with the exception of the 
requirement to register with a State. See id.
    \17\ See FIRREA section 1121(11), 12 U.S.C. 3350(11).
---------------------------------------------------------------------------

    On April 9, 2014, the Agencies published a proposed rule to 
implement the minimum requirements under FIRREA section 1124 for 
registration and supervision of AMCs, with a 60-day public comment 
period.\18\ With certain changes to the proposed rule, this final rule 
implements the statutory requirements discussed above, as well as 
section 1124's requirements for the reporting of the activities of AMCs 
in determining the payment of the annual registry fee.\19\ The final 
rule is being published in the Code of Federal Regulations separately 
by the OCC, the Board, the FDIC, and the FHFA. The Bureau is publishing 
a cross-reference to the OCC rule text in the valuation independence 
provisions of Regulation Z, 12 CFR 1026.42, to highlight that the final 
rule specifically reinforces the valuation independence standards. The 
rules are not different substantively. The implementation of the AMC 
minimum requirements does not affect the responsibility of banks, 
Federal savings associations, State savings associations, bank holding 
companies, and credit unions to ensure that appraisals for their 
institutions comply with applicable laws and regulations and are 
consistent with supervisory guidance. If these regulated financial 
institutions use an AMC to engage appraisers on their behalf, the AMC 
must be acting as an agent for these institutions.\20\
---------------------------------------------------------------------------

    \18\ 79 FR 19521 (Apr. 9, 2014).
    \19\ 12 U.S.C. 3353(e). See also 12 U.S.C. 3338(a)(4) (setting 
out the fee structure for the AMC National Registry).
    \20\ See OCC: 12 CFR 34.45(b)(1); Board: 12 CFR 225.65(b)(1); 
FDIC: 12 CFR 323.5(b)(1); and NCUA: 12 CFR 722.5(b)(1).
---------------------------------------------------------------------------

Consolidation of FDIC and OTS Rules on Appraisals

    Title III of the Dodd-Frank Act transferred the powers, duties, and 
functions formerly performed by the Office of Thrift Supervision (OTS), 
the Federal entity formerly responsible for the supervision of 
Federally insured savings associations and their holding companies, to 
the FDIC for State savings associations and authorized the FDIC to 
consolidate OTS and FDIC rules.\21\ The final rule implements this 
authority by rescinding the OTS regulatory provisions on appraisals 
pertaining to State savings associations, as these entities are now 
covered by the FDIC's appraisal rules.\22\
---------------------------------------------------------------------------

    \21\ The OTS was abolished on October 19, 2011, pursuant to the 
Dodd-Frank Act.
    \22\ Title III of the Dodd-Frank Act transferred supervision of 
Federal savings associations to the OCC. The OCC recently integrated 
the OTS and OCC rules on appraisals. See 79 FR 28393 (May 16, 2014) 
(integrating certain interagency rules for national banks and 
Federal savings associations).
---------------------------------------------------------------------------

II. The Final Rule

    The final rule: (1) Establishes the minimum requirements in section 
1124 of FIRREA for State registration and supervision of AMCs in 
participating States; (2) requires Federally regulated AMCs to meet the 
minimum requirements of section 1124 (other than registering with the 
State); and (3) requires States to report certain AMC information to 
the ASC.\23\ The final rule also integrates FDIC appraisal regulations 
for State nonmember banks and State savings associations.
---------------------------------------------------------------------------

    \23\ See 12 U.S.C. 3353(a), (c), and (e).
---------------------------------------------------------------------------

    For the reasons discussed in section III of this SUPPLEMENTARY 
INFORMATION,

[[Page 32660]]

the final rule adopts the rule substantially as proposed, with 
modifications to: (1) Provide that the standard for determining whether 
an appraiser is an independent contractor will be based on how the 
appraiser is treated for Federal income taxes, as determined under 
Internal Revenue Service (IRS) guidance; (2) clarify that an AMC credit 
union service organization (CUSO) is not considered to be a Federally 
regulated AMC, and therefore would be regulated by the State or States 
in which the AMC CUSO operates; (3) clarify that the rule does not bar 
the use of trainee appraisers; (4) provide that the registration 
limitations on individuals who have had their licenses refused, denied, 
cancelled, surrendered in lieu of revocation, or revoked, should not be 
construed to apply to appraisers whose licenses have been revoked for 
nonsubstantive reasons, as determined by the appropriate State 
appraiser certifying and licensing agency and whose licenses have been 
subsequently reinstated; (5) revise the provision on reporting of 
information by Federally regulated AMCs to clarify that Federally 
regulated AMCs will report information required for the AMC National 
Registry directly to the States; and (6) remove cross-references to 
provisions of Regulation Z, 12 CFR part 1026 (Truth in Lending), in the 
proposed definitions. The Agencies are generally adopting the relevant 
text of the cross-referenced Regulation Z provisions, in lieu of the 
cross-references. The final rule also contains technical, 
nonsubstantive changes.

III. The Final Rule and Public Comments on the Proposed Rule

    The following is a section-by-section review of the proposed rule 
and a discussion of the public comments received by the Agencies 
concerning the proposal. The Agencies received 256 comment letters 
containing 89 unique comments in response to the published proposal. 
These comment letters were received from State appraiser certifying and 
licensing agencies, AMCs, appraiser trade and professional 
associations, appraisal firms, appraisers, financial institutions, 
consumer/community groups and individual commenters. For ease of 
reference, unless otherwise noted, the SUPPLEMENTARY INFORMATION refers 
to section numbers in the proposed and final rule texts for the OCC, 12 
CFR 34.210 et seq. Rule text for the other Agencies is published 
separately in this Federal Register notice at 12 CFR 208.50 and 225.190 
et seq. (Board); 12 CFR 323.8 et seq. (FDIC); and 12 CFR 1222.20 et 
seq. (FHFA).

A. Section 34.211. Definitions

    The Agencies requested comment on the key definitions in the 
proposed rule. The following is a discussion of these key definitions, 
related public comments, and issues relating to those definitions. 
Definitions on which the Agencies did not receive comment are not 
discussed below and are adopted without change in the final rule.
1. Cross-References to Other Regulations
    The Agencies are adopting changes to definitions for which cross-
references to Regulation Z, 12 CFR part 1026, were used in the proposed 
rule. Specifically, the Agencies are removing most cross-references and 
adopting the relevant text of the cross-referenced provisions directly 
(see Sec.  34.211(g) (defining ``consumer credit''), Sec.  34.211(i) 
(defining ``creditor''), and Sec.  34.211(m) (defining ``person''). In 
addition, the Agencies are defining the term ``dwelling'' in Sec.  
34.211(j) by adopting the text of the definition of ``dwelling'' in 12 
CFR 1026.2(a)(19), which was included in the proposed definition of 
``principal dwelling'' (see proposed Sec.  34.211(m)). In new Sec.  
34.211(j)(2), the Agencies are retaining the explanation of ``principal 
dwelling'' that was provided in the proposed rule.\24\ (See proposed 
Sec.  34.211(m)). This explanation is based on Official Interpretation 
12 CFR 1026.2(a)(24)-3. The Agencies are adopting these changes in the 
final rule to simplify the rule and relieve regulatory burden on 
States. Substituting the text of these definitions for cross-references 
mitigates the potential obligations of States to update, clarify, or 
amend State law or its interpretations as Regulation Z is amended over 
time, or if the numbering of definitions in Regulation Z changes.\25\
---------------------------------------------------------------------------

    \24\ See proposed Sec. Sec.  34.211(m) and 34.211(j)(2).
    \25\ These changes also should avoid any inadvertent confusion 
created by referring to Regulation Z, which includes additional 
exemptions that are not included in these regulations, such as for 
transactions meeting the Regulation Z definition of consumer credit 
transaction secured by a principal dwelling, but used to purchase a 
3-4 unit owner-occupied rental property.
---------------------------------------------------------------------------

2. Section 34.211(c): Appraisal Management Company; Section 34.211(d): 
Appraisal Management Services
    Proposed Sec.  34.211(c) defined an AMC as a person that: (1) 
Provides appraisal management services to creditors or secondary 
mortgage market participants; (2) provides these services in connection 
with valuing the consumer's principal dwelling as security for a 
consumer credit transaction (including consumer credit transactions 
incorporated into securitizations); and (3) within a given year, 
oversees an appraiser panel of more than 15 State-certified or State-
licensed appraisers in a State or 25 or more State-certified or State-
licensed appraisers in two or more States. The proposed definition 
cross-referenced proposed Sec.  34.212 for the rules on how to 
calculate the numeric threshold for the appraiser panel.
    Proposed Sec.  34.211(d) defined ``appraisal management services,'' 
which is a key component of the definition of ``appraisal management 
company,'' to mean one or more of the following: (1) Recruiting, 
selecting, and retaining appraisers; (2) contracting with State-
certified or State-licensed appraisers to perform appraisal 
assignments; (3) managing the process of having an appraisal performed, 
including providing administrative duties such as receiving appraisal 
orders and appraisal reports, submitting completed appraisal reports to 
creditors and secondary mortgage market participants, collecting fees 
from creditors and secondary mortgage market participants for services 
provided, and paying appraisers for services performed; and (4) 
reviewing and verifying the work of appraisers. This definition is 
consistent with the appraisal management services outlined in the 
definition of AMC in section 1121.\26\ As in section 1121, the proposed 
definition of appraisal management services did not include performing 
appraisals, nor does the definition of appraisal management services 
adopted in this final rule.\27\
---------------------------------------------------------------------------

    \26\ See 12 U.S.C. 3350(11).
    \27\ See id.
---------------------------------------------------------------------------

a. Commercial Transactions and the Definition of AMC
    Consistent with the statutory definition of AMC, the proposed 
definition of AMC applied to appraisal management services provided in 
connection with residential mortgage transactions secured by the 
consumer's principal dwelling and securitizations involving those 
mortgages. The proposed rule did not extend to appraisal management 
services provided in connection with commercial real estate 
transactions or securitizations involving commercial real estate 
mortgages.\28\
---------------------------------------------------------------------------

    \28\ 12 U.S.C. 3350(11).
---------------------------------------------------------------------------

    In drafting the definition of AMC for the proposal, the Agencies 
considered whether the statutory definition of AMC in section 1121 
should be construed to

[[Page 32661]]

encompass not only appraisal management services provided for 
securitizations of consumer purpose residential mortgages, but also 
appraisal services in connection with securitizations of commercial 
mortgages.\29\ The Agencies proposed the former. The Agencies' reading 
of the statute--that it extends only to consumer purpose residential 
mortgage transactions and securitizations of those mortgages--is 
consistent with the text of section 1124 and with the Dodd-Frank Act as 
a whole.\30\ Non-residential or commercial mortgages are not mentioned 
in any AMC provisions in section 1473 of the Dodd Frank Act (or 
elsewhere in Title XIV of the Dodd-Frank Act). The lack of a reference 
to commercial mortgage lending in the relevant Dodd-Frank Act 
provisions suggests that AMCs were not intended to be covered by the 
AMC minimum requirements when they are providing appraisal management 
services for underwriters or other principals in commercial mortgage 
securitizations. Moreover, the Agencies understand that individual 
appraisers, as opposed to AMCs, are more typically retained to provide 
an appraisal of properties securing commercial mortgage loans (and 
securitizations of such loans) because of the size and complexity of 
those properties. This understanding is based on the supervisory 
experience of the Agencies as well as outreach during the proposed rule 
process to a trade association for AMCs and an individual AMC, which 
confirmed that, under the current business model, AMCs do not generally 
provide services in connection with commercial mortgages.
---------------------------------------------------------------------------

    \29\ While it is clear that the definition of AMC encompasses 
only residential mortgage loans, there is some question as to 
whether the definition includes securitizations of commercial 
mortgages.
    \30\ 12 U.S.C. 3353.
---------------------------------------------------------------------------

    The Agencies received a small number of comments concerning whether 
an AMC's services for commercial mortgage transactions should be 
covered by the final rule. Several commenters supported the proposal to 
exclude commercial real estate transactions from the definition of AMC. 
One commenter disagreed, stating that both commercial and consumer 
transactions should be covered by the rule, but did not elaborate.
    The Agencies continue to believe that commercial real estate 
transactions should be excluded from the definition of AMC based on the 
reasons outlined above. As such, the definition of AMC in the final 
rule includes entities only when they are providing appraisal 
management services for consumer mortgage transactions secured by the 
consumer's principal dwelling and securitizations of those loans.
b. ``External Third Party'' Within the Definition of AMC
    Section 1121 defines an AMC as any ``external third party'' 
authorized to take certain actions by a creditor of a consumer credit 
transaction secured by the consumer's principal dwelling or by an 
underwriter of or other principal in the secondary mortgage 
markets.\31\ Consistent with the statutory definition, the proposal 
defined the term ``appraisal management company'' to exclude a 
department or division of an entity if the department or division 
provides appraisal management services only to that entity. This 
reflects the Agencies' interpretation that a department or a division 
of an entity is not an ``external third party'' as required by the 
statute. Under the proposed rule, an AMC that is an affiliate (rather 
than a department or division) of a creditor or secondary market 
principal would, however, be treated as an AMC, even if the AMC 
provides appraisal management services only to the entity with which it 
is affiliated, because the affiliate is a separate legal entity.
---------------------------------------------------------------------------

    \31\ 12 U.S.C. 3350(11).
---------------------------------------------------------------------------

    The Agencies believe that this interpretation of the term 
``external third party'' is consistent with the plain meaning of 
``external'' and ``third party,'' as well as with section 1124(c), 
which provides that the requirements of section 1124 would apply to 
AMCs that are owned and controlled by financial institutions.\32\ In 
the Agencies' view, this interpretation is also consistent with section 
1124 as a whole, which is directed at regulating parties that provide 
appraisal management services on behalf of creditors and secondary 
market principals, but does not regulate creditors or secondary market 
principals directly.\33\
---------------------------------------------------------------------------

    \32\ 12 U.S.C. 3353(c).
    \33\ 12 U.S.C. 3353.
---------------------------------------------------------------------------

    The Agencies received one comment on this topic, which supported 
the exclusion of departments and divisions from the definition of AMC. 
The Agencies are adopting in the final rule the proposed approach to 
``external third party.''
c. Uniformity and the Definition of AMC
    The Agencies received a number of comments suggesting that the 
Agencies require all participating States to adopt the definition of 
AMC in the proposed rule. Several commenters also stated that reducing 
burden for AMCs would reduce costs for consumers. As a legal basis for 
this position, one commenter noted that the definition of AMC is 
statutory, and therefore should be binding on all the participating 
States.
    The Agencies agree that the definition of AMC in section 1121 sets 
the uniform minimum standards for assessing whether an entity is an AMC 
under this rule.\34\ Under the proposed rule, a participating State 
would be required to treat an entity as an AMC if the entity provides 
services described in the definition and meets the statutory panel size 
threshold. As such, pursuant to section 1121 and the proposed rule, a 
participating State could not revise the definition of AMC to eliminate 
or limit the range of services that would classify an entity as an AMC 
with respect to the minimum requirements in the rule. Similarly, a 
State could not void the statutory panel size threshold that triggers 
the minimum requirements by, for example, adopting an AMC law that 
provides that an entity is an AMC only if it has 50 or more appraisers 
on its nationwide panel.\35\ Thus, all States electing to establish an 
AMC regulatory program under the rule would have a uniform minimum 
scope as to coverage of their program.
---------------------------------------------------------------------------

    \34\ 12 U.S.C. 3350(11). This rule establishes ``minimum'' 
requirements for a State to apply in registering AMCs. Thus, the 
Agencies interpret the rule of construction in FIRREA section 
1124(b) to recognize that States may adopt requirements that exceed 
those in the rule, for example, defining AMC to cover more entities 
than would be covered under the minimum requirements of this rule. 
15 U.S.C. 3353(b).
    \35\ 12 U.S.C. 3350(11).
---------------------------------------------------------------------------

    While the Agencies understand the commenters' desire for 
uniformity, FIRREA section 1124(b) recognizes expressly the authority 
of States to adopt requirements in addition to those in the final rule: 
``Nothing in this section [1124] shall be construed to prevent States 
from establishing requirements in addition to any rules promulgated 
under subsection(a)[by the Agencies].'' \36\ Therefore, the Agencies 
decline to require all participating States to adopt a uniform 
definition of AMC.
---------------------------------------------------------------------------

    \36\ 12 U.S.C. 3353(b).
---------------------------------------------------------------------------

d. ``Portals'' Within the Definition of AMC
    The Agencies received one comment from an entity that provides 
appraisal related services through electronic mechanisms, described as 
a ``portal'' business model. The commenter requested that the Agencies 
address the question of whether a portal is an AMC.
    The Agencies do not support a categorical rule in this regard. The 
business model an entity uses to provide services should not be

[[Page 32662]]

determinative of whether the entity is an AMC; rather, if a portal is 
providing appraisal management services, and meets the other elements 
of the definition, then it should be considered an AMC under the final 
rule. Thus, the final rule does not limit or affect the discretion of 
States to treat a portal as an AMC if a State finds that a portal 
provides appraisal management services.
e. Distinction Between AMCs and Appraisal Firms
    In the proposal, the Agencies addressed whether appraisal firms 
should be considered AMCs pursuant to sections 1124 and 1121(11) \37\ 
and requested comment on whether the distinction between employees and 
independent contractors served as a basis for excluding appraisal firms 
from the definition of an AMC. (See Question 3 in the proposal.) The 
technical distinction between independent contractors and employees, 
for purposes of determining whether an entity meets the statutory panel 
size thresholds, is addressed in the section-by-section analysis of 
Sec.  34.212 (Appraiser Panel), which discusses how to calculate the 
number of appraisers on a panel. The following is a discussion of the 
comments on the broader issue of whether the proposal appropriately 
excluded appraisal firms from the scope of the rule.
---------------------------------------------------------------------------

    \37\ 12 U.S.C. 3353 and 3350(11).
---------------------------------------------------------------------------

    A number of commenters supported the proposal to construe section 
1124 as applying only to AMCs or hybrid entities (discussed in detail 
below) and not to appraisal firms. These commenters stated that the 
business models of AMCs and appraisal firms are different. Under the 
different business models, according to these commenters, employees of 
appraisal firms perform appraisals, while AMCs contract for appraisal 
services, but do not perform appraisals. Another set of commenters 
argued that appraisal firms should be covered by the rule. The basis 
for this argument was the commenters' assertion that there is no 
substantive distinction between AMCs, which hire others to perform 
appraisals, and appraisal firms, which generally hire appraisers as 
employees.
    As discussed in the preamble to the proposed rule, the Agencies 
interpret section 1124 to distinguish between AMCs and appraisal firms 
for three key reasons.\38\ First, the distinction between appraisal 
firms and AMCs is reflected in section 1472 of the Dodd-Frank Act, 
which added provisions concerning valuation independence to TILA.\39\ 
These provisions contemplate expressly that certain entities would not 
be covered by the AMC minimum requirements in FIRREA section 1124 and 
describe this type of entity, in pertinent part, as one that ``utilizes 
the services of State licensed or certified appraisers and receives a 
fee for performing appraisals in accordance with the Uniform Standards 
of Professional Appraisal Practice.'' \40\ The Agencies understand that 
the type of entity described here as excluded from the AMC minimum 
requirements is an appraisal firm, which receives fees for directly 
performing appraisals. Second, FIRREA section 1124 uses the term 
``appraisal management company,'' and not appraisal firm.\41\ Third, 
section 1121(11) describes the activities of AMCs as including 
``contracting with State-certified or State-licensed appraisers to 
perform appraisal assignments,'' but not directly performing 
appraisals.\42\ Section 1121(11) also defines an AMC as an entity that 
``oversees a network or panel of more than 15 certified or licensed 
appraisers in a State or 25 or more nationally (meaning two or more 
States) within a given year . . .'' \43\ By contrast, the Agencies 
understand that appraisal firms perform appraisals as a primary 
function directly through employees and do not oversee a ``network or 
panel'' of non-employee appraisers.
---------------------------------------------------------------------------

    \38\ 12 U.S.C. 3353.
    \39\ See TILA section 129F, 15 U.S.C. 1639e.
    \40\ 15 U.S.C. 1639e(i)(2) (emphasis added); see also 12 U.S.C. 
3353. A ``fee appraiser'' is defined in TILA section 129E, 15 U.S.C. 
1639(e)(i), as a person who: (1) Is not an employee of a loan 
originator or AMC engaging the appraiser; (2) performs an appraisal 
in compliance with USPAP; and (3) is a company [an appraisal firm] 
not subject to the requirements of section 1124 (minimum 
requirements for AMCs, 12 U.S.C. 3353) and that receives a fee for 
performing appraisals.
    \41\ Id.
    \42\ 12 U.S.C. 3350(11).
    \43\ 12 U.S.C. 3350(11).
---------------------------------------------------------------------------

    As stated in the proposal, the Agencies believe that the 
fundamental reasons to distinguish between AMCs and appraisal firms are 
that the business models of AMCs and appraisal firms are different and 
that Congress expressed an intention to exclude entities operating on 
an appraisal firm model from coverage by the AMC minimum requirements. 
This conclusion is consistent with the fact that AMCs provide appraisal 
management services to third parties, including retaining appraisers to 
perform appraisals, but AMCs do not perform appraisals. By contrast, 
appraisal firms perform appraisals using one or more of the firm's 
employees or partners. In addition, appraisal firms typically hire a 
limited number of appraisers, based on identified need, and hire 
inexperienced trainees and train them to become qualified appraisers. 
AMCs, on the other hand, generally have a large number of pre-approved 
appraisers in their network or panel who are available, as independent 
contractors, for potential assignments and do not conduct training for 
inexperienced appraisers.
f. Hybrid Entities
    In the proposal, the Agencies discussed the possibility that there 
are, or may be in the future, ``hybrid'' entities, meaning entities 
that both hire appraisers as employees to perform appraisals and engage 
independent contractors to perform appraisals. In this situation, the 
entity could be considered both an AMC and an appraisal firm. As such, 
under the proposed rule, the hybrid entity would be treated as an AMC 
for purposes of State registration if it meets the statutory panel size 
threshold (of overseeing more than 15 State-certified or State-licensed 
appraisers in a State or 25 or more State-certified or State-licensed 
appraisers in two or more States within a given year). Under the 
proposal, the numerical calculation of panel size for hybrid entities 
would only include appraisers engaged as independent contractors.
    Some commenters supported the proposed treatment of firms that have 
both employee appraisers and independent contractor appraisers. One 
commenter suggested that the Agencies should not recognize a hybrid 
firm as a valid business model, but did not elaborate. The Agencies 
adopt in the final rule the proposed definition of AMC and the proposed 
treatment of hybrid firms. The Agencies continue to believe that 
sections 1124 and 1121(11) are best interpreted to apply only to AMCs, 
as defined in the proposed and final rules, and not to appraisal firms 
(with the exception of hybrid firms). In addition to the statutory 
distinction between appraisal firms and AMCs, the Agencies believe this 
interpretation is consistent with, and supported by, the key 
distinction between AMCs and appraisal firms--that the former contracts 
with appraisers to perform appraisals, while the latter performs 
appraisals directly through employees. Even if some services provided 
by AMCs and appraisal firms overlap, which some commenters assert, this 
key difference between the two entities (that AMCs contract with 
appraisers to perform appraisals and appraisal firms perform appraisals 
directly through their own employees) remains. The final rule also 
reflects the definition of ``appraisal management company'' in

[[Page 32663]]

section 1121(11), which provides that an AMC is an entity that 
``oversees a network or panel'' of appraisers.\44\ Appraisal firms do 
not oversee networks or panels of non-employee appraisers.
---------------------------------------------------------------------------

