Appraisal Subcommittee; Final Order Granting in Part Temporary Waiver Relief

 
CONTENT
Federal Register, Volume 84 Issue 152 (Wednesday, August 7, 2019)
[Federal Register Volume 84, Number 152 (Wednesday, August 7, 2019)]
[Notices]
[Pages 38630-38633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16908]
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FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
[Docket No. AS19-06]
Appraisal Subcommittee; Final Order Granting in Part Temporary
Waiver Relief
AGENCY: Appraisal Subcommittee of the Federal Financial Institutions
Examination Council.
ACTION: Final order granting in part, with specified terms and
conditions,
[[Page 38631]]
and with the Federal Financial Institutions Examination Council (FFIEC)
concurrence, temporary waiver relief.
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SUMMARY: The Appraisal Subcommittee (ASC) of the FFIEC is issuing a
final order pursuant to section 1119(b) of Title XI of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989, as amended
(Title XI) and the rules promulgated thereunder. This order grants in
part, with specified terms and conditions, and with the FFIEC
concurrence, a request for temporary waiver relief received from
Governor Doug Burgum, State of North Dakota, the North Dakota
Department of Financial Institutions, and the North Dakota Bankers
Association, notice of which was published in the Federal Register on
May 30, 2019.
DATES: Applicable August 7, 2019.
FOR FURTHER INFORMATION CONTACT: James R. Park, Executive Director, at
(202) 595-7575, or Alice M. Ritter, General Counsel, at (202) 595-7577,
ASC, 1325 G Street NW, Suite 500, Washington, DC 20005.
SUPPLEMENTARY INFORMATION:
I. Background
A. Relevant Statutory Provisions and Regulations
    The ASC was established by Title XI.\1\ The purpose of Title XI is
``to provide that Federal financial and public policy interests in real
estate related transactions will be protected by requiring that real
estate appraisals utilized in connection with federally related
transactions are performed in writing, in accordance with uniform
standards, by individuals whose competency has been demonstrated and
whose professional conduct will be subject to effective supervision.''
\2\ Section 1119(b) of Title XI authorizes the ASC to waive, on a
temporary basis and with concurrence of the FFIEC, ``any requirement
relating to certification or licensing of a person to perform
appraisals under [Title XI] upon a written determination that there is
a scarcity of certified or licensed appraisers to perform appraisals in
connection with federally related transactions \3\ in a State, or in
any geographical political subdivision of a State, leading to
significant delays in the performance of such appraisals.'' \4\
Congress intended that the ASC exercise this waiver authority
``cautiously.'' \5\
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    \1\ The ASC Board consists of seven members. Five members are
designated by the heads of the FFIEC agencies (Board of Governors of
the Federal Reserve System [Board], Bureau of Consumer Financial
Protection [Bureau], Federal Deposit Insurance Corporation [FDIC],
Office of the Comptroller of the Currency [OCC], and National Credit
Union Administration [NCUA]). The other two members are designated
by the heads of the Department of Housing and Urban Development
(HUD) and the Federal Housing Finance Agency (FHFA).
    \2\ Title XI Sec.  1101, 12 U.S.C. 3331.
    \3\ ``Federally related transaction'' (FRT) refers to any real
estate related financial transaction which: (a) A federal financial
institutions regulatory agency engages in, contracts for, or
regulates; and (b) requires the services of an appraiser. (Title XI
Sec.  1121 (4), 12 U.S.C. 3350.)
    \4\ 12 U.S.C. 3348(b).
    \5\ House Comm. on Banking, Finance and Urban Affairs, Report
Together with Additional, Supplemental, Minority, Individual, and
Dissenting Views, Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, H.R. Rep. No. 101-54 Part 1, 101st Cong.,
1st Sess., at 482-83.
