Appraiser Independence Requirements Policy

Appraiser Independence Requirements (AIR) are a set of standards designed to replace the Home Valuation Code of Conduct (HVCC). The main objective was to preserve the intent of HVCC while continuing to improve security for mortgage investors, lenders, real estate brokers, home buyers, and the overall housing industry. Designed by Federal Housing Finance Agency (FHFA) and other key participants, Appraiser Independence Requirements came into effect on October 15, 2010.

AIR requires you, as a real estate broker, to learn procedures and policies that are in compliance with Federal Rules for Appraiser Independence. This blog will clearly spell out the policies and procedures, including limitations and prohibitions. It will also focus on the permissible practices and customary compensations. For better understanding, we have compiled a list of common questions:

For whom is the Appraiser Independence Requirements Policy Manual ideal for?
Staff and personnel in the operations department, including:

• U.S. Department of Housing and Urban Development (HUD)-approved lenders
• Institutions under the Federal and National agencies
• FHFA-approved lenders

What are the benefits of the Appraiser Independence Requirements Policy?
Typically, AIR policy offers you:

• Seamless operational procedures
• Set training requirements
• Definitions of job roles and work responsibilities for each stakeholder
• Compliance with industry standards

What are the optional services in the AIR policy manual?
Although the key responsibilities and services are well-defined in AIR policy manuals, it also has several operational services, including:

• Frequent updates to meet regulatory requirements
• Publish company policies and procedures

What is the lender’s organizational structure in AIR?
It is the key element of AIR that describes the position and role of a chief loan officer. He sits in between the relevant parties to sign the deal. The property valuation staff works under the loan committee or board of directors, but they don?t hold the same relation with the chief loan officer as they have with residential or commercial loan workers.

Coverage

What kind of loans does AIR policy approve?
It approves all kinds of traditional nuclear families (based on one to four persons) loans that were applied on or after October 15, 2010.

What type of valuation methods are used by AIR?
AIR is applicable for loan origination only. It doesn?t deal with loss mitigation, lender?s foreclosure, or REO processes.

Appraiser Selection

What is the qualification level of an appraiser as per AIR?
The training and qualifications of appraisers are determined by the licensing and certification requirements set by their individual state. The appraiser is expected to understand the basic appraisal requirements, legalities, and standard policies set by the real estate body – Uniform Standards of Professional Appraisal Practice (USPAP).

Can lenders use the appraisal reports prepared by an appraiser working for a real estate agent or mortgage broker?
AIR doesn?t allow lenders to accept the appraisals from appraisers who are compensated by mortgage brokers or real estate agents.

What is the right process to select an appraiser?
Lenders can select from a pre-approved list or panel of appraisers. They may use a rotating roster to select an appraiser, but it is not compulsory. The selection committee must be independent of the loan production staff. The mortgage broker can’t provide the list of appraisers so an appraisal management company (AMC) like AmeriMac is often used to select the appraiser and facilitate the appraisal process.

In-house Appraisers

Can lenders or their correspondents use in-house appraisers for appraisals?
Lenders can use staffed appraisers who are in compliance with Appraiser Independence Requirements.

Appraisal Management Companies

Is it permissible to use appraisals from an AMC that provides other settlement services?
AIR doesn’t require an AMC or any third-party to order appraisals. You can even obtain them using in-house appraisers as long as they are in compliance with AIR. Lenders can also work with an AMC of other settlement services as long as it works in accordance with Appraiser Independence Requirements.

Can brokers select the appraiser?
No, the mortgage broker can?t select appraisers from the AMC?s pre-approved list even if the lender works with multiple AMCs. It is the job of the AMC to choose an appraiser that?s appropriate for the assignment.

Can a mortgage broker request appraisal from the lender-selected AMC?
Yes, the broker can ask for an appraisal request from an AMC that works on behalf of the lender.

Order An Appraisal

What does it mean to order an appraisal?
It means utilizing the services of an appraiser to evaluate a property.
What are the permissible procedures for ordering appraisals and interacting with key participants, including loan production staff, real estate agents, and third parties?

A lender-affiliated AMC can order appraisals if it meets the set standards by AIR. No individual can directly report to the personnel or loan production staff for appraisals. But, the appraiser can contact loan production staff if they require information about the property, such as location.

Can small-sellers use the in-house team for appraisals?
Yes, according to Freddie Mac, sellers with limited staff can use an in-house team for appraisals as they don?t have separate individuals from mortgage production, appraisal orders, and quality assurance.

Payment for Appraisals

Who should pay the appraiser for his appraisal services?
Only a lender or third-party can directly pay the appraiser for his services. Typically, lenders charge brokers and borrowers a small fee for appraisal services. With AmeriMac, borrowers pay appraisal fees via online payments through our portal. This way, our lenders don?t need to worry about this step in the process.

Can the appraiser directly collect the payment from the borrower?
No, according to AIR policy, only lenders or third-party are authorized to compensate appraisers for their services. AmeriMac in this case acts as the authorized third party.

Who can borrowers directly pay for the appraisal?
Borrowers can directly pay lenders, brokers, or an AMC for appraisals.

This comprehensive guide is directed to provide you with industry knowledge on the Appraiser Independence Requirements policy. But, staying up to date on industry regulations like AIR can be a full-time job. You can rely on the appraisal professionals at AmeriMac to generate compliant and accurate appraisal reports every time.