    \44\ 12 U.S.C. 3350(11).
---------------------------------------------------------------------------

    The Agencies also continue to believe that recognition of hybrid 
firms as AMCs is appropriate when the entity maintains a panel of 
appraisers that includes independent contractors meeting the threshold 
minimum numbers pursuant to Sec.  34.212. The Agencies believe that 
this interpretation of the definition of AMC is consistent with the 
statutory language and purpose, appropriately reflects the business 
models of AMCs, and accommodates the possibility that appraisal firms 
may evolve over time. For these reasons, the Agencies adopt in the 
final rule the proposed definition of AMC and the proposed treatment of 
hybrid firms.
3. Section 34.211(e) Appraiser Panel
    The Agencies are adopting the proposed definition of ``appraiser 
panel'' with minor clarifications. Specifically, proposed Sec.  
34.211(e) defined an appraiser network or panel as a network of State-
licensed or State-certified appraisers who are independent contractors 
to an AMC. In the final rule, ``appraiser panel'' is defined as a 
network, list or roster of licensed or certified appraisers approved by 
the AMC to perform appraisals as independent contractors for the AMC. 
Appraisers on an AMC's ``appraiser panel'' under this part include both 
appraisers accepted by the AMC for consideration for future appraisal 
assignments and appraisers engaged by the AMC to perform one or more 
appraisals. The final rule also clarifies in the definition of 
``appraiser panel'' that an appraiser is an independent contractor for 
purposes of this rule if the appraiser is treated as an independent 
contractor by the AMC for purposes of Federal income taxation.
a. Distinction Between Employees and Independent Contractors in 
Determining Panel Membership
    The definition of ``appraisal management company'' in section 
1121(11) provides that an entity will be treated as an AMC subject to 
State registration if it has an ``appraiser network or panel'' of more 
than 15 State-certified or State-licensed appraisers in a State or 25 
or more appraisers nationally (meaning two or more States) within a 
given year.\45\ Section 1121(11) does not specify whether a ``network 
or panel'' consists of employees of an AMC or independent contractors 
retained by the AMC (or both). However, by including only independent 
contractors with the AMC, the proposed and adopted definition of 
``appraiser panel'' reflects the approach taken by the majority of 
States that have adopted AMC registration laws or have proposed AMC 
laws \46\ and reflects the Agencies' understanding that AMCs typically 
engage appraisers as independent contractors under the current AMC 
business model.\47\ Section 34.211(e) also reflects the definition of 
AMC in section 1121(11), which outlines typical tasks carried out by 
AMCs, including as ``contract[ing] with licensed and certified 
appraisers.'' \48\ As discussed above in the section-by-section 
analysis of Sec.  34.211(c), the definition of AMC and its description 
of appraisal management services does not include directly performing 
appraisals through the AMC's own employees--rather, AMCs contract with 
external third parties to perform appraisals.\49\
---------------------------------------------------------------------------

    \45\ 12 U.S.C. 3350(11).
    \46\ A majority of States with AMC laws define ``appraiser 
panel'' as being comprised of independent contractors. See, e.g., 
N.C. Gen. Stat. section 93E-2-2 (defining an appraiser panel as a 
network or panel of appraisers who are independent contractors to 
the AMC); Vernon's Tex. Code Ann. Occupations Code section 
1104.003(b)(3) (same); Louisiana La. Rev. Stat. Ann. section 
37:3415.2(a) (same); see also Ohio (draft code) (same). A minority 
of States use a broader definition for ``appraiser panel'' that 
encompasses a combination of independent contractors and employees. 
See, e.g., Cal. Bus. & Prof. Code section 11302 (defining AMC to 
include both independent contractors and employees); Ark. Code Ann. 
section 17-14-402(2) (same); Ky. Rev. Stat. section 
324A.150(2)(same). The majority approach is consistent with the 
model AMC code offered by a trade association for appraisers and the 
minority approach is consistent with a model code offered by a trade 
association for AMCs.
    \47\ As discussed in the proposal, this understanding is based 
on outreach conducted by the Agencies with associations that 
represent AMCs and appraisers, as well as outreach with State 
appraiser certifying and licensing agencies.
    \48\ 12 U.S.C. 3350(11).
    \49\ The Agencies will monitor AMCs to assess whether they are 
hiring appraisers as part-time employees to avoid State registration 
requirements. Outreach with State officials before the issuance of 
the proposed rule did not indicate this is currently occurring or at 
significant risk of occurring.
---------------------------------------------------------------------------

    The method for calculating whether an entity has an ``appraiser 
network or panel'' of more than 15 State-certified or State-licensed 
appraisers in a State or 25 or more appraisers nationally (meaning two 
or more States) within a calendar year or 12-month period under State 
law is discussed further under the section-by-section analysis of Sec.  
34.212, below.
    The Agencies requested comment on the proposed definition of 
``appraiser panel'' and on the alternative of defining this term to 
include employees as well as independent contractors. (See Question 2 
in the proposal.) Some commenters argued that employees as well as 
independent contractor appraisers should be counted as part of an 
appraiser network or panel. These commenters did not disagree with the 
Agencies' understanding that AMCs generally use independent contractors 
rather than employee appraisers. Nor did the commenters address the key 
distinction between AMCs and appraisal firms, which is that AMCs 
primarily engage third parties to perform appraisals, whereas appraisal 
firms perform appraisals directly through employees.
    As discussed above in the section-by-section analysis of Sec.  
34.211(c), the commenters argued that appraisal firms should be 
regulated as AMCs as a matter of policy. As such, these commenters 
suggested that the distinction between employee and independent 
contractor appraisers be removed from the rule. In support of this 
position, the commenters stated that appraisal firms and AMCs provide 
substantially the same services, and therefore should both be covered 
by the AMC registration and supervision programs.
    Other commenters agreed with the employee-independent contractor 
distinction, stating that defining ``appraiser panel'' to be comprised 
only of independent contractor appraisers reflects the difference 
between the AMC and appraisal firm business models. Specifically, these 
commenters stated that appraisal firms' employees perform appraisals 
directly, while AMCs provide appraisal management services and engage 
third-party appraisers to perform appraisals.
    The Agencies adopt in the final rule the proposed definition of 
``appraiser panel,'' which includes only appraisers who are independent 
contractors to an AMC. The Agencies note the predominance of comments 
in favor of retaining the employee-independent contractor distinction. 
The final rule also reflects that the commenters who opposed the 
proposed employee-independent contractor distinction effectively 
conceded that the distinction is accurate, arguing instead that AMCs 
and appraisal firms should both be regulated as AMCs under section 1124 
and implementing State laws, regardless of the way these entities 
structure their operations.\50\ This larger policy question is 
addressed above in the discussion of the distinction between employees 
and independent contractors as a basis for exclusion of an appraisal 
firm from the definition of an AMC. See the section-by-section analysis 
of Sec.  34.211(c)

[[Page 32664]]

(definition of AMC), above. Moreover, the treatment of hybrid firms 
will help address the potential that a firm may try to avoid the 
requirements of the rule by using a combination of appraisers who are 
employees and appraisers who are independent contractors.
---------------------------------------------------------------------------

    \50\ 12 U.S.C. 3353.
---------------------------------------------------------------------------

b. Definition of Independent Contractor
    The Agencies requested comment on whether the term ``independent 
contractor'' should be defined, and if so why and how, including 
whether it should be defined based on Federal law by using the 
standards or guidance issued by the IRS or standards adopted in other 
Federal regulations, such as those issued under the Secure and Fair 
Enforcement for Mortgage Licensing Act of 2008 (SAFE Act),\51\ or left 
to State law. (See Question 2 in the proposal.) A number of commenters 
requested that the final rule include a definition of independent 
contractor, or that the rule incorporate an external definition, for 
example, IRS guidance on the employee-independent contractor 
distinction or the definition of independent contractor in the SAFE 
Act. In addition, these commenters stated that it would be desirable to 
have a standard for independent contractor that applies in all 
participating States. The commenters stated a preference for using IRS 
guidance for this purpose. One commenter disagreed, suggesting that a 
single definition of the term independent contractor is not needed.
---------------------------------------------------------------------------

    \51\ 12 CFR 1008.23 (``Independent contractor means an 
individual who performs his or her duties other than at the 
direction of and subject to the supervision and instruction of an 
individual . . .'') (emphasis added). The SAFE Act was enacted as 
part of the Housing and Economic Recovery Act of 2008, Pub. L. 110-
289, Division A, Title V, sections 1501-1517, 122 Stat. 2654, 2810-
2824 (July 30, 2008), codified at 12 U.S.C. 5101-5116.
---------------------------------------------------------------------------

    The Agencies believe that additional guidance on the meaning of 
``independent contractor'' under the final rule facilitates compliance 
and, therefore, are amending the proposed definition of appraiser panel 
accordingly. As noted, the definition of appraiser panel in Sec.  
34.211(e) provides that that an appraiser is deemed an ``independent 
contractor'' for purposes of this rule if the appraiser is treated as 
such by the AMC for purposes of Federal income taxation.\52\
---------------------------------------------------------------------------

    \52\ For guidance on how to determine whether an appraiser is an 
employee or independent contractor, see IRS Publication 1779, 
``Independent Contractor or Employee,'' available at https://www.irs.gov/pub/irs-pdf/p1779.pdf and IRS Publication 15-A, 
``Employer's Supplemental Tax Guide,'' at p. 7 et seq. (discussing 
factors for distinguishing employees from independent contractors), 
available at https://www.irs.gov/pub/irs-pdf/p15a.pdf.
---------------------------------------------------------------------------

4. Section 34.211(h): Covered Transaction
    Proposed Sec.  34.211(h) defined a covered transaction as any 
consumer credit transaction secured by the consumer's principal 
dwelling. The proposed definition did not limit the definition of 
``covered transaction'' to Federally related transactions (generally, 
credit transactions involving a Federally regulated depository 
institution, see 12 U.S.C. 3350(4)), even though Title XI of FIRREA and 
its implementing regulations have applied historically only to 
appraisals for Federally related transactions.
    As stated in the proposed rule, defining ``covered transaction'' to 
include all consumer credit transactions secured by the consumer's 
principal dwelling reflects the statutory text of section 1121(11), 
which defines the term ``appraisal management company,'' as in 
pertinent part, ``any external third party authorized either by a 
creditor of a consumer credit transaction secured by the consumer's 
principal dwelling or by an underwriter of or other principal in the 
secondary mortgage markets.'' \53\
---------------------------------------------------------------------------

    \53\ 12 U.S.C. 3350(11).
---------------------------------------------------------------------------

    Applying coverage of the AMC rule beyond Federally related 
transactions is consistent with the structure and text of other parts 
of section 1124, most of which address appraisals generally rather than 
appraisals only for Federally related transactions. For example, 
section 1124(a)(2) specifies that only licensed or certified appraisers 
are to be used for ``federally related transactions,'' but sections 
1124(a)(3) and (a)(4) apply to ``appraisals'' generally.\54\ In 
particular, the text of section 1124(a)(4) indicates that one of the 
chief purposes of the minimum requirements for AMCs is to ensure 
compliance with the valuation independence standards established 
pursuant to section 129E of TILA.\55\ Those standards apply to AMCs 
whenever they engage in a consumer credit transaction secured by the 
consumer's principal dwelling, regardless of whether the transaction is 
a Federally related transaction.\56\
---------------------------------------------------------------------------

    \54\ See 12 U.S.C. 3353(a)(2) (3) and (4).
    \55\ 12 U.S.C. 3353(a)(4).
    \56\ See 15 U.S.C. 1639e(a) (defining scope); 12 CFR 
1026.42(b)(1)-(2) (implementing regulations defining scope).
---------------------------------------------------------------------------

    For these reasons, the proposed rule provided that the minimum 
requirements in participating States would apply to all entities that 
meet the definition of AMC in providing appraisal management services 
related to consumer credit transactions secured by the consumer's 
principal dwelling for both Federally related transactions and non-
Federally related transactions.
    The Agencies received one comment that supported the proposed 
definition of ``covered transaction.'' The Agencies are adopting it in 
the final rule as proposed. As such, a covered transaction is defined 
to mean any consumer credit transaction secured by the consumer's 
principal dwelling. For the reasons discussed above in describing the 
proposed definition, the Agencies have determined the final rule should 
not limit the definition of ``covered transaction'' to consumer credit 
transactions secured by the consumer's principal dwelling that are 
Federally related transactions.
5. Section 34.211(k): Federally Regulated AMCs
    Section Sec.  34.211(k) defines a ``Federally regulated AMC'' as an 
AMC that is owned and controlled by an insured depository institution, 
as defined in 12 U.S.C. 1813, or an insured credit union, as defined in 
12 U.S.C. 1752, and regulated by the OCC, the Board, the NCUA, or the 
FDIC. This definition differs from the proposed definition only in that 
the reference to the NCUA is removed, for reasons discussed below.
    Under section 1124(c), an AMC that is a subsidiary owned and 
controlled by an insured depository institution or an insured credit 
union and regulated by a Federal financial institutions regulatory 
agency \57\ is not required to register with a State.\58\ Proposed 
Sec.  34.211(j) defined an entity of this type as a ``Federally 
regulated AMC,'' meaning an AMC that is owned and controlled by an 
insured depository institution, as defined in 12 U.S.C. 1813, or an 
insured credit union, as defined in 12 U.S.C. 1752, and regulated by 
the OCC, the Board, the NCUA, or the FDIC. Under section 1124(c), a 
Federally regulated AMC must follow the minimum requirements that are 
applicable to a State-registered AMC (other than the requirement to 
register with a State) and is subject to supervision for compliance 
with these requirements by the appropriate Federal financial 
institutions regulatory agency. In addition, under section 1124(e), as

[[Page 32665]]

implemented by the proposed rule, AMCs, including Federally regulated 
AMCs, must report to the participating State or States in which they 
operate the information required to be submitted by the State to the 
ASC for administration of the AMC National Registry. These requirements 
are discussed further in the section-by-section analysis of Sec.  
34.215, below.
---------------------------------------------------------------------------

    \57\ The term ``Federal financial institutions regulatory 
agencies'' means the Board, the FDIC, the OCC, the former OTS, and 
the NCUA. 12 U.S.C. 3350(6). Title III of the Dodd-Frank Act 
provides that the OCC is now the Federal financial institutions 
regulatory agency for Federal savings associations. Title III of the 
Dodd-Frank Act also provides that the FDIC is the Federal financial 
institutions regulatory agency for State savings associations. 
Finally, the Dodd-Frank Act provides that the Board is responsible 
for regulation of savings and loan holding companies.
    \58\ 12 U.S.C. 3353(c).
---------------------------------------------------------------------------

    In the proposal, the Agencies discussed whether an AMC that is a 
subsidiary owned and controlled by a credit union (credit union service 
organization or ``CUSO'') would be considered a Federally regulated 
AMC, and thus exempt from State registration and supervision. The 
Agencies indicated that an AMC, even if owned and controlled by a 
credit union, would not be a Federally regulated AMC because the NCUA, 
unlike the other banking agencies involved in this rulemaking, does not 
directly oversee or regulate CUSOs. Instead, the authority that the 
NCUA exercises over CUSOs is through its regulations that permit 
Federal credit unions to invest in, or lend to, CUSOs.\59\ For these 
reasons, under the proposed rule, if an AMC were owned and controlled 
by a credit union (whether owned by a State or Federally chartered 
credit union) it would not be considered to be regulated by a Federal 
financial institutions regulatory agency. As such, the AMC CUSO would 
be required to be registered in accordance with applicable State 
requirements in participating States.\60\
---------------------------------------------------------------------------

    \59\ See 12 CFR part 712 (outlining requirements relating to 
credit union investments in CUSOs).
    \60\ As noted in the preamble to the proposed rule, the NCUA has 
not, historically, asserted that CUSOs or their employees are exempt 
from applicable State registration and licensing regimes. See 75 FR 
44656, 44659 (applying similar reasoning to the licensing of 
mortgage loan originators who were employees of CUSOs under the SAFE 
Act.
---------------------------------------------------------------------------

    The Agencies requested comment on whether references to the NCUA 
and insured credit unions should be removed from the definition of 
``Federally regulated AMC'' and other parts of the final rule to 
clarify that an AMC CUSO would be subject to State registration and 
supervision. (See Question 4 in the proposal.) Some commenters 
expressed concern that the references to the NCUA and credit unions in 
the proposed regulatory text were confusing and suggested that removing 
these references in the final rule would clarify that AMC CUSOs are 
subject to State registration and supervision.
    To provide clarification in the final rule, the Agencies removed 
references to NCUA and credit unions from pertinent portions of the 
regulatory text defining ``Federally regulated AMC.'' An AMC owned and 
controlled by a credit union (whether owned by a State or Federally 
chartered credit union) is not considered to be regulated by a Federal 
financial institutions regulatory agency under the final rule. As such, 
AMC CUSOs are required to register in accordance with applicable State 
requirements.
6. Section 34.211(n): Secondary Mortgage Market Participant
    In the proposed rule, the Agencies defined ``secondary mortgage 
market participant'' to implement the statutory definition of AMC, 
which refers to an entity that performs services authorized by ``an 
underwriter of or other principal in the secondary mortgage markets.'' 
\61\ Proposed Sec.  34.211(n) defined ``secondary mortgage market 
participant'' to mean a guarantor or insurer of mortgage-backed 
securities, or an underwriter or issuer of mortgage-backed securities. 
The definition included individual investors in a mortgage-backed 
security only if they also serve in the capacity of a guarantor, 
insurer, underwriter, or issuer for the mortgage-backed security.
---------------------------------------------------------------------------

    \61\ 12 U.S.C. 3350(11).
---------------------------------------------------------------------------

    Most commenters supported the proposed definition of ``secondary 
mortgage market participant.'' Some commenters indicated that the 
definition is clear and needs no further additions or clarifications at 
this time, but could at some future date to reflect evolving 
conditions. One commenter believed that the definition is sufficiently 
understandable for States to be able to write statutes and rules to 
enforce the intent of the rule. Another commenter suggested that the 
definition of ``secondary market participant'' is too narrow, and that 
any bank or creditor involved in lending Federally insured funds in a 
transaction secured by real estate (commercial or residential) should 
be considered a secondary market participant.
    Commenters did not provide any specific suggestions for revising 
the proposed definition of secondary mortgage market participant. As 
with other aspects of the proposed rule, the Agencies understand that 
changes in the marketplace may, at some point, require the Agencies to 
amend the final rule, or may require States to amend or re-interpret 
State laws. The Agencies continue to believe, however, that the 
definition of secondary mortgage market participant is accurate at 
present. Regarding the comment that banks or creditors lending 
Federally insured funds should be included, the Agencies note that the 
statutory definition of AMC distinguishes between ``creditors'' and 
``secondary mortgage market participants,'' \62\ and therefore believe 
that including originating banks or creditors in the definition of 
``secondary mortgage market participants'' would be inconsistent with 
this distinction in the statutory definition. The Agencies in the final 
rule adopt the proposed definition of secondary mortgage market 
participant.
---------------------------------------------------------------------------

    \62\ 12 U.S.C. 3350(11).
---------------------------------------------------------------------------

B. Section 34.212: Appraiser Panel--Annual Size Calculation

1. Determining Appraiser Panel
    Section 34.212 finalizes proposed Sec.  34.212 without change, 
other than revising the title from ``Appraiser Panel'' to ``Appraiser 
Panel--Annual Size Calculation,'' for clarity. Section 34.212 sets out 
criteria for determining whether, within a calendar year or 12-month 
period specified by State law, an AMC oversees an appraiser panel of 
more than 15 State-certified or State-licensed appraisers in a State or 
25 or more State-certified or State-licensed appraisers in two or more 
States. Consistent with the proposal, pursuant to Sec.  34.212(a), an 
appraiser is deemed part of the AMC's appraiser panel as of the 
earliest date the AMC accepts the appraiser for consideration for 
future appraisal assignments in covered transactions or engages the 
appraiser to perform one or more appraisal assignments on behalf of a 
creditor or secondary mortgage market participant in a covered 
transaction, including an affiliate of such a creditor or participant. 
Also consistent with the proposal, pursuant to Sec.  34.212(b), an 
appraiser who is considered to be part of the AMC's appraiser panel is 
deemed to remain on the panel until: (1) The date on which the AMC 
sends written notice to the appraiser removing the appraiser from the 
appraiser panel; (2) the date the AMC receives written notice from the 
appraiser asking to be removed from the appraiser panel; or (3) the 
date the AMC receives notice of the death or incapacity of the 
appraiser. If an appraiser is removed from an AMC's appraiser panel, 
but the AMC subsequently accepts the appraiser for consideration for 
future assignments or engages the appraiser at any time during the 
twelve months after the appraiser's removal, the removal would be 
deemed not to have occurred, and the appraiser would be deemed to have 
been part of the AMC's appraiser panel without interruption. The 
Agencies included

[[Page 32666]]

these procedural provisions to give States clarity and prevent 
circumvention of the registration requirement.
    The Agencies received a wide variety of comments relating to the 
calculation of appraiser panel membership under Question 2 of the 
proposal. Some commenters suggested that the approach in the proposal, 
which would count appraisers either engaged to perform appraisals or 
pre-approved to do so, would result in the unintended consequence of 
limiting the number of appraisers in AMC networks or panels. These 
commenters argued that pre-approved appraisers who have not yet been 
engaged by the AMC for an assignment should not be counted. They argued 
that the proposed method of counting appraisers would provide a strong 
incentive for AMCs to limit significantly the size of networks or 
panels, given that the AMC National Registry fee will be determined 
based on the number of appraisers on an AMC's network or panel of 
appraisers. The commenters stated that, to reduce costs, AMCs would 
likely reduce the size of appraiser panels if the proposed method of 
counting appraisers were adopted as final.
    As background, the commenters explained that AMCs maintain large 
panels of pre-approved appraisers in order to offer timely appraisal 
services in a wide variety of areas, including smaller communities and 
rural areas where appraisers are engaged less often than in more 
populated communities. The commenters noted that, if the AMCs reduce 
panels to actively engaged appraisers, then real estate transactions in 
small communities and rural areas will take more time because AMCs 
would not typically have pre-approved appraisers readily available for 
this type of assignment.\63\ For these reasons, the commenters 
requested that the Agencies modify the proposed method of counting 
appraisers in an AMC's network or panel to include only appraisers who 
are actually engaged to perform an appraisal during a 12-month period.
---------------------------------------------------------------------------

    \63\ One commenter, a coalition of three AMCs, stated the 
process of approving an appraiser for a panel typically requires 
from one week at a minimum to a month.
---------------------------------------------------------------------------

    The Agencies understand the commenters' concerns relating to the 
panel membership and the potential for AMCs to reduce their appraiser 
networks or panels to reduce ASC fees. The Agencies are also cognizant 
of, and concerned about, the potential adverse effects this may have on 
small communities and rural areas. However, for several reasons, the 
Agencies decline to amend the rule such that only appraisers actually 
given assignments in a particular year will be counted as being on the 
panel. First, the Agencies interpret sections 1124 and 1121(11) to mean 
that the counting of appraisers in determining whether an entity is 
subject to the AMC minimum requirements does not control or affect the 
counting of appraisers for purposes of payment of the AMC National 
Registry fee.\64\ Therefore, this final rule does not address or 
require the collection or calculation of these fees. Section 34.212 of 
the rule implements FIRREA section 1121(11) and governs how to count 
the number of appraisers on a panel only for purposes of whether an 
entity is an AMC subject to the AMC minimum requirements of this final 
rule, either as an AMC registered with a State that adopts these 
requirements or as a Federally regulated AMC.\65\ The rule requires 
AMCs to provide information to the State or States in which they 
operate, to be used in determining the payment of the annual AMC 
National Registry fee, but does not address or control how to calculate 
the number of appraisers on a network or panel for purposes of 
determining the fee. The AMC National Registry fee provisions 
pertaining to the calculation, assessment, and collection of the fee 
are addressed in FIRREA section 1109(a), which is enforced and 
administered by the ASC, not by the Agencies pursuant to section 
1124.\66\ As such, it is the ASC, and not the Agencies in this 
rulemaking, that will determine how to calculate and pay the AMC 
National Registry fee.
---------------------------------------------------------------------------

    \64\ 12 U.S.C. 3350(11) (defining an AMC subject to the minimum 
requirements as, in pertinent part, an entity with a ``network or 
panel of more than 15 certified or licensed appraisers in a State or 
25 or more nationally (meaning two or more States) within a given 
year.'' 12 U.S.C. 3350(11). The provision of the statute relevant to 
determining the registry fee is in section 1109(a)(4)(B), which 
provides that the fee is based on the number of appraisers ``working 
for or contracting with [an AMC] in [a] state during the previous 
year.'' FIRREA section 1109(a)(4)(B), 12 U.S.C. 3338(a)(4)(B).
    \65\ 12 U.S.C. 3350(11).
    \66\ 12 U.S.C. 3338(a), 3353.
---------------------------------------------------------------------------

    Second, the statute that the Agencies are charged with implementing 
expressly defines an AMC with reference to the number of appraisers 
that the AMC ``oversees'' on a ``network or panel'' in a given year, 
not only on the number of appraisers to which it actually gives 
assignments.\67\ While commenters speculate that this approach to 
defining the number of appraisers that an AMC oversees on a network or 
panel may lead to efforts to evade the definition, the alternative 
approach suggested by commenters of relying only on the number of 
appraisers actually used during a 12-month period will also encourage 
evasion attempts. This alternative would allow AMCs to accumulate 
relationships with large numbers of independent contractors, advertise 
this breadth of coverage, and evade the rule by managing the actual use 
of appraisers through the year.
---------------------------------------------------------------------------

    \67\ FIRREA section 1121(11), 12 U.S.C. 3350(11) (defining AMC).
---------------------------------------------------------------------------

    The Agencies will monitor the effect of the rule and the definition 
of AMC for evasion and revisit the rule to the extent appropriate and 
permitted by statute in light of future developments.
2. Section 34.212(d): Annual Period for Counting Appraisers on AMC 
Panel
    Proposed Sec.  34.212(d) provided two options to States for 
calculating the number of appraisers on an entity's panel for 
determining whether the entity meets the minimum thresholds for 
designation as an AMC. The first was the 12-month calendar year and the 
second was any other 12-month period set by a State. One commenter 
suggested that, to promote uniformity, all States should be required to 
use the calendar year for determining whether an entity has the 
requisite number of appraisers on its panel to qualify as an AMC.
    Under the proposed rule, States would have the flexibility to align 
the 12-month period for determining AMC status with their AMC 
registration calendars, which may, or may not, be based on the calendar 
year. In this regard, the Agencies are aware that many States already 
do not use a calendar year for their existing appraiser registration 
process. The Agencies believe that allowing states to set the 12-month 
period provides appropriate flexibility and will help States comply 
with the minimum requirements and reduce regulatory burden for State 
governments. Thus, the Agencies adopt Sec.  34.212(d) in the final rule 
without change.

