FR 2024-27698

The Federal Register document presents a proposed rule from the Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council. This rule aims to establish a framework for overseeing the effectiveness of State Appraiser and Appraisal Management Company (AMC) programs. Additionally, it outlines the ASC's ability to enforce compliance and take corrective actions if necessary. Public comments on the proposal are invited, with a deadline of February 4, 2025.

General Overview

The ASC's proposal seeks to formalize how it monitors state programs related to real estate appraisals and AMCs. By codifying existing compliance processes with certain modifications, the ASC aims to create a more consistent and transparent approach to assessing program effectiveness. The rule would set standards for maintaining effective programs and allow the ASC to issue warnings, negotiate agreements, and even suspend programs that do not meet set standards.

Significant Issues

The proposed rule has several complex layers and legalese, which might be challenging for the general public to fully comprehend. Such complexity can potentially reduce the rule's transparency and accessibility, posing a barrier to public engagement during the commentary period.

The rule proposes enforcing "non-recognition" as a penalty for inefficient programs, which could significantly impact state real estate markets. However, the rule lacks sufficient discussion on mitigating potential economic consequences. Furthermore, the lack of explicit financial support or incentives for State Appraiser Regulatory Agencies to meet these requirements may prove to be a barrier, particularly for states with limited resources.

There are also concerns regarding the framework for "mitigating and aggravating factors," which could lead to inconsistent applications across various states. The subjectivity involved in evaluating "special documented circumstances" may result in different treatment for similar situations in different states.

Potential Impact on the Public and Stakeholders

For the general public, ensuring effective appraisal practices could lead to improvements in the real estate market's integrity. However, if not implemented smoothly, enforcement actions could restrict the activities of appraisers and AMCs, indirectly affecting home transactions and property values.

For State Appraiser Regulatory Agencies, the proposed rule introduces a more rigorous compliance process, which might require additional resources and time to implement. Agencies might face financial and operational burdens, especially if already encountering deficiencies that need to be rectified. The 12-month timeline for implementation could be demanding, particularly for under-resourced states.

Enforcement of the rule might ultimately enhance transparency and accountability within the appraisal industry, benefiting the broader financial and real estate sectors. Positive outcomes could include more consistent appraisal standards across states, potentially protecting consumers and lending institutions from fraudulent or incompetent appraisal practices.

In conclusion, while the rule aims to improve regulatory oversight and program effectiveness for Appraiser and AMC Programs, genuine concerns exist regarding its clarity, feasibility, and potential economic impacts. These factors present significant considerations for stakeholders and the general public as they assess and provide feedback on the proposal.

The proposed rule by the Appraisal Subcommittee (ASC) includes financial considerations that are significant, yet it suggests that the rule will not lead to extreme expenditures. Specifically, the ASC has taken steps to evaluate whether the rule could lead to a $100 million or more annual expenditure by various government levels or the private sector, as adjusted for inflation. After this analysis, the ASC determined that the proposed rule does not meet the threshold set forth by the Unfunded Mandates Reform Act (UMRA), meaning it should not lead to such high costs. This finding is crucial because it implies that the rule won't impose significant financial burdens on State, local, and Tribal governments or the private sector, potentially easing concerns about economic impact.

Despite this assertion, the document leaves some important gaps unaddressed regarding financial logistics. For example, the potential economic impact of the severest enforcement action, non-recognition, is flagged as an issue without adequate examination of mitigating strategies. If a state's regulatory program is deemed ineffective, leading to non-recognition, the economic repercussions could be severe for that state’s real estate market, impacting both appraisers and real estate transactions. However, the proposal currently lacks a detailed exploration of how to cushion these statewide economic effects, which could benefit from further discussion given the financial stakes involved.

Additionally, there is no mention of financial assistance or federal funding to help states improve their compliance with these new requirements. This could be a barrier, especially for states operating under constrained budgets. The structured framework introduces new compliance and enforcement measures, possibly necessitating more resources. It might challenge states with limited financial capacity to adapt without external financial support or incentives.

Moreover, the lack of discussion around the potential cost or benefits of implementing these rules makes it difficult for stakeholders to thoroughly evaluate the financial impact of the changes. Quantifying these aspects could provide clearer insights into how resources should be allocated to achieve compliance and manage economic repercussions effectively. Also, the document outlines an implementation period of 12 months, which might be tight for some agencies needing additional resources to address existing or newly identified deficiencies promptly.

In conclusion, while the ASC has attempted to ensure the proposed rule does not impose excessively high costs, there are financial considerations, especially concerning implementation and enforcement actions, that could benefit from further elaboration. Specifically, a more explicit analysis of economic impacts and consideration of financial support mechanisms for state agencies could enhance understanding and preparedness among stakeholders.