Maintaining Compliance

As federal guidelines become more stringent it becomes increasingly important to have basic processes in place to mitigate risk. OASIS systems are specifically designed to satisfy Federal, State, and GSE regulatory compliance for federally insured financial service companies. The separation and documentation of various job functions is not only crucial to efficiency, but also supports certain regulatory requirements for federally insured financial services companies.

An institution’s lending functions should not have undue influence that could compromise the program’s independence. There are three major areas that federal guidelines identify concerning the independence of the collateral valuation process: selecting individuals to perform appraisals or evaluations, ordering appraisals, and appraisal and evaluation compliance reviews. These independence concerns illustrate the risk of improperly prepared appraisals undermining the integrity of credit underwriting processes.

Federal Compliance:

With this new legislation, all federally regulated lenders must now comply with regulations that prevent loan production staff from directly engaging valuation professional such as appraisers. The process is now out of direct control of the loan officers, relationship managers and processors.

Under the federal compliance guidelines, a lending institution must establish criteria for the selection and evaluation of real estate appraisals. Additionally, the selection process must be unbiased and the individual selected must be independent and in no way have any invested interested in either the property or the transaction.

The five federal bank regulatory agencies provide extensive documentation to clarify the existing standards for independence within the appraisal and real estate lending regulations.

1. Office of the Comptroller of the Currency

2. Board of Governors of the Federal Reserve System

3. Federal Deposit Insurance Corporation

4. Office of Thrift Supervision

5. National Credit Union Administration

Supporting Documentation:

Appraisal Compliance Paper (August 3, 2006)

Frequently Asked Questions on the Appraisal Regulations (March 22, 2005)

OCC’s Watson Reaffirms Importance of Appraiser Independence (December 18, 2003)

Independent Appraisal and Evaluation Functions (October 28, 2003)

Interagency Appraisal and Evaluation Guidelines (October 7, 1994)