C. Section 34.213: Appraisal Management Company Registration

1. Section 34.213(a): Minimum Requirements for Participating States
    Under proposed Sec.  34.213(a), adopted without change in this 
final rule, participating States must have a licensing program in place 
within the State appraiser certifying and licensing agency that has the 
authority to: (1) Review and approve or deny an AMC's application for 
initial registration; (2) review and renew or refuse to renew an AMC's 
registration periodically; (3) examine the books and records of an

[[Page 32667]]

AMC operating in the State and require the AMC to submit reports, 
information, and documents to the State; (4) verify that the appraisers 
on the AMC's appraiser panel hold valid State certifications or 
licenses, as applicable; (5) conduct investigations of AMCs to assess 
potential violations of applicable appraisal-related laws, regulations, 
or orders; (6) discipline, suspend, terminate, and refuse to renew the 
registration of an AMC that violates applicable appraisal-related laws, 
regulations, or orders; and (7) report to the ASC an AMC's violation of 
applicable appraisal-related laws, regulations, or orders, as well as 
disciplinary and enforcement actions and other relevant information 
about an AMC's operations.
    These authorities and mechanisms reflected the Agencies' 
interpretation of the provisions of section 1124(a), including the 
minimum requirement in section 1124(a)(1) that AMCs be ``subject to 
supervision'' by the State appraiser certifying and licensing 
agency.\68\ The Agencies interpret section 1124(a) as being consistent 
with the criteria outlined in FIRREA sections 1103, 1109, and 1118(a), 
which describe the elements of State regulation of AMCs that will be 
monitored by the ASC.\69\ For example, the ASC is responsible for 
monitoring whether States have supervision systems in place that would 
allow a State to process complaints against an AMC and conduct 
investigations in connection with those complaints.\70\ The ASC is also 
responsible for monitoring whether a State takes appropriate 
enforcement actions against an AMC that is found to have violated 
applicable laws and regulations.\71\ Consistent with the interpretation 
stated in the proposal, the Agencies continue to believe that these 
requirements are consistent with the enforcement and supervision 
authorities underlying an effective regulatory program and will ensure 
that State appraiser certifying and licensing agencies have the 
required structures for the registration and supervision of AMCs.
---------------------------------------------------------------------------

    \68\ 12 U.S.C. 3353(a). As stated in the proposal, the Agencies 
view section 1124 as allowing the Agencies to establish more 
specific requirements for supervision and registration of AMCs that 
implement the general requirements enumerated in section 1124(a). 
Id. In addition, by providing that the regulation shall ``include'' 
the requirements enumerated in section 1124, the statute implies 
that the Agencies have the discretion to establish additional 
supervisory standards for State oversight of AMCs consistent with 
the general requirements specifically enumerated in section 1124(a). 
Id.
    \69\ See 12 U.S.C. 3332(a)(1)(B) (requiring the ASC to monitor 
requirements established by the States for supervision of AMCs); 12 
U.S.C. 3338(a) (requiring each participating State to transmit 
reports to the ASC on supervisory activities involving AMCs and 
disciplinary actions taken); and 12 U.S.C. 3347(a) (requiring the 
ASC to monitor States to assess whether a State has an effective 
regulatory program).
    \70\ See FIRREA section 1103(a)(1)(B), 12 U.S.C. 3332(a)(1)(B).
    \71\ See FIRREA sections 1109(a)(3) and 1118(a)(4), 12 U.S.C. 
3338(a)(3) and 3347(a)(4).
---------------------------------------------------------------------------

2. Section 34.213(b): Minimum Requirements for State-Registered AMCs
    The Agencies are adopting proposed Sec.  34.213(b) without change. 
Section 34.213(b) implements FIRREA sections 1121(11) and 1124 and 
provides that participating States must require State-registered AMCs 
to follow certain minimum requirements when AMCs provide appraisal 
management services for a creditor or ``underwriter of or other 
principal in the secondary mortgage markets'' that are related to a 
covered transaction.\72\ Pursuant to the minimum requirements in Sec.  
34.213(b), an AMC (other than a Federally regulated AMC) is required to 
register with, and be subject to supervision by, a State appraiser 
certifying and licensing agency in each State in which the AMC 
operates. In addition, States must require AMCs to verify that only 
State-certified or State-licensed appraisers are used when a creditor 
or secondary mortgage market participant engages in a transaction that 
requires the services of a State-certified or State-licensed appraiser 
under the Federally related transaction regulations. A State also must 
require registered AMCs to have processes and controls reasonably 
designed to ensure that the AMC, in engaging an appraiser, selects an 
appraiser who has the requisite education, expertise, and experience to 
complete competently the assignment for the particular market and 
property type. This minimum requirement implements the requirement of 
section 1124(a)(2) \73\ and emphasizes a core principle of the 
Agencies' FIRREA appraisal regulation and the Interagency Appraisal and 
Evaluation Guidelines, which is that an appraiser must not only be 
State credentialed and competent generally, but also have specific 
competency to perform a particular appraisal assignment.\74\
---------------------------------------------------------------------------

    \72\ 12 U.S.C. 3350(11), 3353.
    \73\ 12 U.S.C. 3353(a)(2).
    \74\ See 12 CFR 34.46(b) (OCC); see also Interagency Appraisal 
and Evaluation Guidelines, 75 FR 77450, 77458 (December 10, 2010); 
Appraisal Standards Board, Uniform Standards of Professional 
Appraisal Practice, Appraiser Competency Rule (2014-2015), available 
at The Appraisal Foundation, https://netforum.avectra.com/eWeb/DynamicPage.aspx?Site=TAF&WebCode=USPAP (requiring that an appraiser 
have specific competency for the appraisal assignment).
---------------------------------------------------------------------------

    In addition, States must require an AMC to establish and comply 
with processes and controls reasonably designed to ensure that the AMC 
conducts its appraisal management services in accordance with: (1) The 
AMC's obligations as a covered person with respect to mandatory 
reporting, conflicts of interest, and other acts or practices that 
would violate valuation independence pursuant to section 129E(a) 
through (i) of TILA; and (2) the AMC's obligations as a creditor's 
agent with respect to appraiser compensation pursuant to section 
129E(i) of TILA, 15 U.S.C. 1639e(i).\75\
---------------------------------------------------------------------------

    \75\ See 12 CFR 226.42 (Board); 12 CFR 1026.42 (Bureau).
---------------------------------------------------------------------------

    As noted in the proposed rule, the AMC minimum standards do not 
affect the responsibility of banks, Federal savings associations, State 
savings associations, bank holding companies, and credit unions for 
compliance with applicable regulations and guidance concerning 
appraisals. Under the interagency appraisal rules, for example, if an 
appraisal is prepared by a fee appraiser (as opposed to in-house, by 
the institution), the appraiser must be engaged directly by the 
regulated institution or its agent, and have no direct or indirect 
interest, financial or otherwise, in the property or the 
transaction.\76\ As stated in the Interagency Appraisal and Evaluation 
Guidelines, an institution that engages a third party, such as an AMC, 
to administer any part of the institution's appraisal program remains 
responsible for compliance with applicable laws concerning appraisers 
and appraisals.\77\
---------------------------------------------------------------------------

    \76\ 12 CFR 34.45 and 164.5 (OCC); 12 CFR 225.65 (Board); 12 CFR 
323.5 (FDIC); 12 CFR 722.5(NCUA).
    \77\ See Interagency Appraisal and Evaluation Guidelines, 75 FR 
77450, 77463 (discussing third-party arrangements).
---------------------------------------------------------------------------

    The Agencies requested comment on the proposed minimum requirements 
for State registration and supervision of AMCs. (See Question 6 in the 
proposal.) The Agencies also asked related questions concerning 
appraisal review standards and potential challenges States may 
encounter under the proposed minimum requirements for State 
registration and supervision of AMCs. (See Questions 7 through 11 in 
the proposal.) The following is a summary of these comments, followed 
by the response from the Agencies.\78\

[[Page 32668]]

For the reasons explained below, the Agencies adopt proposed Sec.  
34.213 on AMC registration without change in the final rule.
---------------------------------------------------------------------------

    \78\ The Agencies received many comments on Question 6 
concerning the proposed minimum requirements for State registration 
and supervision of AMCs. Commenters were generally supportive of the 
proposed requirements. However, the commenters made several 
observations and expressed concerns with the proposed requirements.
    These comments overlap with comments made concerning other 
questions in the proposal. As such, Question 6 is not addressed 
separately.
---------------------------------------------------------------------------

a. Appraisal Review
    The Agencies requested comment on the proposal to defer 
consideration of appraisal review standards to a separate rulemaking. 
(See Question 7 in the proposal). Some commenters agreed with the 
Agencies that appraisal review standards should be addressed in a 
separate rulemaking. Other commenters suggested that there are many 
pressing questions concerning appraisal review standards and that this 
rulemaking should therefore incorporate such standards.
    In drafting the minimum requirements for State registration and 
supervision of AMCs, and the definition of appraisal management 
services discussed previously, the Agencies considered whether to 
require AMCs to follow minimum standards when performing appraisal 
reviews. This question was presented by section 1121(11), which 
includes appraisal review as one of the types of appraisal management 
services performed by AMCs.\79\ In considering this question, the 
Agencies noted that FIRREA section 1110 requires a separate rulemaking 
regarding the requirement that, for Federally related transactions, 
appraisals shall be subject to ``appropriate'' review for compliance 
with USPAP.\80\ As stated in the proposal, the Agencies believe that a 
rulemaking to implement section 1110 provides the appropriate 
opportunity to address the requirement for appraisal reviews.\81\ For 
this reason, the proposed minimum standards for AMCs did not include 
appraisal review standards.
---------------------------------------------------------------------------

    \79\ 12 U.S.C. 3350(11).
    \80\ FIRREA section 1110(3), 12 U.S.C. 3339(3).
    \81\ 12 U.S.C. 3339(3).
---------------------------------------------------------------------------

    Commenters identified issues that may be appropriate for 
consideration in a rulemaking pursuant to FIRREA section 1110(3), but 
did not address why those standards are more appropriately addressed in 
the context of this rulemaking rather than in a separate rulemaking to 
implement section 1110(3).\82\ The Agencies continue to believe that 
addressing appraisal review issues more comprehensively in a separate 
rulemaking is appropriate, rather than doing so in a limited way as 
part of the AMC rule. The appraisal review standard of section 1110(3) 
applies to all regulated financial institutions subject to the 
appraisal rules of the Federal financial institution regulatory 
agencies, not just appraisals for which one of those firms uses an AMC 
to engage an appraiser. In addition, most commenters supported a 
separate rulemaking on appraisal review standards. For these reasons, 
consistent with the proposal, the final rule does not contain appraisal 
review standards.
---------------------------------------------------------------------------

    \82\ 12 U.S.C. 3339(3).
---------------------------------------------------------------------------

b. Barriers to Implementation of AMC Minimum Requirements
    The Agencies also asked about whether any barriers existed for 
States in implementing the proposed AMC minimum requirements. (See 
Question 8 in the proposal). In response, the Agencies received several 
comments indicating concern that States might not have adequate funding 
or resources to implement or enforce the proposed rule. Other 
commenters expressed the view that the requirement to establish 
authorities and mechanisms to examine the books and records of an AMC 
could be subject to different interpretations by each State, and that 
the Agencies' expectations should be clarified. A third set of 
commenters indicated additional guidance is needed on the expectations 
for States engaging in examinations of AMCs. One commenter believed 
that States should be given the option to register AMCs for longer than 
a period of one year. See proposed Sec.  34.212 (requiring an annual 
count of appraisers on an entity's panel to determine whether the 
entity is subject to State registration requirements pursuant to the 
proposed rule). The commenter indicated that many States allow 
appraiser registration for longer periods and that doing so for AMCs 
might facilitate implementation of the rule by States.
    The Agencies are aware of, and sensitive to, the adequacy of 
participating States' resources to supervise AMCs in the manner 
contemplated by FIRREA section 1124. It is the Agencies' understanding, 
however, that many States that have already established AMC laws and 
registration programs have collected fees from AMCs, in part to offset 
the costs of the registration and supervision programs, using authority 
under State law. Nothing in this rule would prevent these States, or 
States that choose to become participating States, from continuing to 
charge fees to AMCs in the future.\83\ The Agencies also note that the 
registration and supervision of AMCs is voluntary, and that a State may 
elect not to establish such a program for any reason, including if its 
resources do not support such a program.
---------------------------------------------------------------------------

    \83\ This approach is consistent with the States' approach to 
registering appraisers. The Agencies understand that State appraiser 
certifying and licensing agencies have collected fees from 
appraisers for administering national appraiser registration for 
many years.
---------------------------------------------------------------------------

    With respect to the request that the Agencies set standards for 
State supervision of AMCs, the Dodd-Frank Act section 1473 amended 
FIRREA to confirm clearly the States' ability to exercise registration 
and supervisory capacities over AMCs, which the State can exercise 
using its own discretion, based on the individual State's enforcement 
priorities.\84\ As such, the Agencies leave supervisory standards to 
the discretion of the States and to the ASC, which is charged under 
Title XI of FIRREA with evaluating the efficacy of State registration 
and supervision of AMCs.
---------------------------------------------------------------------------

    \84\ 12 U.S.C. 3346.
---------------------------------------------------------------------------

    Regarding the request that States be able to register AMCs for 
longer than a year, the Agencies defer to individual States, but note 
that the requirement for an annual count of appraisers on an entity's 
panel is statutory. Specifically, the definition of AMC in FIRREA 
section 1121(11) bases whether an entity is an AMC on the number of 
appraisers on an entity's panel ``within a given year.'' \85\ Regarding 
whether a two-year AMC National Registry fee collection program is 
permissible or feasible, the Agencies defer to the ASC, which 
administers the relevant portion of FIRREA.\86\ Specifically, FIRREA 
section 1109(a)(4) requires States to submit AMC fees for the AMC 
National Registry to the ASC annually.\87\
---------------------------------------------------------------------------

    \85\ 12 U.S.C. 3350(11).
    \86\ FIRREA section 1109(a)(4), 12 U.S.C. 3338(a)(4) (requiring 
States to submit AMC fees for the National Registry to the ASC 
annually).
    \87\ 12 U.S.C. 3338(a)(4).
---------------------------------------------------------------------------

    While the registration fee cycle is dictated by section 1109(a)(4), 
any additional licensing fees or any other associated fees charged by 
the State can be charged based on the State's determination of an 
appropriate cycle.\88\ The Agencies do not see a need to make any 
changes from the proposed version of the rule to clarify the annual 
registration cycle requirement in the final rule.
---------------------------------------------------------------------------

    \88\ 12 U.S.C. 3338(a)(4).
---------------------------------------------------------------------------

c. Trainee Appraisers
    The Agencies received one comment on the requirement that States 
must verify that the appraisers on an AMC's panel hold valid States 
licenses and certifications (see proposed Sec.  34.213(a)(4)). This 
commenter expressed concern that the requirement

[[Page 32669]]

could be interpreted by some States to prohibit appraisers from using 
trainees to assist with assignments.
    The Agencies are adopting proposed Sec.  34.213(a)(4) with a minor 
non-substantive change. New Sec.  34.213(a)(4) requires States to 
verify that the appraisers on an AMC's appraiser panel--as defined in 
Sec.  34.211(e)--hold valid State certifications or licenses, as 
applicable. The Agencies are removing references to a ``list,'' 
``network,'' or ``roster'' because these terms are incorporated into 
the definition of ``appraiser panel'' in Sec.  34.211(e). Regarding the 
concerns about whether trainee appraisers may be used in light of this 
requirement, Sec.  34.213(a)(4) is not intended to imply any changes in 
the current requirements for their use. The requirement in Sec.  
34.213(a)(4) complements the requirement in proposed Sec.  34.213(b)(2) 
(adopted as final without change) that AMCs must use only State-
licensed or State-certified appraisers for Federally related 
transactions. Both are intended to implement FIRREA section 1124(a)(2), 
under which the Agencies must require States to require AMCs to use 
only State-licensed or certified appraisers for Federally related 
transactions.\89\
---------------------------------------------------------------------------

    \89\ 12 U.S.C. 3353(a)(2).
---------------------------------------------------------------------------

    The trainee appraiser designation established by the Appraiser 
Qualifications Board (AQB) of the Appraisal Foundation requires 
trainees to work under the supervision of a qualified supervisory 
appraiser, as authorized by section 1122(e).\90\ The Agencies continue 
to support the use of trainee appraisers as long as they work under the 
supervision of a State-certified and or State-licensed appraiser and 
have met the qualifications established by the appropriate State and 
the AQB. As such, the requirement in section 1124(a)(2) and the 
proposed and final rules should not be interpreted to bar trainee 
appraisers from working with State-certified or State-licensed 
appraisers who perform appraisals for AMCs, which is authorized by 
section 1122(e).\91\ The final rule amends proposed Sec.  34.213(b)(2), 
by substituting the term ``engage'' for the term ``use'' to clarify 
that an appraiser may work with a trainee appraiser on an appraisal, 
but only the appraiser may be ``engaged'' by the AMC to perform 
appraisals. In a Federally related transaction, an AMC may engage only 
a State-certified or State-licensed appraiser.
---------------------------------------------------------------------------

    \90\ 12 U.S.C. 3351(e).
    \91\ 12 U.S.C. 3351(e), 3353(a)(2).
---------------------------------------------------------------------------

d. Valuation Independence
    The Agencies received comments on proposed Sec.  34.213(b)(5), 
which requires participating States to require AMCs to establish and 
comply with processes and controls reasonably designed to ensure that 
the AMC conducts its appraisal management services in accordance with 
the requirements of the valuation independence requirements of TILA 
section 129E.\92\ These commenters requested that the final rule 
clarify the extent to which States are expected to investigate and 
enforce TILA section 129E and its implementing regulations, which 
includes the requirements to pay appraisers customary and reasonable 
fees. These commenters also expressed concern that States might 
interpret these rules differently, potentially in ways that may 
conflict with Federal interpretations.
---------------------------------------------------------------------------

    \92\ 15 U.S.C. 1639e.
---------------------------------------------------------------------------

    In response to the comments, the Agencies note that, pursuant to 
section 1124(a)(4), States must require AMCs to require that appraisals 
are conducted in accordance with the valuation independence 
requirements of section 129E(a) through (i) of TILA.\93\ The Agencies 
proposed to implement this requirement by mandating that participating 
States require AMCs to:
---------------------------------------------------------------------------

    \93\ 12 U.S.C. 3353(a)(4), 15 U.S.C. 1639e.
---------------------------------------------------------------------------

     Establish and comply with processes and controls 
reasonably designed to ensure that the AMC, in engaging an appraiser, 
selects an appraiser who is independent of the transaction and who has 
the requisite education, expertise, and experience necessary to 
competently complete the appraisal assignment for the particular market 
and property type; and
     Establish and comply with processes and controls 
reasonably designed to ensure that the AMC conducts its appraisal 
management services in accordance with the requirements of section 
129E(a)-(i) of the Truth in Lending Act, 15 U.S.C. 1639e(a)-(i), and 
regulations thereunder.

See proposed Sec.  34.213(b)(3) and (4).

    Questions about what mechanisms a State agency may use to assess a 
party's compliance in connection with any authority the State has to 
commence a civil action to enforce section 129E of TILA are outside the 
scope of this rulemaking.\94\ This final rule sets minimum standards 
for States to adopt in establishing a State program for registering and 
supervising AMCs. Once adopted by a State, these minimum standards 
become part of the State's legal framework for licensing and 
registering AMCs. Questions concerning what authority a State may 
confer on its own agency to supervise for and enforce compliance with 
the State's licensing and registration program are also outside the 
scope of this rulemaking.
---------------------------------------------------------------------------

    \94\ 15 U.S.C. 1639e.
---------------------------------------------------------------------------

3. Other Issues
a. The 36-Month Implementation Period
    The Agencies asked for comment on whether aspects of the proposed 
rule would be challenging for States to implement within 36 months. 
(See Question 9 in the proposal.) The Agencies also asked States to 
identify alternative approaches that would make implementation easier. 
Seven commenters stated that 36 months does not give States enough time 
for implementation and that the 36-month implementation period should 
begin after the ASC establishes the AMC National Registry and has 
issued its clarifying regulations. One commenter asserted that States 
would have difficulty beginning the implementation process until the 
ASC issued its regulations. Other commenters expressed concerns that 
the ASC would be unable to set up a functioning AMC National Registry 
and issue its clarifying regulations within 36 months after this final 
rule is issued.
    The Agencies note that Congress specifically provided for a 36- to 
48-month implementation period before restrictions are imposed on AMCs 
in States that have not yet participated. This 36-month implementation 
period is set pursuant to section 1124(f), which also provides for a 
potential 12-month extension if the ASC finds that a State has made 
substantial progress towards implementing an AMC registration and 
supervision program.\95\ Thus, only the ASC, and not the Agencies, may 
extend the implementation period beyond 36 months. The Agencies 
anticipate that concerns about the 36-month period and the need for 
registry regulations will be addressed by the ASC. In response to the 
concern expressed by the commenters, however, the Agencies are adopting 
changes to the proposed definitions that relied on cross-references to 
Regulation Z, 12 CFR part 1026 rule, by substituting the text of these 
definitions for the cross references. As noted in the section-by-
section analysis of Sec.  34.211, above, the Agencies believe that 
these changes mitigate the potential obligations of States to update, 
clarify, or amend State law or its interpretations as Regulation Z is 
amended over time, or if the

[[Page 32670]]

numbering of definitions in Regulation Z changes.
---------------------------------------------------------------------------

    \95\ FIRREA sections 1124(f)(1) and (2), 12 U.S.C. 3353(f)(1) 
and (2).
---------------------------------------------------------------------------

b. Potential Differences Between State Laws and the Proposed AMC Rule
    The Agencies asked for comment on whether there are questions 
raised by any differences between State laws and the proposed rule and 
whether those differences should be addressed in the final rule. (See 
Question 11 in the proposal.) As noted, one commenter suggested that, 
to promote uniformity, all States should be required to use the 
calendar year for determining whether an entity has the requisite 
number of appraisers on its panel to qualify as an AMC. These comments 
were addressed in the section-by-section analysis of Sec.  34.212(d), 
above.
c. Voluntary Nature of State Adoption of AMC Registration and 
Supervision Programs
    As described earlier in this preamble, the Agencies have 
interpreted section 1124 to mean that there is no requirement for 
States to adopt programs for registration and supervision of AMCs.\96\ 
Rather, if a State chooses not to adopt such a program, AMCs located in 
that State may not provide appraisal management services for Federally 
related transactions, unless the AMCs are Federally regulated. To 
qualify to provide appraisal management services for Federally related 
transactions, a State program must include the minimum requirements for 
registration and supervision of AMCs in section 1124 and in the final 
rule.\97\
---------------------------------------------------------------------------

    \96\ 12 U.S.C. 3353.
    \97\ 12 U.S.C. 3353.
---------------------------------------------------------------------------