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    The ASC has promulgated regulations that set forth procedures \6\
governing the processing of temporary waiver requests. After receiving
a waiver request, the ASC is required to issue a public notice in the
Federal Register requesting comment on the request for a proposed
temporary waiver. Within 15 days of the close of the 30-day comment
period, the ASC, by order, must grant or deny a waiver, in whole or in
part, and with specified terms or conditions, including provisions for
waiver termination. The ASC's order shall respond to comments received,
provide reasons for its finding, and be published promptly in the
Federal Register. Any ASC approval order shall be effective only upon
FFIEC concurrence.
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    \6\ 12 CFR part 1102, subpart A.
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B. Procedural Status
    On August 1, 2018, a letter requesting a temporary waiver was
submitted to the ASC by Governor Doug Burgum, State of North Dakota,
the North Dakota Department of Financial Institutions, and the North
Dakota Bankers Association (collectively, the Requester). On September
7, 2018, ASC staff replied to the Requester by letter, in which ASC
staff described the information required to file a completed waiver
request pursuant to 12 CFR 1102.2 and 1102.3. The Requester submitted
additional information in a letter dated April 10, 2019, in response to
the ASC's September 7, 2018 letter. On April 15, 2019, the ASC convened
a Special Meeting and determined to publish a notice for comment on the
request for temporary waiver in the Federal Register. The request seeks
a waiver of appraiser credentialing requirements for appraisals for
FRTs under $500,000 for 1-to-4 family residential real estate
transactions and under $1,000,000 for agricultural and commercial real
estate transactions throughout the State of North Dakota for a period
of not less than five years.
    On May 30, 2019, the ASC published a Notice of Received Request for
a Temporary Waiver giving interested persons 30 days to submit
comments, including submission of written data, views and arguments.\7\
The comment period closed on July 1, 2019. A discussion of the public
comments received by the ASC concerning the request for temporary
waiver relief follows in Section III below.
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    \7\ 84 FR 25052 (May 30, 2019).
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    The ASC called a Special Meeting to consider this matter on July 9,
2019, and voted to approve the issuance of this final order granting in
part, upon specified terms and conditions, and subject to FFIEC
concurrence, temporary waiver relief. The FFIEC met via teleconference
on July 12, 2019, and a quorum of the Council being present, took the
following action: Pursuant to Sec.  1119(b) of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989, as amended,
the Council approved the temporary waiver granted by the ASC on July 9,
2019.
II. Request for a Temporary Waiver
    The Requester sought a temporary waiver of the appraiser
credentialing requirements for appraisals for FRTs under $500,000 for
1-to-4 family residential real estate transactions and under $1,000,000
for agricultural and commercial real estate transactions throughout the
State of North Dakota for a period of not less than five years. The
Requester stated that a scarcity of appraisers exists, particularly in
the rural areas of the western part of the State, indicating that of
the 53 counties in North Dakota, 29 counties do not have a single
appraiser residing in the county, and that while the most severe impact
of the appraiser scarcity has been experienced in western and the most
rural districts in North Dakota, the population centers are also
impacted.
    The Requester conducted a survey to assess what lenders deem are
appropriate turnaround times for residential and commercial appraisals.
The Requester summarized the results of the survey as follows:
     81 percent reported that up to 30 days is appropriate for
residential appraisals.
     80 percent reported that up to 60 days is appropriate for
commercial appraisals.
     65 percent reported a delay in receiving a residential
real estate appraisal, and 71 percent reported a delay in receiving a
commercial appraisal.
     57 percent reported unreasonable delays in receiving
residential real
[[Page 38632]]
estate appraisals in the prior 12 months. 72 percent reported
unreasonable delays in receiving commercial appraisals in the prior 12
months.
    The Requester acknowledged that federal banking agencies and NCUA
have proposed increases to the appraisal thresholds,\8\ stating that
``[if adopted, it] will have a positive effect that is similar to that
which can be achieved by the granting of this waiver since both
approaches will provide much needed relief.''
