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Compliance for Appraisal Management Companies
Appraisal management companies (“AMCs”) operating in Connecticut are subject to a number of state and federal compliance standards, most of which have been enacted over the past few years as a result of the Dodd-Frank Act of 2010 and in response to the subprime mortgage crisis of the late 2000’s. It is critical that Connecticut AMCs comply with these regulations in order to legally operate in the state. At The Bernard Law Group, our attorneys have been advising clients in all aspects of the real estate and mortgage industry for many years, and we have the experience and know-how to make sure your AMC is in total compliance with all applicable state and federal standards.
Federal Mandates for Registration and Supervision of AMCs
On April 30, 2015, The Consumer Financial Protection Bureau (CFPB), along with five other federal regulatory agencies, issued a final rule for minimum licensing requirements for AMCs, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The rule defines an AMC as an entity that provides appraisal management services to lenders or underwriters or other principals in the secondary mortgage markets. These AMC services include contracting with licensed and certified appraisers to perform appraisal assignments on behalf of mortgage lenders.
The CFPB’s rule includes a provision that states may elect to register and supervise AMCs. The rule does not compel states to establish this licensing or registration requirement, but AMCs in states that have not established a regulatory structure after 36 months from the effective date of this final rule (2018) will be barred from providing AMC services for federally related loans, such as those securitized by Fannie-Mae, Freddie-Mac, HUD/FHA, VA, and USDA.
Increasing State Regulation of AMCs
Several states have begun to draft AMC regulations, and many states (including Connecticut) established AMC regulation ahead of the federal licensing and registration requirements. Specifically, under the new CFPB rule, participating states must require that AMCs:
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
Verify that only state-certified or state-licensed appraisers are used for federally related transactions
Require that appraisals comply with the Uniform Standards of Professional Appraisal Practice (USPAP)
Require that appraisals are conducted in accordance with the statutory valuation independence standards pursuant to the federal Truth in Lending Act and its implementing regulations
In addition, mortgage lenders are obligated by requirements of the CFPB and other federal and state agencies to manage regulatory compliance and oversight of their third-party vendors, such as AMCs.
The state of Connecticut (which Senator Dodd represented for 30 years) has been at the forefront of creating compliance standards for AMCs, and since 2010 the state has implemented numerous pieces of legislation regulating AMCs and mandating compliance requirements.
Lead attorney Wendy Bernard has over 25 years experience working in the mortgage industry, and over a decade of experience in providing counsel to parties in all aspects of the real estate industry. Bernard and her fellow attorneys at The Bernard Law Group have extensive knowledge in helping AMCs to prepare for regulation and licensing compliance, and will work to ensure that your AMC is in compliance with current state and federal regulations in order to meet lender oversight of your AMC operations.
Contact the Bernard Law Group for Proactive Legal Guidance on AMC Compliance
Don’t wait until your top mortgage lender client contacts you for a review or examination of your AMC operations. If you are starting an AMC or already in business as an AMC, contact The Bernard Law Group today for proactive guidance in ensuring your AMC’s compliance with all state and federal guidelines.