    The Agencies received a number of comments concerning the Agencies' 
interpretation of the statute and the conclusion that adoption by 
States of AMC registration and supervision programs is voluntary and 
optional. These commenters argued that, in non-participating States, 
non-Federally regulated AMCs will be at a competitive disadvantage, 
because these AMCs will be barred by statute from providing appraisal 
management services for Federally related transactions. In addition, 
the commenters argued that interpreting State adoption of the minimum 
requirements to be voluntary would burden lenders. These commenters 
asserted that, in non-participating States, lenders would have to set 
up in-house appraisal management staff, which would raise the costs of 
lending. In addition, the commenters argued that, in non-participating 
States, consumers would be affected adversely by increased costs for 
appraisals and delays arising from the absence of AMCs in the 
marketplace. These commenters also suggested that either the Agencies 
or the ASC should serve as a ``back-up'' regulator to register and 
supervise AMCs in non-participating States. These commenters suggested 
that this alternative would address the same policy concerns they 
expressed in arguing for mandatory State participation.
    In response to these comments, the Agencies note first that section 
1124(a), by its plain terms, does not require any State to adopt an AMC 
registration and supervision program.\98\ Nor is there a stated penalty 
for a State that declines to do so. Rather, under section 1124(f), an 
AMC (that is not Federally regulated) in a non-participating State is 
barred from providing appraisal management services for Federally 
related transactions.\99\ The Agencies note that 38 States have already 
adopted AMC programs.\100\ The commenters also provided no 
substantiating basis to support the commenters' warning that lending 
will be inhibited or more costly in non-participating States. If after 
the 36-month period following issuance of the final rule (or any 
extended period permitted by the ASC), a State has not yet adopted an 
AMC registration and supervision program, many options exist for 
creditors to obtain appraisals for Federally related transactions. 
Creditors that do not wish to hire in-house appraisers can engage 
third-party appraisers directly.\101\ Smaller AMCs (those that have 
fewer than 15 appraisers in the State on their panel or fewer than 25 
appraisers in two or more States) as well as Federally regulated AMCs 
can still perform services in Federally related transactions. AMCs that 
exceed the statutory size threshold may also continue to service 
transactions that are not Federally related and, if the State does 
later participate, can also then provide services in Federally related 
transactions.
---------------------------------------------------------------------------

    \98\ 12 U.S.C. 3353(a).
    \99\ 12 U.S.C. 3353(f).
    \100\ One commenter, an AMC, highlighted a report by a Hawaii 
State auditor regarding a proposed bill in the Hawaii legislature 
that concerns the registration of AMCs. The commenter argued that 
this report provided evidence that Hawaii would not adopt an AMC 
law. The auditor's report, however, does not indicate that it would 
be inappropriate for a State to participate in the AMC regulatory 
system established under section 1124. Rather, the report opined 
that the particular proposed bill would not be the appropriate 
method of participation for various reasons, including that the 
regulation of AMCs should not be managed by the State real estate 
commission. See Auditor of the State of Hawaii Report 10-07 (Sept. 
2010) at 4, Sunrise Analysis: Real Estate Appraisal Management 
Companies, (Sept. 2010) at 4, available at https://files.hawaii.gov/auditor/Reports/2010/10-07.pdf.
    \101\ The valuation independence provisions of TILA section 129E 
and its implementing regulations do not require use of AMCs. 15 
U.S.C. 1639e, implemented at 12 CFR 226.42 (Board) and 12 CFR 
1026.42 (Bureau).
---------------------------------------------------------------------------

    Some commenters suggested that the Agencies or the ASC step in to 
register and supervise AMCs in non-participating States. Neither 
section 1124 nor FIRREA authorizes either the Agencies or the ASC to 
serve as a ``back up'' regulator for registration and supervision of 
AMCs.\102\ The Agencies are only permitted to directly supervise 
Federally regulated AMCs, as discussed in the section-by-section 
analysis of Sec.  34.215, below.
---------------------------------------------------------------------------

    \102\ 12 U.S.C. 3353.
---------------------------------------------------------------------------

D. Section 34.214: Registration Limitations

    Section 34.214 finalizes proposed Sec.  34.215, which placed 
certain limitations on whether an AMC (whether or not Federally 
regulated) may be registered in a State or included in the AMC National 
Registry. Proposed Sec.  34.215 was based on section 1124(d), which 
provides that an AMC shall not be registered by a State or included on 
the AMC National Registry if the company, in whole or in part, directly 
or indirectly, is owned by any person who has had an appraiser license 
or certificate refused, denied, cancelled, surrendered in lieu of 
revocation, or revoked in any State.\103\ Section 1124(d) provides 
further that each person who owns more than 10 percent of an AMC must 
be of good moral character, as determined by the State appraiser 
certifying and licensing agency, and must submit to a background 
investigation carried out by the State appraiser certifying and 
licensing agency.\104\
---------------------------------------------------------------------------

    \103\ 12 U.S.C. 3353(d).
    \104\ 12 U.S.C. 3353(d).
---------------------------------------------------------------------------

    To implement this provision, proposed Sec.  34.215(a)--finalized in 
substantially similar form at Sec.  34.214(a)--provided that an AMC may 
not be registered by a State or included on the AMC National Registry 
if such company, in whole or in part, directly or indirectly, is owned 
by any person who has had an appraiser license or certificate refused, 
denied, cancelled, surrendered in lieu of revocation, or revoked in any 
State. As the Agencies noted in the proposal, section 1124(d) states 
clearly that the limitations regarding appraiser licensure and 
certification determine both whether an AMC may be ``registered by a 
State'' and

[[Page 32671]]

whether an AMC may be ``included on the national registry'' of 
AMCs.\105\
---------------------------------------------------------------------------

    \105\ 12 U.S.C. 3353(d).
---------------------------------------------------------------------------

    In addition, proposed Sec.  34.215(b)--finalized at Sec.  
34.214(b)--provided that, for AMCs seeking to be registered in a State, 
each person who owns more than 10 percent of an AMC must be of good 
moral character, as determined by the State appraiser certifying and 
licensing agency, and must submit to a background investigation carried 
out by the State appraiser certifying and licensing agency. Under the 
proposal, this limitation would apply to Federally regulated AMCs only 
if they seek to register voluntarily with a State. Under the proposal, 
these threshold requirements concerning licensure would be ongoing 
obligations for State appraiser certifying and licensing agencies. As 
such, a State would be expected to review whether an AMC meets the 
proposed ownership limitations, as described in the statute and in 
proposed Sec.  34.215 (finalized at Sec.  34.214), at the time of 
registration of an AMC, and at the time of renewal of the AMC license 
each year, or more frequently as determined necessary by that State.
1. Section 34.214 (a): Technical Versus Substantive Licensing 
Violations
    Some commenters suggested that the Agencies consider circumstances 
in which an appraiser's license lapsed or was revoked for technical 
reasons unrelated to the quality of appraisals performed by the 
appraiser. They asserted that being barred from owning an AMC eligible 
for registration in a State or included in the AMC National Registry in 
these cases is potentially unfair. One example of this is when an 
appraiser neglects to renew his or her appraiser's license on time. 
Depending on the State law, an appraiser would typically be able to be 
reinstated, pending payment of certain penalties. In this situation, 
the lapse in the appraiser's license is unrelated to fraud or a failure 
to perform an appraisal in compliance with USPAP.
    The Agencies agree that non-substantive grounds for the revocation 
of an appraiser's license should not be construed to be within the 
scope of the registration limitations in section 1124(d).\106\ In 
connection with this, the Agencies agree that an appraiser who is 
subsequently reinstated by the State appraiser certifying and licensing 
agency should not be within the scope of the registration limitations. 
For example, if an appraiser's license lapses for non-payment of fees, 
and the appraiser is later reinstated by the State appraiser certifying 
and licensing agency after meeting his or her obligation, the appraiser 
should not be barred from owning an AMC. If, however, an appraiser's 
license or certificate is revoked, for example, for violations of the 
TILA independence standards or for failure to comply with USPAP, an AMC 
owned wholly or in part by that appraiser should not be eligible to 
register in a State or appear on the AMC National Registry. For these 
reasons, the final rule clarifies that an appraiser is subject to the 
ownership ban if the revocation of the appraiser's license or 
certification was for a substantive cause, as determined by the State 
certifying and licensing agency.
---------------------------------------------------------------------------

    \106\ 12 U.S.C. 3353(d).
---------------------------------------------------------------------------

2. Other Issues
    Some commenters expressed concern that States may not be able to 
obtain the information to determine whether an appraiser license has 
been revoked in another State. One commenter requested guidance on how 
to approach the moral character registration requirement within a 
corporate structure. Specifically, the commenter inquired about whether 
a State must review issues related to moral character to owners beyond 
the AMC, for example to a holding company. Another commenter suggested 
that the Agencies define ``good moral character'' rather than leaving 
it to participating States to adopt their own definition.
    With respect to the commenters' questions concerning the details 
and logistics of a State's investigation of an applicant for presence 
of the registration limitation factors, the Agencies believe that it is 
desirable to afford flexibility to the States, many of which currently 
perform background investigations in connection with various licensing 
regimes, to establish appropriate procedures and the scope of the 
background investigations to be performed by that particular State. The 
statute establishes the ASC as the agency that oversees the adequacy of 
State AMC registration and investigation procedures. Similarly, with 
respect to the comment suggesting the final rule define ``good moral 
character'' in a manner that all participating States would be required 
to adopt, the Agencies note that section 1124 provides for the good 
moral character limitation to be applied ``as determined by the 
State.'' Thus, consistent with the statute, the final rule defers to 
the participating States to make determinations as to the scope of the 
good moral character requirement.\107\ In overseeing implementation by 
participating States, the ASC potentially could provide input as well.
---------------------------------------------------------------------------

    \107\ State appraiser boards also have experience applying the 
``good moral character'' standard, which is a common element of 
appraiser licensure standards already. See, e.g., Virginia 18 VAC 
130-20-30(1); Pennsylvania Code Ch. 36.12(a); Michigan Code Ch. 
339.2610; Missouri Code Ch. 339.511(2); N.J. S.A. Title 45 Ch. 14F-
10(b).
---------------------------------------------------------------------------

    Finally, the Agencies are also clarifying in Sec.  34.214(a) that 
the section regarding registration limitations applies to AMCs required 
to register with a State, not to Federally regulated AMCs (unless they 
voluntarily wish to register with a State). Accordingly, the title of 
this section has been revised from ``Registration limitations'' to 
``Ownership limitations for AMCs registering in a State.'' As discussed 
in the section-by-section analysis of new Sec.  34.215(b), below, for 
clarity the Agencies added a separate provision regarding limitations 
on Federally regulated AMCs being included on the AMC National 
Registry, also pursuant to section 1124(d).\108\
---------------------------------------------------------------------------

    \108\ 12 U.S.C. 3353(d).
---------------------------------------------------------------------------

E. Section 34.215: Requirements for Federally Regulated AMCs

    Section 1124(c) provides that AMCs that are owned and controlled 
subsidiaries of an insured depository institution or an insured credit 
union and regulated by a Federal financial institutions regulatory 
agency, are not required to register with a State.\109\ These Federally 
regulated AMCs are, however, subject to the same minimum requirements 
as AMCs that are not regulated by a Federal financial institutions 
regulatory agency.
---------------------------------------------------------------------------

    \109\ 12 U.S.C. 3353(c). However, nothing in the proposed rule 
would prohibit a Federally regulated AMC from registering with a 
State if the State permitted it to do so.
---------------------------------------------------------------------------

1. Section 34.215(a): Requirements in Providing Services
    Section 34.215(a) finalizes without change the proposed Sec.  
34.214(a) concerning requirements for Federally regulated AMCs. 
Pursuant to proposed Sec.  34.214(a), Federally regulated AMCs were 
subject to the same substantive standards that were proposed for non-
Federally regulated AMCs. Specifically, pursuant to Sec.  34.214(a), 
Federally regulated AMCs were required to have systems in place to 
ensure that only State-certified or State-licensed appraisers perform 
appraisals for Federally related transactions; that appraisers with the 
requisite education, expertise, and experience necessary for the 
assignment are used; that appraisals comply with USPAP; and that the

[[Page 32672]]

valuation independence requirements of TILA section 129E are met.\110\
---------------------------------------------------------------------------

    \110\ See section 129E of TILA, 15 U.S.C. 1639e (implemented at 
12 CFR 1026.42).
---------------------------------------------------------------------------

2. Section 34.215(b): Ownership Limitations for Federally Regulated 
AMCs
    Section 34.215(b) reflects a non-substantive revision to the 
proposal. This provision implements limitations on inclusion in the AMC 
National Registry for Federally regulated AMCs pursuant to section 
1124(d) and reorganizes them into a separate section for Federally 
regulated AMCs.\111\ The proposed rule folded the limitations on 
Federally regulated AMCs into proposed Sec.  34.215 (Registration 
limitations), which also addressed limitations on AMCs that are 
required to register with a State.
---------------------------------------------------------------------------

    \111\ 12 U.S.C. 3353(d).
---------------------------------------------------------------------------

    For clarity, the final rule separates the ownership limitations on 
AMCs required to register with States (proposed Sec.  32.215; finalized 
in Sec.  34.214) from the ownership limitations on Federally regulated 
AMCs that can be included on the AMC National Registry (Sec.  
34.215(b)). Specifically, Sec.  34.215(b) states that a Federally 
regulated AMC shall not be included on the AMC National Registry if 
such AMC, in whole or in part, directly or indirectly, is owned by any 
person who has had an appraiser license or certificate refused, denied, 
cancelled, surrendered in lieu of revocation, or revoked in any State 
for a substantive cause, as determined by the State. Section 34.215(b) 
also provides that an AMC is not barred by Sec.  34.215(b) from being 
included on the AMC National Registry if the license or certificate of 
the appraiser with an ownership interest in the AMC has been reinstated 
by the State or States in which the appraiser was licensed or 
certified.
3. Section 34.215(c): Reporting Information for the AMC National 
Registry
    As part of being included on the AMC National Registry, the 
proposed rule required Federally regulated AMCs to provide to each 
participating State in which the AMC operates the information required 
by the ASC for administration of the AMC National Registry. 
Specifically, under proposed Sec.  34.214(b), Federally regulated AMCs 
would have been required to provide information relating to the 
determination of the AMC National Registry fee and the information 
needed to determine whether the ownership limitations under proposed 
Sec.  34.215 (finalized as Sec.  34.215(b), discussed above) apply. 
Finally, the proposed rule directed Federally regulated AMCs to contact 
the ASC concerning alternative means for submitting the information 
outlined in Sec.  34.214(b), in the event a State did not convey the 
information.
    The Agencies received comments concerning the requirement that 
States convey information on Federally regulated AMCs to the ASC, which 
many commenters addressed when responding to a specific question in the 
proposal concerning potential barriers to a State providing the 
necessary information to the ASC, as discussed below.
    The Agencies asked for comment on whether there may be barriers to 
collecting information on Federally regulated AMCs for the ASC. (See 
Question 10 in the proposal.) A number of commenters expressed the view 
that the supervision and handling of Federally regulated AMCs should be 
done by the ASC, not by the States. Other commenters expressed concern 
that States do not have a way to identify a Federally regulated AMC. 
Another set of commenters suggested that States would have difficulty 
with collecting information concerning Federally regulated AMCs because 
they do not have a process for the collection of such information. A 
few other commenters argued that States do not have authority over 
Federally regulated AMCs, which would make it impossible to police the 
collection requirement. Some commenters suggested that requiring States 
to collect information on Federally regulated AMCs amounted to an 
unfunded mandate, particularly if State law prohibited an agency from 
collecting a fee from an entity it does not license or regulate. These 
commenters argued that States should be compensated for collecting 
information from Federally regulated AMCs.
    The Agencies note that the proposed and final rules do not 
implement the statutory requirement for States to collect the AMC 
National Registry fee, nor do they determine the process for 
collection. The collection of the fee is provided for pursuant to 
FIRREA section 1109 and will be implemented by the ASC, not the 
Agencies as part of this joint rulemaking.\112\ In addition, the 
Agencies note that the requirement for States to collect fees from 
Federally regulated AMCs is statutory.\113\ Under FIRREA section 
1109(a)(4)(B), participating States are required to collect an annual 
ASC fee from each AMC that is registered with the States or operated as 
a subsidiary of a Federally regulated financial institution.\114\
---------------------------------------------------------------------------

    \112\ 12 U.S.C. 3338.
    \113\ See section 1109(a)(4)(B), 12 U.S.C. 3338(a)(4)(B).
    \114\ 12 U.S.C. 3338(a)(4)(B).
---------------------------------------------------------------------------

    In FIRREA section 1124(e), the Agencies are charged with jointly 
promulgating regulations for the reporting of the activities of AMCs to 
the ASC in determining the payment of the AMC National Registry 
fee.\115\ The Agencies interpret FIRREA sections 1109(a)(4)(B) and 
1124(e) together to require States to collect information related to 
the determination of the fee for Federally regulated AMCs operating in 
their States.\116\ Therefore, in Sec.  34.215(c), the Agencies are 
adopting the proposal to require Federally regulated AMCs to submit 
information required for the AMC National Registry to the States in 
which they operate without substantive change.
---------------------------------------------------------------------------

    \115\ See FIRREA section 1124(e), 12 U.S.C. 3353(e).
    \116\ See 12 U.S.C. 3338(a)(4)(B), 3353(e).
---------------------------------------------------------------------------

    Specifically, new Sec.  34.215(c) requires Federally regulated AMCs 
to report to the State or States in which they operate the information 
required to be submitted by the State to the ASC, pursuant to policies 
that will be developed and issued by the ASC regarding the 
determination of the AMC National Registry fee, including but not 
necessarily limited to information related to the ownership limitations 
in Sec.  34.215(b). These ownership limitations relate to determining 
the AMC National Registry fee because the limitations determine whether 
an AMC is eligible to be included in the Registry in the first 
instance.
    The Agencies understand commenters' concerns about States 
collecting information from Federally regulated AMCs and submitting it 
to the ASC. As discussed, the Agencies interpret the statute to require 
that participating States have a mechanism for collecting information 
from identified Federally regulated AMCs operating in their States and 
submitting it to the ASC. However, the Agencies emphasize that this 
final rule does not require States to identify Federally regulated AMCs 
operating in their States, nor are they responsible for supervising or 
enforcing a Federally regulated AMC's compliance with information 
submission requirements related to the AMC National Registry. Rather, 
the Federal agencies overseeing Federally regulated AMCs are 
responsible for supervising and enforcing the compliance of Federally 
regulated AMCs with these requirements, including whether the

[[Page 32673]]

AMC identifies itself to the State and submits required information. 
States are also not required to assess whether any licensing issues in 
that State of owners of a Federally regulated AMC disqualify the AMC 
from being on the AMC National Registry, pursuant to the ownership 
limitations in Sec.  34.215(b). The final rule defers to the ASC to 
determine whether the cause of an appraiser license issue arose was 
``substantive.'' The Agencies are sensitive to concerns raised about 
the cost to States of collecting and remitting information regarding 
Federally regulated AMCs. The final rule does not bar a State from 
collecting a fee from Federally regulated AMCs to offset the cost of 
collecting the AMC National Registry fee and the information related to 
the fee. In addition, pursuant to section 1109(b)(5), the ASC has the 
authority to provide grants to State appraiser certifying and licensing 
agencies to support the efforts of such agencies to comply with Title 
XI of FIRREA, including in connection with implementation of the AMC 
National Registry.\117\ Finally, the Agencies consulted further with 
the ASC regarding the proposal to give Federally regulated AMCs the 
alternative to report information directly to the ASC, for example, 
when operating in a non-participating State that is not collecting 
information. Due to operational challenges raised by the ASC, the 
Agencies are removing this alternative from the final rule. However, 
the Agencies recognize that practical challenges may arise as the 
minimum requirements are adopted in States and reporting requirements 
take effect and will be monitoring these issues.
---------------------------------------------------------------------------

    \117\ 12 U.S.C. 3338(b)(5).
---------------------------------------------------------------------------

F. Section 34.216: Information To Be Presented to the ASC by 
Participating States

    Section Sec.  34.216 is adopted without change from proposed rule. 
Pursuant to Sec.  34.216, States that establish AMC registration and 
supervision programs are required to submit to the ASC the information 
regarding AMCs required by ASC regulations and guidance. This provision 
implements the requirement in section 1124(e) for the Agencies to 
establish these reporting requirements.
    The Agencies did not receive comments specifically relating to 
Sec.  34.216; however, as discussed above in response to questions 
concerning potential barriers to State registration and supervision of 
AMCs, some commenters expressed concern regarding the costs of 
collecting information related to fees and the registration 
limitations, as well as the logistics of doing so with respect to 
Federally regulated AMCs.\118\ As discussed above in the section-by-
section analysis of Sec.  34.213, the Agencies are aware that there are 
States that currently charge AMCs a fee to offset administrative costs 
and could continue to do so. The Agencies also believe that cost 
concerns may be addressed by the ASC, through its authority to provide 
grants to States to assist States in complying with Title XI of FIRREA. 
The Agencies expect that the ASC will work with both the States and the 
Agencies to address logistical issues as the final rule is implemented.
---------------------------------------------------------------------------

    \118\ The commenters, however, did not offer data on what volume 
or burden the collection of information and transmission process 
would be expected to pose.
---------------------------------------------------------------------------

G. Integration of FDIC and OTS Rules on Appraisals

    The FDIC proposed to integrate its appraisal regulations for both 
nonmember banks and State savings associations. Specifically, the FDIC 
proposed to rescind 12 CFR part 390, subpart X (part 390, subpart X), 
of the former OTS regulation entitled ``Appraisals.'' The FDIC did not 
receive any comments specifically relating to the integration of the 
former OTS rules on appraisals. The final rule implements this 
authority by rescinding the former OTS regulatory provisions on 
appraisals pertaining to State savings associations, as these entities 
are now covered by the FDIC's appraisal rules.

IV. Statutory Implementation Period

    Pursuant to section 1124(f)(1), the limitation that applies to AMCs 
operating without registering with a participating State will apply as 
of 36 months from the effective date of this final rule.\119\ As a 
result, States electing to participate have 36 months from August 10, 
2015 to establish an AMC registration and supervision program that 
meets the minimum requirements in this final rule and register AMCs 
seeking to provide appraisal management services related to Federally 
related transactions in the State before this limitation begins to 
apply. Subject to the approval of the FFIEC, the ASC may extend this 
period by an additional 12 months if it makes a written finding that a 
State has made substantial progress towards implementing a registration 
and supervision program for AMCs that meets the standards in Title XI 
of FIRREA. The compliance date for the final rule for Federally 
regulated AMCs is 12 months after the effective date of this final rule 
with respect to practice requirements in Sec.  34.215(a). This 12-month 
compliance date will allow Federally regulated AMCs time to develop the 
processes and controls required by this final rule. The compliance date 
for AMCs that are regulated by States will be determined by each State.
---------------------------------------------------------------------------

    \119\ 12 U.S.C. 3353(f).
---------------------------------------------------------------------------

V. Regulatory Analysis

Paperwork Reduction Act

    Certain provisions of the final rule contain ``information 
collection'' requirements within the meaning of the Paperwork Reduction 
Act (PRA) of 1995 (44 U.S.C. 3501 et seq.). Under the PRA, the Agencies 
may not conduct or sponsor, and, notwithstanding any other provision of 
law, a person is not required to respond to, an information collection 
unless the information collection displays a valid Office of Management 
and Budget (OMB) control number. The information collection 
requirements contained in this final rule were submitted to OMB for 
review and approval at the proposed rule stage by the FDIC, FHFA, and 
OCC pursuant to section 3506 of the PRA and section 1320.11 of the 
OMB's implementing regulations (5 CFR part 1320). OMB instructed the 
agencies to examine public comment in response to the proposed rule and 
describe in the supporting statement of their next collections any 
public comments received regarding the collection as well as why (or 
why it did not) incorporate the commenter's recommendation. The 
Agencies received no public comments regarding the collection. The 
Board reviewed the proposed rule under the authority delegated to the 
Board by OMB.
    The collection of information requirements in the final rule are 
found in Sec. Sec.  34.212-34.216. This information is required to 
implement section 1473 of the Dodd-Frank Act.
    Title of Information Collection: Minimum Requirements for Appraisal 
Management Companies.
    OMB Control Nos.: The Agencies will be seeking new control numbers 
for these collections.
    Frequency of Response: Event generated.
    Affected Public: States; businesses or other for-profit and not-
for-profit organizations.
    Abstract:
    State Recordkeeping Requirements
    States seeking to register AMCs must have an AMC registration and 
supervision program. Section 34.213(a) requires each participating 
State to establish and maintain within its

[[Page 32674]]

appraiser certifying and licensing agency a registration and 
supervision program with the legal authority and mechanisms to: (i) 
Review and approve or deny an application for initial registration; 
(ii) periodically review and renew, or deny renewal of, an AMC's 
registration; (iii) examine an AMC's books and records and require the 
submission of reports, information, and documents; (iv) verify an AMC's 
panel members' certifications or licenses; (v) investigate and assess 
potential law, regulation, or order violations; (vi) discipline, 
suspend, terminate, or deny registration renewals of, AMCs that violate 
laws, regulations, or orders; and (vii) report violations of appraisal-
related laws, regulations, or orders, and disciplinary and enforcement 
actions to the ASC.
    Section 34.213(b) requires each participating State to impose 
requirements on AMCs not owned and controlled by an insured depository 
institution and regulated by a Federal financial institutions 
regulatory agency to: (i) Register with and be subject to supervision 
by a State appraiser certifying and licensing agency in each State in 
which the AMC operates; (ii) engage only State-certified or State-
licensed appraisers for Federally regulated transactions in conformity 
with any Federally regulated transaction regulations; (iii) establish 
and comply with processes and controls reasonably designed to ensure 
that the AMC, in engaging an appraiser, selects an appraiser who is 
independent of the transaction and who has the requisite education, 
expertise, and experience necessary to competently complete the 
appraisal assignment for the particular market and property type; (iv) 
direct the appraiser to perform the assignment in accordance with 
USPAP; and (v) establish and comply with processes and controls 
reasonably designed to ensure that the AMC conducts its appraisal 
management services in accordance with section 129E(a)-(i) of TILA.
State Reporting Burden
    Section 34.216 requires that each State electing to register AMCs 
for purposes of permitting AMCs to provide appraisal management 
services relating to covered transactions in the State must submit to 
the ASC the information required to be submitted under this Subpart and 
any additional information required by the ASC concerning AMCs.
AMC Reporting Requirements
    Section 34.215(c) requires that a Federally regulated AMC must 
report to the State or States in which it operates the information 
required to be submitted by the State pursuant to the ASC's policies, 
including: (i) Information regarding the determination of the AMC 
National Registry fee; and (ii) the information listed in Sec.  34.214.
    Section 34.214 provides that an AMC may not be registered by a 
State or included on the AMC National Registry if such company is 
owned, directly or indirectly, by any person who has had an appraiser 
license or certificate refused, denied, cancelled, surrendered in lieu 
of revocation, or revoked in any State. Each person that owns more than 
10 percent of an AMC shall submit to a background investigation carried 
out by the State appraiser certifying and licensing agency. While Sec.  
34.214 does not authorize States to conduct background investigations 
of Federally regulated AMCs, it would allow a State to do so if the 
Federally regulated AMC chooses to register voluntarily with the State.
AMC Recordkeeping Requirements
    Section 34.212(b) provides that an appraiser in an AMC's network or 
panel is deemed to remain on the network or panel until: (i) the AMC 
sends a written notice to the appraiser removing the appraiser with an 
explanation; or (ii) receives a written notice from the appraiser 
asking to be removed or a notice of the death or incapacity of the 
appraiser. The AMC would retain these notices in its files.
    Burden Estimates:
    Total Number of Respondents: 500 AMCs, 55 States.
    Bureau: Since the Bureau is merely adopting a cross-reference in 
Regulation Z to the OCC regulatory text, the Bureau is not imposing any 
new or additional information collection requirements on regulated 
entities. Therefore, the Bureau is not seeking OMB approval for the 
information collection requirements already accounted for by the other 
agencies' information collection requests submitted to OMB in 
association with this rule.
    FDIC Burden Total: 1,545 hours.
    FHFA Burden Total: 617 hours.
    OCC Burden Total: 1,545 hours.
    Board Burden Total: 1,545 hours.
    Total Burden: 5,252 hours.