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    \8\ See 83 FR 63110 (December 7, 2018) (OCC, Board, and FDIC
proposing to increase the residential real estate appraisal
threshold level from $250,000 to $400,000); 83 FR 49857 (October 3,
2018) (NCUA proposing to increase the appraisal threshold for non-
residential real estate transactions from $250,000 to $1,000,000).
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III. Summary of Comments
    The ASC received 109 \9\ comment letters in response to the
published Notice of Received Request for a Temporary Waiver and request
for comment. These comment letters were received from State appraiser
certifying and licensing agencies, appraiser and mortgage lending
associations, professional associations, appraisal firms, appraisers,
and several banks and financial institution associations in the State
of North Dakota.
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    \9\ Regulations.gov shows 109 comments received in total with
105 viewable comments due to duplicates and 2 withdrawals.
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    While a few commenters supported the granting of a temporary
waiver, the majority of comments received were from appraisers opposing
the granting of a temporary waiver. Associations representing insured
depository institutions in North Dakota (banks and credit unions)
meanwhile argued that the waiver would provide some measure of relief
in local communities without increasing any safety and soundness risks.
Several other commenters disputed that there was a shortage of
appraisers in North Dakota and that there are significant delays.
Specifically, commenters offered data showing that the number of
appraisers in North Dakota is consistent with other similarly populated
States. Commenters also stated that the turn time of appraisals in
North Dakota average within the Requester's range of appropriate turn
times. Commenters also noted decreased economic activity in North
Dakota and that turn times have improved in recent years. Several
commenters also expressed varying concerns about the long term impact a
waiver would have on appraisers and the appraisal profession, consumers
and the safety and soundness of the North Dakota banking system.
Several commenters reported making attempts to be added to lender lists
of approved appraisers without success. Several commenters asked if a
waiver were granted, who would be qualified to perform a Uniform
Standards of Professional Appraisal Practice (USPAP)-compliant
appraisal without the training and education a credentialed appraiser
is required to have, and with whom consumers and other parties would
file a complaint. Commenters also expressed concern over the loss of
protection to the public if a waiver is granted. The ASC acknowledges
these concerns and emphasizes that this is a temporary waiver while
more long-term solutions are researched and implemented by the
Requester and interested stakeholders in the State of North Dakota. In
the interim, lenders are still required to obtain USPAP-compliant
appraisals for FRTs and should review appraisals for compliance with
USPAP. Several commenters challenged the ASC's authority to exercise
temporary waiver discretion at this point in time, commenting that the
statutory provision was meant to be applied when States were first
setting up appraiser regulatory programs and were perhaps not going to
be able to meet the statutory deadline to establish a program. The ASC
notes that the statute includes no expiration of the waiver provisions
in the statute.
    The North Dakota Real Estate Appraiser Qualifications and Ethics
Board (Appraiser Board) provided a letter in which they recommend
denying the request. The Appraiser Board reported a 44 percent increase
in appraisers since 2009 and submitted data in support of their
position. The letter from the Appraiser Board also addressed recent
regulatory changes that have been made or are being considered that
address many of the concerns in the request.
IV. ASC Discussion
    In order to grant a temporary waiver, the ASC must make a
determination that a scarcity of credentialed appraisers is leading to
significant delays in obtaining appraisals for FRTs in the geographic
area \10\ specified in the request. In considering this request, the
ASC examined both evidence of a scarcity of appraisers in North Dakota,
and evidence of scarcity leading to significant delay. The ASC noted
that North Dakota's appraisal turnaround time is one of the slowest in
the country. In this case, while data provided to the ASC by the
Requester and the Appraiser Board and included in public comments, was
not consistent and sometimes conflicted, the majority of the ASC
members concluded that a scarcity of appraisers does exist in North
Dakota and that the scarcity is leading to a significant delay in
appraisal services for FRTs. Therefore, by majority vote, the ASC
determined to grant in part, subject to specified terms and conditions,
and subject to FFIEC concurrence, temporary waiver relief as follows:
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    \10\ The ASC's section 1119(b) temporary waiver authority is
with respect to a State or any geographical political subdivision of
a State.