Regulatory Flexibility Act

    OCC: The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
generally requires that, in connection with a rulemaking, an agency 
prepare and make available for public comment a regulatory flexibility 
analysis that describes the impact of the rule on small entities. 
However, the regulatory flexibility analysis otherwise required under 
the RFA is not required if an agency certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities (defined in regulations promulgated by the Small Business 
Administration (SBA) to include commercial banks and savings 
institutions, and trust companies, with assets of $550 million or less 
and $38.5 million or less, respectively) and publishes its 
certification and a brief explanatory statement in the Federal Register 
together with the rule.
    The OCC currently supervises 1,492 insured depository institutions 
(1,051 commercial banks and 441 Federal savings associations) of which 
approximately 1,090 are small entities based on the SBA's definition of 
small entities for RFA purposes. The OCC classifies the economic impact 
of total costs on a small entity as significant if the total costs in a 
single year are greater than 5 percent of total salaries and benefits, 
or greater than 2.5 percent of total non-interest expense.
    As discussed in the SUPPLEMENTARY INFORMATION above, section 1473 
of the Dodd-Frank Act requires the Agencies to jointly prescribe 
regulations to implement the minimum requirements for State 
registration and supervision of AMCs. The final rule meets this 
obligation by requiring States that elect to register and supervise 
AMCs to impose certain requirements on AMCs. The final rule also 
requires participating States to have certain basic supervisory 
authorities, such as the ability to investigate complaints against 
AMCs, and take disciplinary action with respect to AMCs that violate 
applicable laws.
    The OCC believes the final rule will not have a significant 
economic impact on a substantial number of small entities for several 
reasons. First, the final rule imposes requirements primarily on 
States, not on national banks or Federal savings associations. Second, 
to the extent that the final rule imposes burden on national banks or 
Federal savings associations that own and control an AMC, there are 
only two such AMCs, and these are owned by large national banks. For 
these reasons, the OCC believes that the final rule will not have an 
impact on a substantial number of OCC-supervised small entities. 
Therefore, the OCC certifies that the final rule would not have a 
significant economic impact on a substantial number of small entities.
    Board: The RFA, 5 U.S.C. 601 et seq., requires an agency to provide 
and make available for public comment a regulatory flexibility analysis 
that describes the impact of a proposed rule

[[Page 32675]]

on small entities. However, a regulatory flexibility analysis is not 
required, if the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities 
(defined in regulations of the SBA to include banking organizations 
(commercial banks, savings institutions, and trust companies)) with 
total assets of less than or equal to $550 million and publishes its 
certification and a short explanatory statement in the Federal Register 
together with the rule.\120\ Based on its analysis, and for the reasons 
stated below, the Board believes that the final rule will not have a 
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \120\ U.S. Small Business Administration, Table of Small 
Business Size Standards Matched to North American Industry 
Classification System Codes, available at https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
---------------------------------------------------------------------------

    The AMC Rule applies to States that elect to establish licensing 
and certifying authorities to regulate AMCs. In the Board's regulatory 
flexibility analysis for this Rule, the Board determined that 
approximately 32 entities would be subject to direct regulation and 
supervision by Federal financial institutions regulatory agencies. 
These entities would be subject to direct regulation and supervision 
under the Rule because the entities are Federally regulated AMCs. The 
number of these 32 entities that actually would be subject to 
regulation under the AMC Rule is currently unknown because some of the 
entities may have a network or panel of contract appraisers that is too 
small to satisfy a threshold requirement of the AMC Rule and therefore 
would be exempt from regulation and supervision under the AMC Rule.
    Data currently available to the Board indicate that approximately 
five State member banks operate a Federally regulated AMC. Data 
available to the Board are not sufficient to estimate how many of the 
approximately five entities subject to Board regulation and supervision 
would be classified as ``small entities.''
    Generally, the RFA requires an agency to perform a regulatory 
flexibility analysis of small entity impacts only when the agency's 
rule directly regulates the small entities. The impact of this final 
rule on small entities is indirect. This final rule does not impose 
directly any significant new recordkeeping, reporting, or compliance 
requirements on small entities, but instead requires participating 
States to impose certain requirements on AMCs. The final rule also 
requires participating States to have certain basic supervisory 
capabilities, such as the ability to investigate complaints against 
AMCs, and take disciplinary action with respect to AMCs that violate 
applicable laws and regulations.
    Moreover, while certain minimum requirements are imposed on 
participating States by the language of section 1473 of the Dodd-Frank 
Act, each State may establish requirements in addition to those 
required by section 1473. Furthermore, an entity with a network or 
panel of appraisers that does not meet the numerical test specified in 
section 1473 may voluntarily register with a participating state and 
the ASC, thus incurring some nominal expenses in establishing and 
maintaining the required registration information and meeting the 
minimum operational requirements. Because of these uncertainties, 
calculation of the impact of the final rule on the average Board-
supervised institution or entity is uncertain, although the number of 
Board-supervised entities directly subject to supervision under the 
Rule is expected to be less than five.
    Based on its analysis, and for the reasons stated above, the Board 
certifies that the final rule will not have a significant economic 
impact on a substantial number of small entities.
    FDIC: The RFA generally requires that, in connection with a 
rulemaking, an agency prepare and make available for public comment an 
initial regulatory flexibility analysis (IRFA) that describes the 
impact of the final rule on small entities.\121\ A regulatory 
flexibility analysis is not required, however, if the agency certifies 
that the final rule will not have a significant economic impact on a 
substantial number of small entities (defined in regulations 
promulgated by the SBA to include banking organizations with total 
assets of less than or equal to $550 million) and publishes its 
certification and a short, explanatory statement in the Federal 
Register together with the final rule.
---------------------------------------------------------------------------

    \121\ See 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    As of September 30, 2014, there were approximately 3,451 small 
FDIC-supervised institutions, which include 3,167 State nonmember banks 
and 284 State-chartered savings institutions. The FDIC analyzed the 
organizational structure information in the Board of Governors of the 
Federal Reserve System's National Information Center database. This 
analysis found that few FDIC-supervised institutions owned or 
controlled an entity that provides the types of appraisal management 
services specified in section 1473. Of these institutions, none 
oversees a network or panel of appraisers that meets the statutory 
panel size threshold specified in section 1473 for an entity to be an 
AMC. Therefore, the final rule would not have any impact on any FDIC-
supervised institutions. If any FDIC-supervised institution that owns 
or controls an entity with a network or panel of appraisers that does 
not meet the statutory panel size threshold specified in section 1473 
voluntarily decides to register that entity with the States, then the 
institution may incur some nominal expenses in establishing and 
maintaining a process for providing the required registration 
information and meeting the minimum operational requirements.
    In addition, the final rule implements the minimum requirements for 
States to register and supervise AMCs as required by section 1473 of 
the Dodd-Frank Act. The final rule meets this obligation by requiring 
States that elect to register and supervise AMCs to impose certain 
requirements on AMCs. The final rule also requires participating States 
to have certain basic supervisory authorities, such as the ability to 
investigate complaints against AMCs and take disciplinary action with 
respect to AMCs that violate applicable laws.
    It is the opinion of the FDIC that the final rule will not have a 
significant economic impact on a substantial number of small entities 
that it regulates in light of the fact that no FDIC-supervised 
institutions own or control an entity with a network or panel of 
appraisers that meets the statutory panel size threshold specified in 
section 1473 for an entity to be an AMC. In addition, the final rule 
imposes requirements primarily on States and not on FDIC-supervised 
institutions. Accordingly, the FDIC certifies that the final rule would 
not have a significant economic impact on a substantial number of small 
entities. Thus, a regulatory flexibility analysis is not required.
    Bureau: The RFA generally requires an agency to conduct an IRFA and 
a final regulatory flexibility analysis (FRFA) of any rule subject to 
notice-and-comment rulemaking requirements, unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities.\122\
---------------------------------------------------------------------------

    \122\ For purposes of assessing the impacts of the proposed rule 
on small entities, ``small entities'' is defined in the RFA to 
include small businesses, small not-for-profit organizations, and 
small government jurisdictions. 5 U.S.C. 601(6). A ``small 
business'' is determined by application of SBA regulations and 
reference to the North American Industry Classification System 
(NAICS) classifications and size standards. 5 U.S.C. 601(3). A 
``small organization'' is any ``not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
5 U.S.C. 601(4). A ``small governmental jurisdiction'' is the 
government of a city, county, town, township, village, school 
district, or special district with a population of less than 50,000. 
5 U.S.C. 601(5). Given this definition, participating States are not 
small governmental jurisdictions and the burden on them is not 
relevant to this analysis.

---------------------------------------------------------------------------

[[Page 32676]]

    An FRFA is not required because this rule will not have a 
significant economic impact on a substantial number of small entities.
    This final rule implements the minimum requirements to be applied 
by participating States in the registration and supervision of AMCs, as 
well as requirements directly applicable to Federally regulated AMCs. 
The Bureau notes that the final rule does not impose requirements on 
AMCs (other than Federally regulated AMCs), but instead seeks to 
encourage States to adopt minimum requirements in their regulation of 
AMCs. Burden may be generated from the States' exercise of discretion 
to implement the final rule, based on the States having the option to 
decline to participate. The Bureau does not view this as burden 
resulting from the rule itself, however. Nonetheless, to inform the 
rulemaking and to inform the public, the Bureau exercised its 
discretion to analyze economic impacts that will be imposed on AMCs by 
States that implement final rule.\123\ For this purpose, the Bureau 
assumed States that have not yet passed an AMC licensing and 
registration law (17 States, as of November 2014) would all elect to 
pass such a law and establish an AMC licensing and supervision program 
that satisfies the standards of the final rule. This assumption is 
taken to establish an outer bound. Because the final rule does not 
require States to adopt the minimum requirements in the final rule, 
however, it is possible that not all 17 States (as defined in the final 
rule) would do so.\124\
---------------------------------------------------------------------------

    \123\ The Bureau does not assume costs associated with the final 
rule's requirements to ensure compliance with USPAP and other 
regulations, because AMCs would be subject to these standards even 
without their being referenced in the final rule.
    \124\ A State could accept the consequences on AMCs' business in 
the State from not implementing the final rule. FIRREA section 
1124(f) provides that three years after the final rule takes effect, 
AMCs cannot provide services in Federally related transactions 
unless and until a State has implemented the final rule. However, 
the Bureau understands that only a minority of mortgage transactions 
are ``Federally related transactions'' within the meaning of FIRREA. 
See, e.g., 12 CFR 225.62(f) (transaction must ``[r]equire the 
services of an appraiser'' to be federally related). But see id. at 
Sec.  225.63(a)(1),(9),(10) (exemptions from FIRREA appraisal 
requirements for transactions of $250,000 or less, transactions 
insured by or sold to a U.S. government agency, and transactions 
that conform to GSE appraisal standards). However, the Bureau 
believes all States will choose to participate. Several industry 
comments expressed concerns with the possible consequences if States 
did not participate. These comments did not establish that it was 
likely that States would not do so, however. Thus, the Bureau 
continues to rely on the assumption that the remaining States will 
choose to participate either within three years or soon thereafter. 
However, even if this is not the case, the transactions affected 
until a State did participate would be portfolio loans over $250,000 
that are not insured by either the Federal Housing Administration 
(FHA), the U.S. Department of Veterans Affairs (VA), or the United 
States Department of Agriculture Rural Housing Service (USDA RHS). 
These loans represent a small percentage of the market, and 
therefore inability by certain market participants (certain types of 
AMCs) to provide appraisal management services in these types of 
transactions in a non-participating State will not result in a 
significant economic impact on a substantial number of small 
entities.
---------------------------------------------------------------------------

    Various commenters expressed their concerns with State and Federal 
fees that may be instituted in connection with AMC registration and 
supervision. This rule does not determine fee amounts for States to 
charge, require collection of registration fees by the ASC, or 
authorize the collection of such ASC fees. It instead provides minimum 
requirements for States to use to regulate AMCs within the State. How a 
State chooses to implement these requirements, including which if any 
new State fees to charge, is within the discretion of the States. With 
respect to the ASC registration fee, the Dodd-Frank Act grants 
authority to set that fee exclusively to the ASC.\125\ Therefore, the 
Bureau does not consider any fees imposed on AMCs by the ASC (whether 
directly or through the States for forwarding to the ASC) as an impact 
of the final rule.
---------------------------------------------------------------------------

    \125\ See 12 U.S.C. 3338. This provision in FIRREA is not part 
of the joint rulemaking authority in section 1124 that is the basis 
for the Agencies' issuance of this final rule.
---------------------------------------------------------------------------

    A national association commented explicitly on the fees that AMCs 
would pay and the fees' effect on consumers:
    ``150+- AMCs, $2,500 average fee per State (includes application 
fee, surety bond fees, background checks, secretary of State 
application fees, administration fees, and etc.)
    150 AMCs x $2,500 x 50 States = $18,750,000.00
    150 AMCs x 2500 appraisers x $50 ASC fee = $18,750,000.00.''
    The Bureau's analysis differs from the commenter's in several ways. 
First, for the purposes of RFA, the Bureau is concerned only with 
smaller AMCs, and an AMC with 2,500 appraisers that operates in all 50 
States is unlikely to be small under the SBA definition that would 
include only AMCs with yearly revenues below $7,500,000. Second, the 
Bureau does not count as a burden imposed by the final rule those 
registration fees in States that already established AMC registration 
regimes before adoption of the final rule; thus the multiplier in the 
first calculation should be 17 rather than 50. Third, the Bureau 
assumes for its base calculations that only the minimum State rate is 
caused by the rule (Vermont's $250 fee), thus the multiplier is $250 
instead of $2,500. Finally, as mentioned above, the Bureau does not 
include the ASC fee or, in other words the third line overall (which in 
any event assumes a fee amount that the ASC has not yet established). 
Note that the Bureau's use of the minimum State rate for its base 
calculation of impacts does not imply that the Bureau suggests that the 
remaining 17 States adopt this rate.
    Commenters also discussed the impact of the rule on States and the 
burden that may result with the implementation of the final rule. While 
the Bureau acknowledges these comments, for the purposes of making a 
determination under the RFA, the impact of the final rule on the States 
is not incorporated into the FRFA because States are not classified as 
small entities.
    As discussed in the proposed rulemaking, State registration fees in 
States that have not yet passed an AMC licensing and registration law 
would constitute the primary economic impact of the final rule. As also 
noted in the proposed rule, such fees in States that have established 
such laws vary widely. Such State registration and renewal fees are not 
necessarily for the sole purpose of recovering costs of administering 
the minimum requirements under the final rule. States can impose 
charges for a variety of reasons, including to raise revenue 
(independent of the cost of the registration regime) or to fund the 
administration of a regime that exceeds the minimum requirements under 
the final rule. The Bureau believes that the fee charged by Vermont--
$125 for registration and $250 for annual renewal--would be sufficient 
to recover the cost of implementing the final rule in a newly-
participating State.\126\ The Bureau therefore considered this fee in 
estimating the economic impact of the final rule in the 17 States that 
do not yet have AMC registration requirements. As discussed further 
below, however, the Bureau also considered more

[[Page 32677]]

conservative estimates of the impact of the final rule using 
significantly higher fee amounts. The Bureau believes that the 38 
States that already have AMC registration requirements would have to do 
minimal, if any, updating of the requirements due to this rule, as 
discussed in the preamble. Thus, the Bureau believes that the rule's 
indirect burden on the AMCs operating in these 38 States is negligible.
---------------------------------------------------------------------------

    \126\ The application fee in Vermont is $125. See https://www.sec.state.vt.us/media/188701/amc_application.pdf. The annualized 
renewal fee is $250 ($500 for a two-year period). See https://www.sec.state.vt.us/media/486847/Appraisal-Management-Company-Renewal-Form-077-2014.pdf. In addition, while some States may elect 
to impose additional requirements relating to examination and 
inspection of their AMCs, the Bureau does not believe that the 
minimum requirements that States must provide would lead to 
significant costs for AMCs.
---------------------------------------------------------------------------

    As noted in the section-by-section analysis, it is possible that an 
appraisal firm, which hires employees to perform appraisals, could also 
oversee more than 15 appraisers engaged as independent contractors in a 
State, or 25 or more appraisers in two or more States, in a given year. 
Comments did not establish that such firms--described in the section-
by-section analysis as `hybrid firms'--currently exist to any 
meaningful extent. The Bureau believes that to the extent such firms do 
exist, they are either already included in what the Bureau has counted 
as an AMC, or the firm is unlikely to be considered ``small'' within 
the meaning of the RFA.
    An additional requirement in the final rule is that the State AMC 
licensing programs have authority and mechanisms to examine books and 
records of the AMCs, to otherwise obtain information from the AMCs, and 
to discipline AMCs. The Bureau believes that existing State 
registration fees generally already account for the cost to the States 
of having such authority and mechanisms, and that the requirement in 
the final rule therefore would not lead to higher registration fees in 
any significant amount.\127\ Accordingly, in the 17 States that would 
adopt new registration and renewal systems, the Bureau believes the 
renewal fee currently charged in Vermont would cover the State's cost 
associated with implementing this requirement.
---------------------------------------------------------------------------

    \127\ See, e.g., Vermont Statutes Title 26 section 3324 
(requiring AMCs to ``retain all records related to an appraisal, 
review, or consulting assignment for no less than five years . . . 
[and w]ith reasonable notice, a licensee or registrant shall produce 
any records governed by this section for inspection and copying by 
the board or its authorized agent.'').
---------------------------------------------------------------------------

    The Bureau notes that the final rule is not prescriptive as to how 
or when the States must exercise the authority or mechanisms. Exercise 
of such authority and mechanisms is determined at the discretion of the 
States, subject to monitoring by the ASC for effectiveness in the 
judgment or discretion of the ASC. Accordingly, to the extent that 
State exercise of such authority and mechanisms leads to burden on 
small entities, such burden would be attributable to such State 
implementation and/or ASC oversight expectations rather than to the 
final rule itself. Therefore, State statutes that implement this 
requirement relating to establishing examination authority and 
mechanisms are not expected to cause fee increases or new burden above 
the $250 overall baseline that is assumed for purposes of this 
analysis.\128\
---------------------------------------------------------------------------

    \128\ In addition, the Bureau does not believe that in States 
that add this requirement there will be any significant new burden 
on the AMCs. The Bureau believes that the AMCs already keep their 
books and records in order as a standard course of business 
practice, and thus the occasional State examiner visits should not 
impose any significant burden. In addition, the final rule requires 
only that the State have the authority and mechanism to request 
records and information. The final rule does not require that the 
State exercise this authority and any burdensome exercise of this 
authority would therefore not be caused by the final rule. Finally, 
to the extent State supervision programs do increase burden, the 
Bureau believes this burden would be within the sensitivity 
tolerances described in the footnote at the end of this section.
---------------------------------------------------------------------------

    Similarly, the Bureau believes that other minimum requirements for 
AMCs under the final rule (verifying the use of licensed or certified 
status of appraisers, requiring that appraisers comply with USPAP, 
complying with any contractual review provisions, and establishing and 
complying with processes to ensure appraisers are qualified and 
independent and that the AMC acts in compliance with applicable 
valuation independence regulations), as well as the standard for 
removing appraisers from the appraiser panel, would not result in new 
burden on AMCs because these standards merely reinforce existing 
compliance requirements as well as industry practice.\129\ The Bureau 
further notes that States have discretion to interpret the requirements 
to establish processes and controls to ensure compliance, subject to 
monitoring by the ASC for effectiveness in the judgment or discretion 
of the ASC. Accordingly, to the extent that State interpretations of 
such requirements leads to burden on small entities, such burden would 
be attributable to such State implementation and/or ASC oversight 
expectations rather than to the final rule itself.
---------------------------------------------------------------------------

    \129\ These requirements also would not result in new burden on 
Federally regulated AMCs, for the same reason. Federally regulated 
AMCs do not have to comply with State registration and renewal 
requirements, which can entail fees. Conservatively, however, the 
Bureau applied the State fee burden to all of the small AMCs in its 
calculation method described herein. As a result, the estimated 
burden of State fees associated with the final rule may be over-
estimated.
---------------------------------------------------------------------------

    Just as these conduct standards would not impose a significant 
burden on AMCs required to register at the State level, the Bureau does 
not believe they would impose significant burdens on Federally 
regulated AMCs either. See Interagency Appraisal and Evaluation 
Guidelines, 75 FR 77450 (Dec. 10, 2010) (Interagency Guidelines). The 
Interagency Guidelines, part VI, already require Federal financial 
institutions, when obtaining required appraisals, to select appraisers 
who are certified or licensed, qualified, in compliance with USPAP, and 
independent. 75 FR at 77458. Federally regulated AMCs frequently 
perform appraisals for their affiliates. Therefore, it can be assumed 
that in delegating these functions to AMCs, these Federal financial 
institutions also delegated these requirements from part VI of the 
Interagency Guidelines to these AMCs.
    To estimate the impact of the final rule on small AMCs, the Bureau 
conducted a survey. The Bureau called nine AMCs, selected randomly from 
a list of approximately 500 AMCs provided by industry trade 
associations. The AMCs were asked for certain basic data including the 
number of States in which they operate, their revenue (including the 
revenue from any non-appraisal business), and the number of appraisals 
that they performed in 2012.\130\ The Bureau estimated the revenue to 
be the number of appraisals performed in 2012 multiplied by $350--the 
average appraisal cost assumed in the Agencies' analysis under section 
1022 of the Dodd-Frank Act in the 2013 Interagency Appraisals Rule. 
This revenue estimate is likely to be underestimated, given that 
several AMCs out of nine reported additional revenue that was not due 
to the residential appraisal business. Out of the nine AMCs, six had 
revenues of less than $7,500,000 in 2012, and thus would be within the 
scope of the RFA analysis based upon SBA guidelines.\131\ The Bureau 
computed the cost of registration and renewal fees in States that do 
not already have them, allocated these costs to individual AMCs based 
upon the number of States in which the AMC operated,\132\ and computed 
the ratio of these allocated costs to the AMCs' revenues.
---------------------------------------------------------------------------

    \130\ One of the AMCs did not report its revenue.
    \131\ NAICS code 531320--Offices of Real Estate Appraisers--
includes ``appraisal services,'' which we believe would include 
services provided by AMCs in the processing and review of 
appraisals. An alternative classification would be NAICS code 
561110--Office Administrative Services. In any event, this code also 
has an SBA threshold of $7,500,000.
    \132\ The Bureau assumed that an AMC that operated in x States 
needs to register in additional (17/55)*x States. This assumption 
results in a (17/55)*x*$250 State registration and renewal fee 
burden on an AMC operating in x States.

---------------------------------------------------------------------------

[[Page 32678]]

    The Bureau acknowledges that requiring AMCs to send letters to the 
appraisers that the AMC decides to remove from its panel might add 
burden in States that do not already have registration requirements 
(which typically include notice provisions). The Bureau does not 
possess any evidence on the number of appraisers to whom an AMC would 
have to send these letters. According to the Bureau of Labor and 
Statistics' August 2014 preliminary numbers, 1.9 percent of the labor 
force in the real estate and rental and leasing industry was either 
laid off or discharged in the most recent month. Thus, the Bureau 
estimates that an AMC will dismiss approximately a quarter of 
appraisers from its panel in any given year. The Bureau assumes that 
each AMC will have several standardized letters explaining the reason 
for dismissal: for example, changing economic conditions or the 
appraiser's violation of USPAP or work performance issues. Each AMC 
might incur a minimal one-time cost to draft these letters, with some 
industry associations potentially providing templates. After this 
minimal one-time cost is incurred, the ongoing cost would include a 
minimal adjustment of the letter based on the appraiser's particular 
circumstances and the actual printing and mailing cost. These letters 
also could be sent in batches, periodically, such as on an annual 
basis. Thus, for the purposes of this analysis, the Bureau implicitly 
accounts for these costs in the sensitivity analyses below (which use a 
State fee of $5,150 and include a $300 administrative expense).
    The Bureau then fit the received ratios using three different 
distributions: normal, generalized extreme value, and logistic. The 
three different distributions were used because no a priori assumptions 
regarding how these ratios are distributed can be made. The three 
distributions mentioned above are commonly used by empirical 
researchers to fit observed values. Considering the costs imposed by 
the States as a result of the final rule, the Bureau believes that less 
than 1 percent of the small entities would experience a cost of over 1 
percent of their revenue, using either the normal, or the logistic, or 
the generalized extreme value distributions.\133\ The Bureau also notes 
that because the sample did not include any AMCs that were either too 
small (for example, with 15 or fewer appraisers in one State) or that 
were Federally regulated AMCs, these estimates are likely overstated.
---------------------------------------------------------------------------

    \133\ The Bureau notes that the percentage of small institutions 
for which the estimated burden of the final rule would amount to 
over 3 percent of the revenue would remain under 1 percent even if 
the Bureau had used the following alternative assumptions: (1) 
$5,150 as the assumed burden of the proposed rule for states that 
adopt new registration regimes--the highest among the existing state 
registration fees (in Minnesota, per https://mn.gov/elicense/licenses/licensedetail.jsp?URI=tcm:29-9313&CT_URI=tcm:27-117-32), 
and assumed this same amount as the annual renewal fee (even though 
the Minnesota renewal fee is only $2,650, per https://mn.gov/elicense/licenses/licensedetail.jsp?URI=tcm:29-9313&CT_URI=tcm:27-117-32); and (2) an additional annual labor cost of $300 for any 
possible associated burden of (a) filling out registration and 
renewal forms in those states (assuming an AMC operates in 
approximately 20 states on average, such that 6.26 of those states 
adopt new AMC licensing programs) and any additional burden related 
to notices from small AMCs removing appraisers from their panels in 
those states. The percentages of institutions for which this cost 
would amount to over 1 percent of the revenue changed, respectively, 
to 26 percent, 18 percent, and 15 percent of the small institutions 
affected, according to the normal, generalized extreme value, and 
logistic distributions.
---------------------------------------------------------------------------

Certification
    Accordingly, the Bureau Director, by signing below, certifies that 
this final rule would not have a significant economic impact on a 
substantial number of small entities.
    FHFA: The RFA (5 U.S.C. 601 et seq.) requires an agency to analyze 
a proposed regulation's impact on small entities if the final rule is 
expected to have a significant economic impact on a substantial number 
of small entities.\134\ A regulatory flexibility analysis is not 
required if the agency certifies that the final rule will not have a 
significant economic impact on a substantial number of small entities 
and publishes its certification and a short statement in the Federal 
Register together with the final rule.
---------------------------------------------------------------------------

    \134\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    The rule implements section 1124 of FIRREA and establishes minimum 
requirements to be imposed by a participating State appraiser 
certifying and licensing agency on AMCs doing business in the State. 
FHFA has considered the impact of this regulation and determined that 
it is not likely to have a significant economic impact on a substantial 
number of small entities because States and FHFA's regulated entities--
Fannie Mae, Freddie Mac, and the Federal Home Loan Banks--are not small 
entities for purposes of the RFA. See 5 U.S.C. 601(6).
    NCUA: The RFA \135\ requires NCUA to provide a regulatory 
flexibility analysis to certify that a rulemaking will not have a 
significant economic impact on a substantial number of small entities 
(defined for purposes of the RFA to include credit unions with assets 
less than $50 million) and publish its certification and a short 
explanatory statement in the Federal Register with the final rule.\136\ 
As explained above, the requirements of this rule would only apply 
directly to AMC subsidiaries owned and controlled by an insured 
depository institution, or an insured credit union, and regulated by a 
Federal financial institutions regulatory agency. NCUA, unlike the 
other banking agencies to this rulemaking, does not directly oversee or 
regulate any subsidiaries owned and controlled by credit unions, 
including AMC subsidiaries. Rather, NCUA's regulations permit Federal 
credit unions to invest in or lend only to CUSOs that conform to 
specific requirements outlined in part 712 of the NCUA's regulations. 
Because NCUA does not directly regulate or oversee CUSOs owned by State 
or Federally chartered credit unions, NCUA is not adopting regulatory 
text or any requirements through this rulemaking that would directly 
affect small entities. Accordingly, the NCUA Board certifies the rule 
will not have a significant economic impact on a substantial number of 
small entities.
---------------------------------------------------------------------------

    \135\ 5 U.S.C. 601 et seq.
    \136\ 78 FR 4032 (Jan. 18, 2013).
---------------------------------------------------------------------------

Unfunded Mandates Reform Act of 1995 Determination

    OCC: The OCC has analyzed the final rule under the factors in the 
Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this 
analysis, the OCC considered whether the final rule includes Federal 
mandates that may result in the expenditure by State, local, and tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year (adjusted annually for inflation). For 
the following reasons, the OCC finds that the final rule does not 
trigger the $100 million UMRA threshold. First, the mandates in the 
final rule apply only to those States that choose to establish an AMC 
registration system. Second, the costs specifically related to 
requirements set forth in law are excluded from expenditures under the 
UMRA. Although the OCC estimates that expenditures by State governments 
could be $82 million in one year, the UMRA cost estimate for the final 
rule is zero, given that the final rule's mandates are set forth in 
section 1473. For this reason, and for the other reasons cited above, 
the OCC has determined that this final rule will not result in 
expenditures by State, local, and tribal governments, or the private 
sector, of $100 million or more in any one year. Accordingly, this

[[Page 32679]]

final rule is not subject to section 202 of the UMRA.

List of Subjects

12 CFR Part 34

    Appraisal, Appraiser, Banks, Banking, Consumer protection, Credit, 
Mortgages, National banks, Reporting and recordkeeping requirements, 
Savings associations, Truth in lending.

12 CFR Part 208

    Accounting, Agriculture, Banks, Banking, Confidential business 
information, Consumer protection, Crime, Currency, Insurance, 
Investments, Mortgages, Reporting and recordkeeping requirements, 
Securities.

12 CFR Part 225

    Administrative practice and procedure, Banks, Banking, Federal 
Reserve System, Holding companies, Reporting and recordkeeping 
requirements, Securities.

12 CFR Part 323

    Banks, Banking, Mortgages, Reporting and recordkeeping 
requirements, Savings associations.

12 CFR Part 1026

    Advertising, Appraisal, Appraiser, Banks, Banking, Consumer 
protection, Credit, Credit unions, Mortgages, National banks, Reporting 
and recordkeeping requirements, Savings associations, Truth in lending.

12 CFR Part 1222

    Appraisals, Government sponsored enterprises, Mortgages.

Department of the Treasury

Office of the Comptroller of the Currency

Authority and Issuance
    For the reasons set forth in the preamble, the OCC is amending 12 
CFR part 34 as follows:

PART 34--REAL ESTATE LENDING AND APPRAISALS

0
1. The authority citation for part 34 is revised to read as follows:

    Authority: 12 U.S.C. 1 et seq., 25b, 29, 93a, 371, 1462a, 1463, 
1464, 1465, 1701j-3, 1828(o), 3331 et seq., 5101 et seq., and 
5412(b)(2)(B) and 15 U.S.C. 1639h.


0
2. Subpart H to part 34 is added to read as follows:

Subpart H--Appraisal Management Company Minimum Requirements

Sec.
34.210 Authority, purpose, and scope.
34.211 Definitions.
34.212 Appraiser panel--annual size calculation.
34.213 Appraisal management company registration.
34.214 Ownership limitations for State-registered appraisal 
management companies.
34.215 Requirements for Federally regulated appraisal management 
companies.
34.216 Information to be presented to the Appraisal Subcommittee by 
participating States.


Sec.  34.210  Authority, purpose, and scope.

    (a) Authority. This subpart is issued by the Office of the 
Comptroller of the Currency under 12 U.S.C. 93a and Title XI of the 
Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), 
as amended by the Dodd-Frank Wall Street Reform and Consumer Protection 
Act (the Dodd-Frank Act) (Pub. L. 111-203, 124 Stat. 1376 (2010)), 12 
U.S.C. 3331 et seq.
    (b) Purpose. The purpose of this subpart is to implement sections 
1109, 1117, 1121, and 1124 of FIRREA Title XI, 12 U.S.C. 3338, 3346, 
3350, and 3353.
    (c) Scope. This subpart applies to States and to appraisal 
management companies (AMCs) providing appraisal management services in 
connection with consumer credit transactions secured by a consumer's 
principal dwelling or securitizations of those transactions.
    (d) Rule of construction. Nothing in this subpart should be 
construed to prevent a State from establishing requirements in addition 
to those in this subpart. In addition, nothing in this subpart should 
be construed to alter guidance in, and applicability of, the 
Interagency Appraisal and Evaluation Guidelines \3\ or other relevant 
agency guidance that cautions banks, bank holding companies, Federal 
savings associations, state savings associations, and credit unions, as 
applicable, that each such entity is accountable for overseeing the 
activities of third-party service providers and ensuring that any 
services provided by a third party comply with applicable laws, 
regulations, and supervisory guidance applicable directly to the 
financial institution.
---------------------------------------------------------------------------

    \3\ See https://www.occ.gov/news-issuances/bulletins/2010/bulletin-2010-42.html.
---------------------------------------------------------------------------


Sec.  34.211  Definitions.

    For purposes of this subpart:
    (a) Affiliate has the meaning provided in 12 U.S.C. 1841.
    (b) AMC National Registry means the registry of State-registered 
AMCs and Federally regulated AMCs maintained by the Appraisal 
Subcommittee.
    (c)(1) Appraisal management company (AMC) means a person that:
    (i) Provides appraisal management services to creditors or to 
secondary mortgage market participants, including affiliates;
    (ii) Provides such services in connection with valuing a consumer's 
principal dwelling as security for a consumer credit transaction or 
incorporating such transactions into securitizations; and
    (iii) Within a given 12-month period, as defined in Sec.  
34.212(d), oversees an appraiser panel of more than 15 State-certified 
or State-licensed appraisers in a State or 25 or more State-certified 
or State-licensed appraisers in two or more States, as described in 
Sec.  34.212;
    (2) An AMC does not include a department or division of an entity 
that provides appraisal management services only to that entity.
    (d) Appraisal management services means one or more of the 
following:
    (1) Recruiting, selecting, and retaining appraisers;
    (2) Contracting with State-certified or State-licensed appraisers 
to perform appraisal assignments;
    (3) Managing the process of having an appraisal performed, 
including providing administrative services such as receiving appraisal 
orders and appraisal reports, submitting completed appraisal reports to 
creditors and secondary market participants, collecting fees from 
creditors and secondary market participants for services provided, and 
paying appraisers for services performed; and
    (4) Reviewing and verifying the work of appraisers.
    (e) Appraiser panel means a network, list or roster of licensed or 
certified appraisers approved by an AMC to perform appraisals as 
independent contractors for the AMC. Appraisers on an AMC's ``appraiser 
panel'' under this part include both appraisers accepted by the AMC for 
consideration for future appraisal assignments in covered transactions 
or for secondary mortgage market participants in connection with 
covered transactions and appraisers engaged by the AMC to perform one 
or more appraisals in covered transactions or for secondary mortgage 
market participants in connection with covered transactions. An 
appraiser is an independent contractor for purposes of this subpart if 
the appraiser is treated as an independent contractor by the AMC for 
purposes of Federal income taxation.
    (f) Appraisal Subcommittee means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council.

[[Page 32680]]

    (g) Consumer credit means credit offered or extended to a consumer 
primarily for personal, family, or household purposes.
    (h) Covered transaction means any consumer credit transaction 
secured by the consumer's principal dwelling.
    (i) Creditor means:
    (1) A person who regularly extends consumer credit that is subject 
to a finance charge or is payable by written agreement in more than 
four installments (not including a down payment), and to whom the 
obligation is initially payable, either on the face of the note or 
contract, or by agreement when there is no note or contract.
    (2) A person regularly extends consumer credit if the person 
extended credit (other than credit subject to the requirements of 12 
CFR 1026.32) more than 5 times for transactions secured by a dwelling 
in the preceding calendar year. If a person did not meet these 
numerical standards in the preceding calendar year, the numerical 
standards shall be applied to the current calendar year. A person 
regularly extends consumer credit if, in any 12-month period, the 
person originates more than one credit extension that is subject to the 
requirements of 12 CFR 1026.32 or one or more such credit extensions 
through a mortgage broker.
    (j) Dwelling means:
    (1) A residential structure that contains one to four units, 
whether or not that structure is attached to real property. The term 
includes an individual condominium unit, cooperative unit, mobile home, 
and trailer, if it is used as a residence.
    (2) A consumer can have only one ``principal'' dwelling at a time. 
Thus, a vacation or other second home would not be a principal 
dwelling. However, if a consumer buys or builds a new dwelling that 
will become the consumer's principal dwelling within a year or upon the 
completion of construction, the new dwelling is considered the 
principal dwelling for purposes of this section.
    (k) Federally regulated AMC means an AMC that is owned and 
controlled by an insured depository institution, as defined in 12 
U.S.C. 1813 and regulated by the Office of the Comptroller of the 
Currency, the Board of Governors of the Federal Reserve System, or the 
Federal Deposit Insurance Corporation.
    (l) Federally related transaction regulations means regulations 
established by the Office of the Comptroller of the Currency, the Board 
of Governors of the Federal Reserve System, the Federal Deposit 
Insurance Corporation, or the National Credit Union Administration, 
pursuant to sections 1112, 1113, and 1114 of FIRREA Title XI, 12 U.S.C. 
3341-3343.
    (m) Person means a natural person or an organization, including a 
corporation, partnership, proprietorship, association, cooperative, 
estate, trust, or government unit.
    (n) Secondary mortgage market participant means a guarantor or 
insurer of mortgage-backed securities, or an underwriter or issuer of 
mortgage-backed securities. Secondary mortgage market participant only 
includes an individual investor in a mortgage-backed security if that 
investor also serves in the capacity of a guarantor, insurer, 
underwriter, or issuer for the mortgage-backed security.
    (o) States mean the 50 States and the District of Columbia and the 
territories of Guam, Mariana Islands, Puerto Rico, and the U.S. Virgin 
Islands.
    (p) Uniform Standards of Professional Appraisal Practice (USPAP) 
means the appraisal standards promulgated by the Appraisal Standards 
Board of the Appraisal Foundation.


Sec.  34.212  Appraiser panel--annual size calculation.

    For purposes of determining whether, within a 12-month period, an 
AMC oversees an appraiser panel of more than 15 State-certified or 
State-licensed appraisers in a State or 25 or more State-certified or 
State-licensed appraisers in two or more States pursuant to Sec.  
34.211(c)(1)(iii)--
    (a) An appraiser is deemed part of the AMC's appraiser panel as of 
the earliest date on which the AMC:
    (1) Accepts the appraiser for the AMC's consideration for future 
appraisal assignments in covered transactions or for secondary mortgage 
market participants in connection with covered transactions; or
    (2) Engages the appraiser to perform one or more appraisals on 
behalf of a creditor for a covered transaction or secondary mortgage 
market participant in connection with covered transactions.
    (b) An appraiser who is deemed part of the AMC's appraiser panel 
pursuant to paragraph (a) of this section is deemed to remain on the 
panel until the date on which the AMC:
    (1) Sends written notice to the appraiser removing the appraiser 
from the appraiser panel, with an explanation of its action; or
    (2) Receives written notice from the appraiser asking to be removed 
from the appraiser panel or notice of the death or incapacity of the 
appraiser.
    (c) If an appraiser is removed from an AMC's appraiser panel 
pursuant to paragraph (b) of this section, but the AMC subsequently 
accepts the appraiser for consideration for future assignments or 
engages the appraiser at any time during the twelve months after the 
AMC's removal, the removal will be deemed not to have occurred, and the 
appraiser will be deemed to have been part of the AMC's appraiser panel 
without interruption.
    (d) The period for purposes of counting appraisers on an AMC's 
appraiser panel may be the calendar year or a 12-month period 
established by law or rule of each State with which the AMC is required 
to register.


Sec.  34.213  Appraisal management company registration.

    Each State electing to register AMCs pursuant to paragraph (b)(1) 
of this section must:
    (a) Establish and maintain within the State appraiser certifying 
and licensing agency a licensing program that is subject to the 
limitations set forth in Sec.  34.214 and with the legal authority and 
mechanisms to:
    (1) Review and approve or deny an AMC's application for initial 
registration;
    (2) Review and renew or review and deny an AMC's registration 
periodically;
    (3) Examine the books and records of an AMC operating in the State 
and require the AMC to submit reports, information, and documents;
    (4) Verify that the appraisers on the AMC's appraiser panel hold 
valid State certifications or licenses, as applicable;
    (5) Conduct investigations of AMCs to assess potential violations 
of applicable appraisal-related laws, regulations, or orders;
    (6) Discipline, suspend, terminate, or deny renewal of the 
registration of an AMC that violates applicable appraisal-related laws, 
regulations, or orders; and
    (7) Report an AMC's violation of applicable appraisal-related laws, 
regulations, or orders, as well as disciplinary and enforcement actions 
and other relevant information about an AMC's operations, to the 
Appraisal Subcommittee.
    (b) Impose requirements on AMCs that are not owned and controlled 
by an insured depository institution and not regulated by a Federal 
financial institutions regulatory agency to:
    (1) Register with and be subject to supervision by the State 
appraiser certifying and licensing agency;
    (2) Engage only State-certified or State-licensed appraisers for 
Federally related transactions in conformity with any Federally related 
transaction regulations;
    (3) Establish and comply with processes and controls reasonably

[[Page 32681]]

designed to ensure that the AMC, in engaging an appraiser, selects an 
appraiser who is independent of the transaction and who has the 
requisite education, expertise, and experience necessary to competently 
complete the appraisal assignment for the particular market and 
property type;
    (4) Direct the appraiser to perform the assignment in accordance 
with USPAP; and
    (5) Establish and comply with processes and controls reasonably 
designed to ensure that the AMC conducts its appraisal management 
services in accordance with the requirements of section 129E(a) through 
(i) of the Truth in Lending Act, 15 U.S.C. 1639e(a) through (i), and 
regulations thereunder.


Sec.  34.214  Ownership limitations for State-registered appraisal 
management companies.

    (a) Appraiser certification or licensing of owners. (1) An AMC 
subject to State registration pursuant to Sec.  34.213 shall not be 
registered by a State or included on the AMC National Registry if such 
AMC, in whole or in part, directly or indirectly, is owned by any 
person who has had an appraiser license or certificate refused, denied, 
cancelled, surrendered in lieu of revocation, or revoked in any State 
for a substantive cause, as determined by the appropriate State 
appraiser certifying and licensing agency.
    (2) An AMC subject to State registration pursuant to Sec.  34.213 
is not barred by paragraph (a)(1) of this section from being registered 
by a State or included on the AMC National Registry if the license or 
certificate of the appraiser with an ownership interest was not revoked 
for a substantive cause and has been reinstated by the State or States 
in which the appraiser was licensed or certified.
    (b) Good moral character of owners. An AMC shall not be registered 
by a State if any person that owns more than 10 percent of the AMC--
    (1) Is determined by the State appraiser certifying and licensing 
agency not to have good moral character; or
    (2) Fails to submit to a background investigation carried out by 
the State appraiser certifying and licensing agency.


Sec.  34.215  Requirements for Federally regulated appraisal management 
companies.

    (a) Requirements in providing services. To provide appraisal 
management services for a creditor or secondary mortgage market 
participant relating to a covered transaction, a Federally regulated 
AMC must comply with the requirements in Sec.  34.213(b)(2) through 
(5).
    (b) Ownership limitations. (1) A Federally regulated AMC shall not 
be included on the AMC National Registry if such AMC, in whole or in 
part, directly or indirectly, is owned by any person who has had an 
appraiser license or certificate refused, denied, cancelled, 
surrendered in lieu of revocation, or revoked in any State for a 
substantive cause, as determined by the Appraisal Subcommittee.
    (2) A Federally regulated AMC is not barred by this paragraph (b) 
from being included on the AMC National Registry if the license or 
certificate of the appraiser with an ownership interest was not revoked 
for a substantive cause and has been reinstated by the State or States 
in which the appraiser was licensed or certified.
    (c) Reporting information for the AMC National Registry. A 
Federally regulated AMC must report to the State or States in which it 
operates the information required to be submitted by the State to the 
Appraisal Subcommittee, pursuant to the Appraisal Subcommittee's 
policies regarding the determination of the AMC National Registry fee, 
including but not necessarily limited to the collection of information 
related to the limitations set forth in this section, as applicable.


Sec.  34.216  Information to be presented to the Appraisal Subcommittee 
by participating States.

    Each State electing to register AMCs for purposes of permitting 
AMCs to provide appraisal management services relating to covered 
transactions in the State must submit to the Appraisal Subcommittee the 
information required to be submitted by Appraisal Subcommittee 
regulations or guidance concerning AMCs that operate in the State.

Board of Governors of the Federal Reserve System

    For the reasons set forth in the preamble, the Board amends 12 CFR 
parts 208 and 225, as follows:

PART 208--MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL 
RESERVE SYSTEM (REGULATION H)

0
3. The authority citation for part 208 is revised to read as follows:

    Authority: 12 U.S.C. 24, 36, 92a, 93a, 248(a), 248(c), 321-338a, 
371d, 461, 481-486, 601, 611, 1814, 1816, 1818, 1820(d)(9), 1833(j), 
1828(o), 1831, 1831o, 1831p-1, 1831r-1, 1831w, 1831x, 1835a, 1882, 
2901-2907, 3105, 3310, 3331-3351, 3353, and 3905-3909; 15 U.S.C. 
78b, 78l(b), 78l(i), 780-4(c)(5), 78q, 78q-1, 78w, 1681s, 1681w, 
6801 and 6805; 31 U.S.C. 5318; 42 U.S.C. 4012a, 4104b, 4106, and 
4128.


0
4. Revise the heading of subpart E to read as follows:

Subpart E--Real Estate Lending, Appraisal Standards, and Minimum 
Requirements for Appraisal Management Companies

0
5. Section 208.50 is revised to read as follows:


Sec.  208.50  Authority, purpose, and scope.

    (a) Authority. Subpart E of Regulation H (12 CFR part 208, subpart 
E) is issued by the Board of Governors of the Federal Reserve System 
pursuant to section 304 of the Federal Deposit Insurance Corporation 
Improvement Act of 1991, (12 U.S.C 1828(o)), Title XI of the Financial 
Institutions Reform, Recovery, and Enforcement Act, (12 U.S.C 3331-
3351), and section 1473 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, (12 U.S.C. 3353).
    (b) Purpose and scope. This subpart prescribes standards for real 
estate lending to be used by state member banks in adopting internal 
real estate lending policies. The standards applicable to appraisals 
rendered in connection with Federally related transactions entered into 
by member banks and the minimum requirements for appraisal management 
companies are set forth in 12 CFR part 225, subparts G and M 
respectively (Regulation Y).

PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL 
(REGULATION Y)

0
6. The authority citation for part 225 is revised to read as follows:

    Authority:  12 U.S.C. 1844(b), 3106 and 3108, 1817(j)(13), 
1818(b), 1831i, 1972, 3310, 3331-3351 and 3353; 12 U.S.C. 3901, et 
seq.; and 12 U.S.C. 1841, et seq.

0
7. Subpart M is added to part 225 to read as follows:

Subpart M--Minimum Requirements for Appraisal Management Companies

Sec.
225.190 Authority, purpose, and scope.
225.191 Definitions.
225.192 Appraiser panel--annual size calculation.
225.193 Appraisal management company registration.
225.194 Ownership limitations for State-registered appraisal 
management companies.
225.195 Requirements for Federally regulated appraisal management 
companies.

[[Page 32682]]

225.196 Information to be presented to the Appraisal Subcommittee by 
participating States.


Sec.  225.190  Authority, purpose, and scope.

    (a) Authority. This subpart is issued by the Board of Governors of 
the Federal Reserve System (the Board) pursuant to title XI of the 
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 
(FIRREA) (Pub. L. 101-73, 103 Stat. 183 (1989)), 12 U.S.C. 3310, 3331-
3351, section 1473 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, 12 U.S.C. 3353, and section 5(b) of the Bank Holding 
Company Act, 12 U.S.C. 1844(b).
    (b) Purpose and scope. (1) The purpose of this subpart is to 
implement sections 1109, 1117, 1121, and 1124 of FIRREA Title XI, 12 
U.S.C. 3338, 3346, 3350, and 3353. Title XI provides protection for 
Federal financial and public policy interests in real estate related 
transactions by requiring real estate appraisals used in connection 
with Federally related transactions to be performed in writing, in 
accordance with uniform standards, by appraisers whose competency has 
been demonstrated and whose professional conduct will be subject to 
effective supervision. This subpart implements the requirements of 
title XI as amended by the Dodd-Frank Wall Street Reform and Consumer 
Protection Act and applies to all Federally related transactions and to 
States and to appraisal management companies (AMCs) performing 
appraisal management services in connection with consumer credit 
transactions secured by a consumer's principal dwelling or 
securitizations of those transactions.
    (2) This subpart:
    (i) Identifies which real estate related financial transactions 
require the services of an appraiser.
    (ii) Prescribes which categories of Federally related transactions 
shall be appraised by a State-certified appraiser and which by a State-
licensed appraiser;
    (iii) Prescribes minimum standards for the performance of real 
estate appraisals in connection with Federal related transactions under 
the jurisdiction of the Board;
    (iv) Prescribes minimum requirements to be applied by participating 
States in the registration and supervision of AMCs; and
    (v) Prescribes minimum requirements to be applied by participating 
States to report certain information concerning AMCs registered with 
the States to a national registry of AMCs.
    (c) Rule of construction. Nothing in this subpart should be 
construed to prevent a State from establishing requirements in addition 
to those in this subpart. In addition, nothing in this subpart should 
be construed to alter guidance in, and applicability of, the 
Interagency Appraisal and Evaluation Guidelines \1\ or other relevant 
agency guidance that cautions banks and bank holding companies, that 
each organization is accountable for overseeing the activities of 
third-party service providers and ensuring that any services provided 
by a third party comply with applicable laws, regulations, and 
supervisory guidance applicable directly to the creditor.
---------------------------------------------------------------------------

    \1\ See, Agencies issue final appraisal and evalutation 
guidelines, https://www.federalreserve.gov/newsevents/press/bcreg/20101202a.htm.
---------------------------------------------------------------------------


Sec.  225.191  Definitions.

    For purposes of this subpart:
    (a) Affiliate has the meaning provided in 12 U.S.C. 1841.
    (b) AMC National Registry means the registry of State-registered 
AMCs and Federally regulated AMCs maintained by the Appraisal 
Subcommittee.
    (c) Appraisal Foundation means the Appraisal Foundation established 
on November 30, 1987, as a not-for-profit corporation under the laws of 
Illinois.
    (d)(1) Appraisal management company (AMC) means a person that:
    (i) Provides appraisal management services to creditors or to 
secondary mortgage market participants, including affiliates;
    (ii) Provides such services in connection with valuing a consumer's 
principal dwelling as security for a consumer credit transaction or 
incorporating such transactions into securitizations; and
    (iii) Within a 12-month period, as defined in Sec.  225.192(d), 
oversees an appraiser panel of more than 15 State-certified or State-
licensed appraisers in a State or 25 or more State-certified or State-
licensed appraisers in two or more States, as described in Sec.  
225.192;
    (2) An AMC does not include a department or division of an entity 
that provides appraisal management services only to that entity.
    (e) Appraisal management services means one or more of the 
following:
    (1) Recruiting, selecting, and retaining appraisers;
    (2) Contracting with State-certified or State-licensed appraisers 
to perform appraisal assignments;
    (3) Managing the process of having an appraisal performed, 
including providing administrative services such as receiving appraisal 
orders and appraisal reports, submitting completed appraisal reports to 
creditors and secondary market participants, collecting fees from 
creditors and secondary market participants for services provided, and 
paying appraisers for services performed; and
    (4) Reviewing and verifying the work of appraisers.
    (f) Appraiser panel means a network, list or roster of licensed or 
certified appraisers approved by an AMC to perform appraisals as 
independent contractors for the AMC. Appraisers on an AMC's ``appraiser 
panel'' under this part include both appraisers accepted by the AMC for 
consideration for future appraisal assignments in covered transactions 
or for secondary mortgage market participants in connection with 
covered transactions and appraisers engaged by the AMC to perform one 
or more appraisals in covered transactions or for secondary mortgage 
market participants in connection with covered transactions. An 
appraiser is an independent contractor for purposes of this part if the 
appraiser is treated as an independent contractor by the AMC for 
purposes of Federal income taxation.
    (g) Consumer credit means credit offered or extended to a consumer 
primarily for personal, family, or household purposes.
    (h) Covered transaction means any consumer credit transaction 
secured by the consumer's principal dwelling.
    (i) Creditor means:
    (1) A person who regularly extends consumer credit that is subject 
to a finance charge or is payable by written agreement in more than 
four installments (not including a down payment), and to whom the 
obligation is initially payable, either on the face of the note or 
contract, or by agreement when there is no note or contract.
    (2) A person regularly extends consumer credit if the person 
extended credit (other than credit subject to the requirements of 12 
CFR 1026.32) more than 5 times for transactions secured by a dwelling 
in the preceding calendar year. If a person did not meet these 
numerical standards in the preceding calendar year, the numerical 
standards shall be applied to the current calendar year. A person 
regularly extends consumer credit if, in any 12-month period, the 
person originates more than one credit extension that is subject to the 
requirements of 12 CFR 1026.32 or one or more such credit extensions 
through a mortgage broker.
    (j) Dwelling means:
    (1) A residential structure that contains one to four units, 
whether or not that structure is attached to real property. The term 
includes an individual condominium unit,

[[Page 32683]]

cooperative unit, mobile home, and trailer, if it is used as a 
residence.
    (2) A consumer can have only one ``principal'' dwelling at a time. 
Thus, a vacation or other second home would not be a principal 
dwelling. However, if a consumer buys or builds a new dwelling that 
will become the consumer's principal dwelling within a year or upon the 
completion of construction, the new dwelling is considered the 
principal dwelling for purposes of this section.
    (k) Federally regulated AMC means an AMC that is owned and 
controlled by an insured depository institution, as defined in 12 
U.S.C. 1813 and regulated by the Office of the Comptroller of the 
Currency, the Board of Governors of the Federal Reserve System, or the 
Federal Deposit Insurance Corporation.
    (l) Federally related transaction regulations means regulations 
established by the Office of the Comptroller of the Currency, the Board 
of Governors of the Federal Reserve System, the Federal Deposit 
Insurance Corporation, or the National Credit Union Administration, 
pursuant to sections 1112, 1113, and 1114 of FIRREA Title XI, 12 U.S.C. 
3341-3343.
    (m) Person means a natural person or an organization, including a 
corporation, partnership, proprietorship, association, cooperative, 
estate, trust, or government unit.
    (n) Secondary mortgage market participant means a guarantor or 
insurer of mortgage-backed securities, or an underwriter or issuer of 
mortgage-backed securities. Secondary mortgage market participant only 
includes an individual investor in a mortgage-backed security if that 
investor also serves in the capacity of a guarantor, insurer, 
underwriter, or issuer for the mortgage-backed security.
    (o) States mean the 50 States and the District of Columbia and the 
territories of Guam, Mariana Islands, Puerto Rico, and the U.S. Virgin 
Islands.
    (p) Uniform Standards of Professional Appraisal Practice (USPAP) 
means the appraisal standards promulgated by the Appraisal Standards 
Board of the Appraisal Foundation.


Sec.  225.192  Appraiser panel--annual size calculation.

    For purposes of determining whether, within a 12-month period, an 
AMC oversees an appraiser panel of more than 15 State-certified or 
State-licensed appraisers in a State or 25 or more State-certified or 
State-licensed appraisers in two or more States pursuant to Sec.  
225.191(d)(1)(iii)-
    (a) An appraiser is deemed part of the AMC's appraiser panel as of 
the earliest date on which the AMC:
    (1) Accepts the appraiser for the AMC's consideration for future 
appraisal assignments in covered transactions or for secondary mortgage 
market participants in connection with covered transactions; or
    (2) Engages the appraiser to perform one or more appraisals on 
behalf of a creditor for a covered transaction or secondary mortgage 
market participant in connection with a covered transaction.
    (b) An appraiser who is deemed part of the AMC's appraiser panel 
pursuant to paragraph (a) of this section is deemed to remain on the 
panel until the date on which the AMC:
    (1) Sends written notice to the appraiser removing the appraiser 
from the appraiser panel, with an explanation of its action; or
    (2) Receives written notice from the appraiser asking to be removed 
from the appraiser panel or notice of the death or incapacity of the 
appraiser.
    (c) If an appraiser is removed from an AMC's appraiser panel 
pursuant to paragraph (b) of this section, but the AMC subsequently 
accepts the appraiser for consideration for future assignments or 
engages the appraiser at any time during the twelve months after the 
AMC's removal, the removal will be deemed not to have occurred, and the 
appraiser will be deemed to have been part of the AMC's appraiser panel 
without interruption.
    (d) The period for purposes of counting appraisers on an AMC's 
appraiser panel may be the calendar year or a 12-month period 
established by law or rule of each State with which the AMC is required 
to register.


Sec.  225.193  Appraisal management company registration.

    Each State electing to register AMCs pursuant to paragraph (b)(1) 
of this section must:
    (a) Establish and maintain within the State appraiser certifying 
and licensing agency a licensing program that is subject to the 
limitations set forth in Sec.  225.194 and with the legal authority and 
mechanisms to:
    (1) Review and approve or deny an AMC's application for initial 
registration;
    (2) Review and renew or review and deny an AMC's registration 
periodically;
    (3) Examine the books and records of an AMC operating in the State 
and require the AMC to submit reports, information, and documents;
    (4) Verify that the appraisers on the AMC's appraiser panel hold 
valid State certifications or licenses, as applicable;
    (5) Conduct investigations of AMCs to assess potential violations 
of applicable appraisal-related laws, regulations, or orders;
    (6) Discipline, suspend, terminate, or deny renewal of the 
registration of an AMC that violates applicable appraisal-related laws, 
regulations, or orders; and
    (7) Report an AMC's violation of applicable appraisal-related laws, 
regulations, or orders, as well as disciplinary and enforcement actions 
and other relevant information about an AMC's operations, to the 
Appraisal Subcommittee.
    (b) Impose requirements on AMCs that are not owned and controlled 
by an insured depository institution and not regulated by a Federal 
financial institutions regulatory agency to:
    (1) Register with and be subject to supervision by the State 
appraiser certifying and licensing agency;
    (2) Engage only State-certified or State-licensed appraisers for 
Federally related transactions in conformity with any Federally related 
transaction regulations;
    (3) Establish and comply with processes and controls reasonably 
designed to ensure that the AMC, in engaging an appraiser, selects an 
appraiser who is independent of the transaction and who has the 
requisite education, expertise, and experience necessary to competently 
complete the appraisal assignment for the particular market and 
property type;
    (4) Direct the appraiser to perform the assignment in accordance 
with USPAP; and
    (5) Establish and comply with processes and controls reasonably 
designed to ensure that the AMC conducts its appraisal management 
services in accordance with the requirements of section 129E(a)-(i) of 
the Truth in Lending Act, 15 U.S.C. 1639e(a)-(i), and regulations 
thereunder.


Sec.  225.194  Ownership limitations for State-registered appraisal 
management companies.

    (a) Appraiser certification or licensing of owners. (1) An AMC 
subject to State registration pursuant to Sec.  225.193 shall not be 
registered by a State or included on the AMC National Registry if such 
AMC, in whole or in part, directly or indirectly, is owned by any 
person who has had an appraiser license or certificate refused, denied, 
cancelled, surrendered in lieu of revocation, or revoked in any State 
for a substantive cause, as determined by the appropriate State 
appraiser certifying and licensing agency.

[[Page 32684]]

    (2) An AMC subject to State registration pursuant to Sec.  225.193 
is not barred by paragraph (a)(1) of this section from being registered 
by a State or included on the AMC National Registry if the license or 
certificate of the appraiser with an ownership interest was not revoked 
for a substantive cause and has been reinstated by the State or States 
in which the appraiser was licensed or certified.
    (b) Good moral character of owners. An AMC shall not be registered 
by a State if any person that owns more than 10 percent of the AMC--
    (1) Is determined by the State appraiser certifying and licensing 
agency not to have good moral character; or
    (2) Fails to submit to a background investigation carried out by 
the State appraiser certifying and licensing agency.


Sec.  225.195  Requirements for Federally regulated appraisal 
management companies.

    (a) Requirements in providing services. To provide appraisal 
management services for a creditor or secondary mortgage market 
participant relating to a covered transaction, a Federally regulated 
AMC must comply with the requirements in Sec.  225.193(b)(2) through 
(5).
    (b) Ownership limitations. (1) A Federally regulated AMC shall not 
be included on the AMC National Registry if such AMC, in whole or in 
part, directly or indirectly, is owned by any person who has had an 
appraiser license or certificate refused, denied, cancelled, 
surrendered in lieu of revocation, or revoked in any State for a 
substantive cause, as determined by the ASC.
    (2) A Federally regulated AMC is not barred by this paragraph (b) 
from being included on the AMC National Registry if the license or 
certificate of the appraiser with an ownership interest was not revoked 
for a substantive cause and has been reinstated by the State or States 
in which the appraiser was licensed or certified.
    (c) Reporting information for the AMC National Registry. A 
Federally regulated AMC must report to the State or States in which it 
operates the information required to be submitted by the State to the 
Appraisal Subcommittee pursuant to the Appraisal Subcommittee's 
policies regarding the determination of the AMC National Registry fee, 
including but not necessarily limited to the collection of information 
related to the limitations set forth in this section.


Sec.  225.196  Information to be presented to the Appraisal 
Subcommittee by participating States.

    Each State electing to register AMCs for purposes of permitting 
AMCs to provide appraisal management services relating to covered 
transactions in the State must submit to the Appraisal Subcommittee the 
information required to be submitted by Appraisal Subcommittee 
regulations or guidance concerning AMCs that operate in the State.

Federal Deposit Insurance Corporation

Authority and Issuance

    For the reasons set forth in the preamble, the FDIC amends 12 CFR 
parts 323 and 390 as follows:

PART 323--APPRAISALS

0
8. Revise the authority citation for part 323 to read as follows:

    Authority:  12 U.S.C. 1818, 1819 [``Seventh'' and ``Tenth''] and 
3331 et seq.

0
9. Add a heading for new subpart A to read as follows:

Subpart A--Appraisals Generally

    Sec. Sec.  323.1 through 323.7--[Designated as subpart A]

0
10. Designate Sec. Sec.  323.1 through 323.7 as new subpart A.
    Sec. Sec.  323.1, 323.3, 323.4, and 323.5--[Amended]

0
11. Amend Sec. Sec.  323.1, 323.3, 323.4, and 323.5 by removing 
``part'' and adding ``subpart'' in its place in each instance in which 
it appears.

0
12. Add subpart B to part 323 to read as follows:

Subpart B--Appraisal Management Company Minimum Requirements

Sec.
323.8 Authority, purpose, and scope.
323.9 Definitions.
323.10 Appraiser panel--annual size calculation.
323.11 Appraisal management company registration.
323.12 Ownership limitations for State-registered appraisal 
management companies.
323.13 Requirements for Federally regulated appraisal management 
companies.
323.14 Information to be presented to the Appraisal Subcommittee by 
participating States.


Sec.  323.8  Authority, purpose, and scope.

    (a) Authority. This subpart is issued pursuant to12 U.S.C. 1818, 
1819 [``Seventh'' and ``Tenth''] and Title XI of the Financial 
Institutions Reform, Recovery, and Enforcement Act (FIRREA), as amended 
by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the 
Dodd-Frank Act) (Pub. L. 111-203, 124 Stat. 1376 (2010)), 12 U.S.C. 
3331 et seq.
    (b) Purpose. The purpose of this subpart is to implement sections 
1109, 1117, 1121, and 1124 of FIRREA Title XI, 12 U.S.C. 3338, 3346, 
3350, and 3353.
    (c) Scope. This subpart applies to States and to appraisal 
management companies (AMCs) providing appraisal management services in 
connection with consumer credit transactions secured by a consumer's 
principal dwelling or securitizations of those transactions.
    (d) Rule of construction. Nothing in this subpart should be 
construed to prevent a State from establishing requirements in addition 
to those in this subpart. In addition, nothing in this subpart should 
be construed to alter guidance in, and applicability of, the 
Interagency Appraisal and Evaluation Guidelines \1\ or other relevant 
agency guidance that cautions banks, bank holding companies, Federal 
savings associations, state savings association, and credit unions, as 
applicable, that each such entity is accountable for overseeing the 
activities of third-party service providers and ensuring that any 
services provided by a third party comply with applicable laws, 
regulations, and supervisory guidance applicable directly to the 
financial institution.
---------------------------------------------------------------------------

    \1\ https://www.fdic.gov/regulations/laws/rules/5000-4800.html.
---------------------------------------------------------------------------


Sec.  323.9  Definitions.

    For purposes of this subpart:
    (a) Affiliate has the meaning provided in 12 U.S.C. 1841.
    (b) AMC National Registry means the registry of State-registered 
AMCs and Federally regulated AMCs maintained by the Appraisal 
Subcommittee.
    (c)(1) Appraisal management company (AMC) means a person that:
    (i) Provides appraisal management services to creditors or to 
secondary mortgage market participants, including affiliates;
    (ii) Provides such services in connection with valuing a consumer's 
principal dwelling as security for a consumer credit transaction or 
incorporating such transactions into securitizations; and
    (iii) Within a given 12-month period, as defined in Sec.  
323.10(d), oversees an appraiser panel of more than 15 State-certified 
or State-licensed appraisers in a State or 25 or more State-certified 
or State-licensed appraisers in two or more States, as described in 
Sec.  323.12;

[[Page 32685]]

    (2) An AMC does not include a department or division of an entity 
that provides appraisal management services only to that entity.
    (d) Appraisal management services means one or more of the 
following:
    (1) Recruiting, selecting, and retaining appraisers;
    (2) Contracting with State-certified or State-licensed appraisers 
to perform appraisal assignments;
    (3) Managing the process of having an appraisal performed, 
including providing administrative services such as receiving appraisal 
orders and appraisal reports, submitting completed appraisal reports to 
creditors and secondary market participants, collecting fees from 
creditors and secondary market participants for services provided, and 
paying appraisers for services performed; and
    (4) Reviewing and verifying the work of appraisers.
    (e) Appraiser panel means a network, list or roster of licensed or 
certified appraisers approved by an AMC to perform appraisals as 
independent contractors for the AMC. Appraisers on an AMC's ``appraiser 
panel'' under this part include both appraisers accepted by the AMC for 
consideration for future appraisal assignments in covered transactions 
or for secondary mortgage market participants in connection with 
covered transactions and appraisers engaged by the AMC to perform one 
or more appraisals in covered transactions or for secondary mortgage 
market participants in connection with covered transactions. An 
appraiser is an independent contractor for purposes of this subpart if 
the appraiser is treated as an independent contractor by the AMC for 
purposes of Federal income taxation.
    (f) Appraisal Subcommittee means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council.
    (g) Consumer credit means credit offered or extended to a consumer 
primarily for personal, family, or household purposes.
    (h) Covered transaction means any consumer credit transaction 
secured by the consumer's principal dwelling.
    (i) Creditor means:
    (1) A person who regularly extends consumer credit that is subject 
to a finance charge or is payable by written agreement in more than 
four installments (not including a down payment), and to whom the 
obligation is initially payable, either on the face of the note or 
contract, or by agreement when there is no note or contract.
    (2) A person regularly extends consumer credit if the person 
extended credit (other than credit subject to the requirements of 12 
CFR 1026.32) more than 5 times for transactions secured by a dwelling 
in the preceding calendar year. If a person did not meet these 
numerical standards in the preceding calendar year, the numerical 
standards shall be applied to the current calendar year. A person 
regularly extends consumer credit if, in any 12-month period, the 
person originates more than one credit extension that is subject to the 
requirements of 12 CFR 1026.32 or one or more such credit extensions 
through a mortgage broker.
    (j) Dwelling means:
    (1) A residential structure that contains one to four units, 
whether or not that structure is attached to real property. The term 
includes an individual condominium unit, cooperative unit, mobile home, 
and trailer, if it is used as a residence.
    (2) A consumer can have only one ``principal'' dwelling at a time. 
Thus, a vacation or other second home would not be a principal 
dwelling. However, if a consumer buys or builds a new dwelling that 
will become the consumer's principal dwelling within a year or upon the 
completion of construction, the new dwelling is considered the 
principal dwelling for purposes of this section.
    (k) Federally regulated AMC means an AMC that is owned and 
controlled by an insured depository institution, as defined in 12 
U.S.C. 1813 and regulated by the Office of the Comptroller of the 
Currency, the Board of Governors of the Federal Reserve System, or the 
Federal Deposit Insurance Corporation.
    (l) Federally related transaction regulations means regulations 
established by the Office of the Comptroller of the Currency, the Board 
of Governors of the Federal Reserve System, the Federal Deposit 
Insurance Corporation, or the National Credit Union Administration, 
pursuant to sections 1112, 1113, and 1114 of FIRREA Title XI, 12 U.S.C. 
3341-3343.
    (m) Person means a natural person or an organization, including a 
corporation, partnership, proprietorship, association, cooperative, 
estate, trust, or government unit.
    (n) Secondary mortgage market participant means a guarantor or 
insurer of mortgage-backed securities, or an underwriter or issuer of 
mortgage-backed securities. Secondary mortgage market participant only 
includes an individual investor in a mortgage-backed security if that 
investor also serves in the capacity of a guarantor, insurer, 
underwriter, or issuer for the mortgage-backed security.
    (o) States mean the 50 States and the District of Columbia and the 
territories of Guam, Mariana Islands, Puerto Rico, and the U.S. Virgin 
Islands.
    (p) Uniform Standards of Professional Appraisal Practice (USPAP) 
means the appraisal standards promulgated by the Appraisal Standards 
Board of the Appraisal Foundation.


Sec.  323.10  Appraiser panel--annual size calculation.

    For purposes of determining whether, within a 12-month period, an 
AMC oversees an appraiser panel of more than 15 State-certified or 
State-licensed appraisers in a State or 25 or more State-certified or 
State-licensed appraisers in two or more States pursuant to Sec.  
323.9(c)(1)(iii)--
    (a) An appraiser is deemed part of the AMC's appraiser panel as of 
the earliest date on which the AMC:
    (1) Accepts the appraiser for the AMC's consideration for future 
appraisal assignments in covered transactions or for secondary mortgage 
market participants in connection with covered transactions; or
    (2) Engages the appraiser to perform one or more appraisals on 
behalf of a creditor for a covered transaction or secondary mortgage 
market participant in connection with a covered transaction.
    (b) An appraiser who is deemed part of the AMC's appraiser panel 
pursuant to paragraph (a) of this section is deemed to remain on the 
panel until the date on which the AMC:
    (1) Sends written notice to the appraiser removing the appraiser 
from the appraiser panel, with an explanation of its action; or
    (2) Receives written notice from the appraiser asking to be removed 
from the appraiser panel or notice of the death or incapacity of the 
appraiser.
    (c) If an appraiser is removed from an AMC's appraiser panel 
pursuant to paragraph (b) of this section, but the AMC subsequently 
accepts the appraiser for consideration for future assignments or 
engages the appraiser at any time during the twelve months after the 
AMC's removal, the removal will be deemed not to have occurred, and the 
appraiser will be deemed to have been part of the AMC's appraiser panel 
without interruption.
    (d) The period for purposes of counting appraisers on an AMC's 
appraiser panel may be the calendar year or a 12-month period 
established by law or rule of each State with which the AMC is required 
to register.


Sec.  323.11  Appraisal management company registration.

    Each State electing to register AMCs pursuant to paragraph (b)(1) 
of this section must:

[[Page 32686]]

    (a) Establish and maintain within the State appraiser certifying 
and licensing agency a licensing program that is subject to the 
limitations set forth in Sec.  323.12 and with the legal authority and 
mechanisms to:
    (1) Review and approve or deny an AMC's application for initial 
registration;
    (2) Review and renew or review and deny an AMC's registration 
periodically;
    (3) Examine the books and records of an AMC operating in the State 
and require the AMC to submit reports, information, and documents;
    (4) Verify that the appraisers on the AMC's appraiser panel hold 
valid State certifications or licenses, as applicable;
    (5) Conduct investigations of AMCs to assess potential violations 
of applicable appraisal-related laws, regulations, or orders;
    (6) Discipline, suspend, terminate, or deny renewal of the 
registration of an AMC that violates applicable appraisal-related laws, 
regulations, or orders; and
    (7) Report an AMC's violation of applicable appraisal-related laws, 
regulations, or orders, as well as disciplinary and enforcement actions 
and other relevant information about an AMC's operations, to the 
Appraisal Subcommittee.
    (b) Impose requirements on AMCs that are not owned and controlled 
by an insured depository institution and not regulated by a Federal 
financial institution regulatory agency to:
    (1) Register with and be subject to supervision by the State 
appraiser certifying and licensing agency;
    (2) Engage only State-certified or State-licensed appraisers for 
Federally regulated transactions in conformity with any Federally 
related transaction regulations;
    (3) Establish and comply with processes and controls reasonably 
designed to ensure that the AMC, in engaging an appraiser, selects an 
appraiser who is independent of the transaction and who has the 
requisite education, expertise, and experience necessary to competently 
complete the appraisal assignment for the particular market and 
property type;
    (4) Direct the appraiser to perform the assignment in accordance 
with USPAP; and
    (5) Establish and comply with processes and controls reasonably 
designed to ensure that the AMC conducts its appraisal management 
services in accordance with the requirements of section 129E(a)-(i) of 
the Truth in Lending Act, 15 U.S.C. 1639e(a)-(i), and regulations 
thereunder.


Sec.  323.12  Ownership limitations for State-registered appraisal 
management companies.

    (a) Appraiser certification or licensing of owners. (1) An AMC 
subject to State registration pursuant to this section shall not be 
registered by a State or included on the AMC National Registry if such 
AMC, in whole or in part, directly or indirectly, is owned by any 
person who has had an appraiser license or certificate refused, denied, 
cancelled, surrendered in lieu of revocation, or revoked in any State 
for a substantive cause, as determined by the appropriate State 
appraiser certifying and licensing agency.
    (2) An AMC subject to State registration pursuant to this section 
is not barred by Sec.  323.11(a)(1) from being registered by a State or 
included on the AMC National Registry if the license or certificate of 
the appraiser with an ownership interest was not revoked for a 
substantive cause and has been reinstated by the State or States in 
which the appraiser was licensed or certified.
    (b) Good moral character of owners. An AMC shall not be registered 
by a State if any person that owns more than 10 percent of the AMC--
    (1) Is determined by the State appraiser certifying and licensing 
agency not to have good moral character; or
    (2) Fails to submit to a background investigation carried out by 
the State appraiser certifying and licensing agency.


Sec.  323.13  Requirements for Federally regulated appraisal management 
companies.

    (a) Requirements in providing services. To provide appraisal 
management services for a creditor or secondary mortgage market 
participant relating to a covered transaction, a Federally regulated 
AMC must comply with the requirements in Sec.  323.11(b)(2) through 
(5).
    (b) Ownership limitations. (1) A Federally regulated AMC shall not 
be included on the AMC National Registry if such AMC, in whole or in 
part, directly or indirectly, is owned by any person who has had an 
appraiser license or certificate refused, denied, cancelled, 
surrendered in lieu of revocation, or revoked in any State for a 
substantive cause, as determined by the ASC.
    (2) A Federally regulated AMC is not barred by Sec.  323.12(b) from 
being included on the AMC National Registry if the license or 
certificate of the appraiser with an ownership interest was not revoked 
for a substantive cause and has been reinstated by the State or States 
in which the appraiser was licensed or certified.
    (c) Reporting information for the AMC National Registry. A 
Federally regulated AMC must report to the State or States in which it 
operates the information required to be submitted by the State pursuant 
to the Appraisal Subcommittee's policies regarding the determination of 
the AMC National Registry fee, including but not necessarily limited to 
the collection of information related to the limitations set forth in 
Sec.  323.12, as applicable.


Sec.  323.14  Information to be presented to the Appraisal Subcommittee 
by participating States.

    Each State electing to register AMCs for purposes of permitting 
AMCs to provide appraisal management services relating to covered 
transactions in the State must submit to the Appraisal Subcommittee the 
information required to be submitted by Appraisal Subcommittee 
regulations or guidance concerning AMCs that operate in the State.

PART 390--REGULATIONS TRANSFERRED FROM THE OFFICE OF THRIFT 
SUPERVISION

0
13. The authority citation for part 390 is revised to read as follows:

    Authority: 12 U.S.C. 1819.
    Subpart A also issued under 12 U.S.C. 1820.
    Subpart B also issued under 12 U.S.C. 1818.
    Subpart C also issued under 5 U.S.C. 504; 554-557; 12 U.S.C. 
1464; 1467; 1468; 1817; 1818; 1820; 1829; 3349, 4717; 15 U.S.C. 78l; 
78o-5; 78u-2; 28 U.S.C. 2461 note; 31 U.S.C. 5321; 42 U.S.C. 4012a.
    Subpart D also issued under 12 U.S.C. 1817; 1818; 1820; 15 
U.S.C. 78l.
    Subpart E also issued under 12 U.S.C. 1813; 1831m; 15 U.S.C. 78.
    Subpart F also issued under 5 U.S.C. 552; 559; 12 U.S.C. 2901 et 
seq.
    Subpart G also issued under 12 U.S.C. 2810 et seq., 2901 et 
seq.; 15 U.S.C. 1691; 42 U.S.C. 1981, 1982, 3601-3619.
    Subpart I also issued under 12 U.S.C. 1831x.
    Subpart J also issued under 12 U.S.C. 1831p-1.
    Subpart K also issued under 12 U.S.C. 1817; 1818; 15 U.S.C. 78c; 
78l.
    Subpart L also issued under 12 U.S.C. 1831p-1.
    Subpart M also issued under 12 U.S.C. 1818.
    Subpart N also issued under 12 U.S.C. 1821.
    Subpart O also issued under 12 U.S.C. 1828.
    Subpart P also issued under 12 U.S.C. 1470; 1831e; 1831n; 1831p-
1; 3339.
    Subpart Q also issued under 12 U.S.C. 1462; 1462a; 1463; 1464.

[[Page 32687]]

    Subpart R also issued under 12 U.S.C. 1463; 1464; 1831m; 1831n; 
1831p-1.
    Subpart S also issued under 12 U.S.C. 1462; 1462a; 1463; 1464; 
1468a; 1817; 1820; 1828; 1831e; 1831o; 1831p-1; 1881-1884; 3207; 
3339; 15 U.S.C. 78b; 78l; 78m; 78n; 78p; 78q; 78w; 31 U.S.C. 5318; 
42 U.S.C. 4106.
    Subpart T also issued under 12 U.S.C. 1462a; 1463; 1464; 15 
U.S.C. 78c; 78l; 78m; 78n; 78w.
    Subpart U also issued under 12 U.S.C. 1462a; 1463; 1464; 15 
U.S.C. 78c; 78l; 78m; 78n; 78p; 78w; 78d-1; 7241; 7242; 7243; 7244; 
7261; 7264; 7265.
    Subpart V also issued under 12 U.S.C. 3201-3208.
    Subpart W also issued under 12 U.S.C. 1462a; 1463; 1464; 15 
U.S.C. 78c; 78l; 78m; 78n; 78p; 78w.
    Subpart Y also issued under 12 U.S.C.1831o.
    Subpart Z also issued under 12 U.S.C. 1462; 1462a; 1463; 1464; 
1828 (note).

Subpart X--[Removed and Reserved]

0
14. Remove and reserve subpart X consisting of Sec. Sec.  390.440 
through 390.447.

Bureau of Consumer Financial Protection

Authority and Issuance

    For the reasons stated above, the Bureau amends Regulation Z, 12 
CFR part 1026, as follows:

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
15. The authority citation for part 1026 is revised to read as follows:

    Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353, 
5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.

Subpart A--General

0
16. Section 1026.1 is amended by revising paragraph (a) to read as 
follows:


Sec.  1026.1  Authority, purpose, coverage, organization, enforcement, 
and liability.

    (a) Authority. This part, known as Regulation Z, is issued by the 
Bureau of Consumer Financial Protection to implement the Federal Truth 
in Lending Act, which is contained in title I of the Consumer Credit 
Protection Act, as amended (15 U.S.C. 1601 et seq.). This part also 
implements title XII, section 1204 of the Competitive Equality Banking 
Act of 1987 (Pub. L. 100-86, 101 Stat. 552). Furthermore, this part 
implements certain provisions of the Real Estate Settlement Procedures 
Act of 1974, as amended (12 U.S.C. 2601 et seq.). In addition, this 
part implements certain provisions of the Financial Institutions 
Reform, Recovery, and Enforcement Act, as amended (12 U.S.C. 3331 et 
seq.). The Bureau's information-collection requirements contained in 
this part have been approved by the Office of Management and Budget 
(OMB) under the provisions of 44 U.S.C. 3501 et seq. and have been 
assigned OMB No. 3170-0015 (Truth in Lending).
* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

0
17. Section 1026.42 is amended by adding paragraph (h) to read as 
follows:


Sec.  1026.42  Valuation independence.

* * * * *
    (h) The Bureau issued a joint rule to implement the appraisal 
management company minimum requirements in the Financial Institutions 
Reform, Recovery, and Enforcement Act, as amended by section 1473 of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act. See 12 
CFR part 34.

Federal Housing Finance Agency

Authority and Issuance

    For the reasons set forth in the SUPPLEMENTARY INFORMATION, FHFA 
amends 12 CFR part 1222, as follows:

PART 1222--APPRAISALS

0
18. The authority citation for part 1222 is revised to read as follows:

    Authority: 12 U.S.C. 4501 et seq., 12 U.S.C. 4526 and 15 U.S.C. 
1639h.

0
19. Add subpart B to part 1222 to read as follows:

Subpart B--Appraisal Management Company Minimum Requirements

Sec.
1222.20 Authority, purpose, and scope.
1222.21 Definitions.
1222.22 Appraiser panel--annual size calculation.
1222.23 Appraisal management company registration.
1222.24 Ownership limitations for State-registered appraisal 
management companies.
1222.25 Requirements for Federally regulated appraisal management 
companies.
1222.26 Information to be presented to the Appraisal Subcommittee by 
participating States.


Sec.  1222.20  Authority, purpose, and scope.

    (a) Authority. This subpart is issued by the Federal Housing 
Finance Agency pursuant to 12 U.S.C. 4501 et seq., 12 U.S.C. 4526, and 
Title XI of the Financial Institutions Reform, Recovery, and 
Enforcement Act (FIRREA), as amended by the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (the Dodd-Frank Act) (Pub. L. 111-
203, 124 Stat. 1376 (2010)), 12 U.S.C. 3331 et seq.
    (b) Purpose. The purpose of this subpart is to implement sections 
1109, 1117, 1121, and 1124 of FIRREA Title XI, 12 U.S.C. 3338, 3346, 
3350, and 3353.
    (c) Scope. This subpart applies to States and to appraisal 
management companies (AMCs) providing appraisal management services in 
connection with consumer credit transactions secured by a consumer's 
principal dwelling or securitizations of those transactions.
    (d) Rule of construction. Nothing in this subpart should be 
construed to prevent a State from establishing requirements in addition 
to those in this subpart. In addition, nothing in this subpart should 
be construed to alter guidance in, and applicability of, the 
Interagency Appraisal and Evaluation Guidelines \1\ or other relevant 
agency guidance that cautions banks, bank holding companies, Federal 
savings associations, state savings associations, and credit unions, as 
applicable, that each such entity is accountable for overseeing the 
activities of third-party service providers and ensuring that any 
services provided by a third party comply with applicable laws, 
regulations, and supervisory guidance applicable directly to the 
financial institution.
---------------------------------------------------------------------------

    \1\ 75 FR 77450 (December 10, 2010).
---------------------------------------------------------------------------


Sec.  1222.21  Definitions.

    For purposes of this subpart:
    (a) Affiliate has the meaning provided in 12 U.S.C. 1841.
    (b) AMC National Registry means the registry of State-registered 
AMCs and Federally regulated AMCs maintained by the Appraisal 
Subcommittee.
    (c)(1) Appraisal management company (AMC) means a person that:
    (i) Provides appraisal management services to creditors or to 
secondary mortgage market participants, including affiliates;
    (ii) Provides such services in connection with valuing a consumer's 
principal dwelling as security for a consumer credit transaction or 
incorporating such transactions into securitizations; and
    (iii) Within a given 12-month period, as defined in Sec.  
1222.22(d), oversees an appraiser panel of more than 15 State-certified 
or State-licensed appraisers in a State or 25 or more State-certified 
or State-licensed appraisers in two or more States, as described in 
Sec.  1222.22;
    (2) An AMC does not include a department or division of an entity 
that

[[Page 32688]]

provides appraisal management services only to that entity.
    (d) Appraisal management services means one or more of the 
following:
    (1) Recruiting, selecting, and retaining appraisers;
    (2) Contracting with State-certified or State-licensed appraisers 
to perform appraisal assignments;
    (3) Managing the process of having an appraisal performed, 
including providing administrative services such as receiving appraisal 
orders and appraisal reports, submitting completed appraisal reports to 
creditors and secondary market participants, collecting fees from 
creditors and secondary market participants for services provided, and 
paying appraisers for services performed; and
    (4) Reviewing and verifying the work of appraisers.
    (e) Appraiser panel means a network, list or roster of licensed or 
certified appraisers approved by an AMC to perform appraisals as 
independent contractors for the AMC. Appraisers on an AMC's ``appraiser 
panel'' under this part include both appraisers accepted by the AMC for 
consideration for future appraisal assignments in covered transactions 
or for secondary mortgage market participants in connection with 
covered transactions and appraisers engaged by the AMC to perform one 
or more appraisals in covered transactions or for secondary mortgage 
market participants in connection with covered transactions. An 
appraiser is an independent contractor for purposes of this subpart if 
the appraiser is treated as an independent contractor by the AMC for 
purposes of Federal income taxation.
    (f) Appraisal Subcommittee means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council.
    (g) Consumer credit means credit offered or extended to a consumer 
primarily for personal, family, or household purposes.
    (h) Covered transaction means any consumer credit transaction 
secured by the consumer's principal dwelling.
    (i) Creditor means:
    (1) A person who regularly extends consumer credit that is subject 
to a finance charge or is payable by written agreement in more than 
four installments (not including a down payment), and to whom the 
obligation is initially payable, either on the face of the note or 
contract, or by agreement when there is no note or contract.
    (2) A person regularly extends consumer credit if the person 
extended credit (other than credit subject to the requirements of 12 
CFR 1026.32) more than 5 times for transactions secured by a dwelling 
in the preceding calendar year. If a person did not meet these 
numerical standards in the preceding calendar year, the numerical 
standards shall be applied to the current calendar year. A person 
regularly extends consumer credit if, in any 12-month period, the 
person originates more than one credit extension that is subject to the 
requirements of 12 CFR 1026.32 or one or more such credit extensions 
through a mortgage broker.
    (j) Dwelling means:
    (1) A residential structure that contains one to four units, 
whether or not that structure is attached to real property. The term 
includes an individual condominium unit, cooperative unit, mobile home, 
and trailer, if it is used as a residence.
    (2) A consumer can have only one ``principal'' dwelling at a time. 
Thus, a vacation or other second home would not be a principal 
dwelling. However, if a consumer buys or builds a new dwelling that 
will become the consumer's principal dwelling within a year or upon the 
completion of construction, the new dwelling is considered the 
principal dwelling for purposes of this section.
    (k) Federally regulated AMC means an AMC that is owned and 
controlled by an insured depository institution, as defined in 12 
U.S.C. 1813 and that is regulated by the Office of the Comptroller of 
the Currency, the Board of Governors of the Federal Reserve System, or 
the Federal Deposit Insurance Corporation.
    (l) Federally related transaction regulations means regulations 
established by the Office of the Comptroller of the Currency, the Board 
of Governors of the Federal Reserve System, the Federal Deposit 
Insurance Corporation, or the National Credit Union Administration, 
pursuant to sections 1112, 1113, and 1114 of FIRREA Title XI, 12 U.S.C. 
3341-3343.
    (m) Person means a natural person or an organization, including a 
corporation, partnership, proprietorship, association, cooperative, 
estate, trust, or government unit.
    (n) Secondary mortgage market participant means a guarantor or 
insurer of mortgage-backed securities, or an underwriter or issuer of 
mortgage-backed securities. Secondary mortgage market participant only 
includes an individual investor in a mortgage-backed security if that 
investor also serves in the capacity of a guarantor, insurer, 
underwriter, or issuer for the mortgage-backed security.
    (o) States mean the 50 States and the District of Columbia and the 
territories of Guam, Mariana Islands, Puerto Rico, and the U.S. Virgin 
Islands.
    (p) Uniform Standards of Professional Appraisal Practice (USPAP) 
means the appraisal standards promulgated by the Appraisal Standards 
Board of the Appraisal Foundation.


Sec.  1222.22  Appraiser panel--annual size calculation.

    For purposes of determining whether, within a 12-month period, an 
AMC oversees an appraiser panel of more than 15 State-certified or 
State-licensed appraisers in a State or 25 or more State-certified or 
State-licensed appraisers in two or more States pursuant to Sec.  
1222.21(c)(1)(iii)--
    (a) An appraiser is deemed part of the AMC's appraiser panel as of 
the earliest date on which the AMC:
    (1) Accepts the appraiser for the AMC's consideration for future 
appraisal assignments in covered transactions or for secondary mortgage 
market participants in connection with covered transactions; or
    (2) Engages the appraiser to perform one or more appraisals on 
behalf of a creditor for a covered transaction or secondary mortgage 
market participant in connection with covered transactions.
    (b) An appraiser who is deemed part of the AMC's appraiser panel 
pursuant to paragraph (a) of this section is deemed to remain on the 
panel until the date on which the AMC:
    (1) Sends written notice to the appraiser removing the appraiser 
from the appraiser panel, with an explanation of its action; or
    (2) Receives written notice from the appraiser asking to be removed 
from the appraiser panel or notice of the death or incapacity of the 
appraiser.
    (c) If an appraiser is removed from an AMC's appraiser panel 
pursuant to paragraph (b) of this section, but the AMC subsequently 
accepts the appraiser for consideration for future assignments or 
engages the appraiser at any time during the twelve months after the 
AMC's removal, the removal will be deemed not to have occurred, and the 
appraiser will be deemed to have been part of the AMC's appraiser panel 
without interruption.
    (d) The period for purposes of counting appraisers on an AMC's 
appraiser panel may be the calendar year or a 12-month period 
established by law or rule of each State with which the AMC is required 
to register.


Sec.  1222.23  Appraisal management company registration.

    Each State electing to register AMCs pursuant to paragraph (b)(1) 
of this section must:

[[Page 32689]]

    (a) Establish and maintain within the State appraiser certifying 
and licensing agency a licensing program that is subject to the 
limitations set forth in Sec.  1222.24 and with the legal authority and 
mechanisms to:
    (1) Review and approve or deny an AMC's application for initial 
registration;
    (2) Review and renew or review and deny an AMC's registration 
periodically;
    (3) Examine the books and records of an AMC operating in the State 
and require the AMC to submit reports, information, and documents;
    (4) Verify that the appraisers on the AMC's panel hold valid State 
certifications or licenses, as applicable;
    (5) Conduct investigations of AMCs to assess potential violations 
of applicable appraisal-related laws, regulations, or orders;
    (6) Discipline, suspend, terminate, or deny renewal of the 
registration of an AMC that violates applicable appraisal-related laws, 
regulations, or orders; and
    (7) Report an AMC's violation of applicable appraisal-related laws, 
regulations, or orders, as well as disciplinary and enforcement actions 
and other relevant information about an AMC's operations, to the 
Appraisal Subcommittee.
    (b) Impose requirements on AMCs that are not owned and controlled 
by an insured depository institution and not regulated by a Federal 
financial institutions regulatory agency to:
    (1) Register with and be subject to supervision by the State 
appraiser certifying and licensing agency;
    (2) Engage only State-certified or State-licensed appraisers for 
Federally related transactions in conformity with any Federally related 
transaction regulations;
    (3) Establish and comply with processes and controls reasonably 
designed to ensure that the AMC, in engaging an appraiser, selects an 
appraiser who is independent of the transaction and who has the 
requisite education, expertise, and experience necessary to competently 
complete the appraisal assignment for the particular market and 
property type;
    (4) Direct the appraiser to perform the assignment in accordance 
with USPAP; and
    (5) Establish and comply with processes and controls reasonably 
designed to ensure that the AMC conducts its appraisal management 
services in accordance with the requirements of section 129E(a)-(i) of 
the Truth in Lending Act, 15 U.S.C. 1639e(a)-(i), and regulations 
thereunder.


Sec.  1222.24  Ownership limitations for State-registered appraisal 
management companies.

    (a) Appraiser certification or licensing of owners. (1) An AMC 
subject to State registration pursuant to Sec.  1222.23 shall not be 
registered by a State or included on the AMC National Registry if such 
AMC, in whole or in part, directly or indirectly, is owned by any 
person who has had an appraiser license or certificate refused, denied, 
cancelled, surrendered in lieu of revocation, or revoked in any State 
for a substantive cause, as determined by the appropriate State 
appraiser certifying and licensing agency.
    (2) An AMC subject to State registration pursuant to Sec.  1222.23 
is not barred by paragraph (a)(1) of this section from being registered 
by a State or included on the AMC National Registry if the license or 
certificate of the appraiser with an ownership interest was not revoked 
for a substantive cause and has been reinstated by the State or States 
in which the appraiser was licensed or certified.
    (b) Good moral character of owners. An AMC shall not be registered 
by a State if any person that owns more than 10 percent of the AMC--
    (1) Is determined by the State appraiser certifying and licensing 
agency not to have good moral character; or
    (2) Fails to submit to a background investigation carried out by 
the State appraiser certifying and licensing agency.


Sec.  1222.25  Requirements for Federally regulated appraisal 
management companies.

    (a) Requirements in providing services. To provide appraisal 
management services for a creditor or secondary mortgage market 
participant relating to a covered transaction, a Federally regulated 
AMC must comply with the requirements in Sec.  1222.23(b)(2) through 
(5).
    (b) Ownership limitations. (1) A Federally regulated AMC shall not 
be included on the AMC National Registry if such AMC, in whole or in 
part, directly or indirectly, is owned by any person who has had an 
appraiser license or certificate refused, denied, cancelled, 
surrendered in lieu of revocation, or revoked in any State for a 
substantive cause, as determined by the ASC.
    (2) A Federally regulated AMC is not barred pursuant to paragraph 
(b)(1) of this section from being included on the AMC National Registry 
if the license or certificate of the appraiser with an ownership 
interest was not revoked for substantive cause and has been reinstated 
by the State or States in which the appraiser was licensed or 
certified.
    (c) Reporting information for the AMC National Registry. A 
Federally regulated AMC must report to the State or States in which it 
operates the information required to be submitted by the State to the 
Appraisal Subcommittee pursuant to the Appraisal Subcommittee's 
policies regarding the determination of the AMC National Registry fee, 
including but not necessarily limited to the collection of information 
related to the limitations set forth in this section, as applicable.


Sec.  1222.26  Information to be presented to the Appraisal 
Subcommittee by participating States.

    Each State electing to register AMCs for purposes of permitting 
AMCs to provide appraisal management services relating to covered 
transactions in the State must submit to the Appraisal Subcommittee the 
information required to be submitted by Appraisal Subcommittee 
regulations or guidance concerning AMCs that operate in the State.

    Dated: April 21, 2015.
Thomas J. Curry,
Comptroller of the Currency.
    By order of the Board of Governors of the Federal Reserve 
System, April 29, 2015
Robert deV. Frierson,
Secretary of the Board.
    Dated: April 21, 2015.
Robert E. Feldman,
Executive Secretary.
    By order of the Board of Directors.

Federal Deposit Insurance Corporation.

    Dated: April 14, 2015.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
    Dated: March 23, 2015.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
    In concurrence:

    Dated: April 22, 2015.
Gerard Poliquin,
Secretary of the Board, NCUA.
[FR Doc. 2015-12719 Filed 6-8-15; 8:45 am]
 BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 7535-01-P; 4810-AM-P; 
8070-01-P