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     A temporary waiver of appraiser credentialing requirements
for appraisals of FRTs under $500,000 for 1-to-4 family residential
real estate transactions throughout the State of North Dakota for a
period of one year, unless the federal banking agencies issue a rule
increasing appraisal exemption threshold limits for residential real
estate transactions,\11\ in which case the residential waiver will
terminate 60 days after the effective date of that threshold increase.
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    \11\ 83 FR 63110 (December 7, 2018).
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     A temporary waiver of appraiser credentialing requirements
for appraisals of FRTs under $1,000,000 for commercial real estate
transactions \12\ throughout the State of North Dakota for a period of
one year.
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    \12\ The request was for commercial and agricultural, but
agricultural loans are already included in either commercial or
business loans.
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     During the one-year period, the Requester is expected to
develop a plan through continued dialogue with North Dakota
stakeholders, including the Appraiser Board, to identify potential
solutions to address appraiser scarcity and appraisal delay.
     At least 30 days prior to the expiration of the one-year
period, the Requester should provide (1) a status report to the ASC on
the plan that was developed in collaboration with stakeholders and any
implementation progress made on that plan toward identifying meaningful
solutions to resolve appraiser scarcity and delay issues faced in North
Dakota; and (2) supporting data showing that appraiser scarcity leading
to significant delays continues to exist, which may include information
to identify specific localities affected by appraiser scarcity. The ASC
will consider the information as presented by the Requester, and by
vote in open session, may extend the temporary waiver for an additional
one-year period.
     The ASC at any time may terminate a waiver order on a
finding that significant delay in the receipt of appraisals for FRTs no
longer exists, or
[[Page 38633]]
that the terms and conditions of the order are not being satisfied.
V. Order
    For the reasons stated above, and pursuant to section 1119(b) of
Title XI and 12 CFR part 1102, subpart A, the ASC grants temporary
waiver relief to the Requester, subject to the following specified
terms and conditions:
     A temporary waiver of appraiser credentialing requirements
for appraisals of FRTs under $500,000 for 1-to-4 family residential
real estate transactions throughout the State of North Dakota for a
period of one year, unless the federal banking agencies issue a rule
increasing appraisal exemption threshold limits for residential real
estate transactions,\13\ in which case the residential waiver will
terminate 60 days after the effective date of that threshold increase.
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    \13\ 83 FR 63110 (December 7, 2018).
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     A temporary waiver of appraiser credentialing requirements
for appraisals of FRTs under $1,000,000 for commercial real estate
transactions throughout the State of North Dakota for a period of one
year.
     During the one-year period, the Requester is expected to
develop a plan through continued dialogue with North Dakota
stakeholders, including the Appraiser Board, to identify potential
solutions to address appraiser scarcity and appraisal delay.
     At least 30 days prior to the expiration of the one-year
period, the Requester should provide (1) a status report to the ASC on
the plan that was developed in collaboration with stakeholders and any
implementation progress made on that plan toward identifying meaningful
solutions to resolve appraiser scarcity and delay issues faced in North
Dakota; and (2) supporting data showing that appraiser scarcity leading
to significant delays continues to exist, which may include information
to identify specific localities affected by appraiser scarcity. The ASC
will consider the information as presented by the Requester, and by
vote in open session, may extend the temporary waiver for an additional
one-year period.
     The ASC at any time may terminate a waiver order on a
finding that significant delay in the receipt of appraisals for FRTs no
longer exists, or that the terms and conditions of the order are not
being satisfied.
* * * * *
    By the Appraisal Subcommittee.
    Dated: August 2, 2019.
Arthur Lindo,
Chairman.
[FR Doc. 2019-16908 Filed 8-6-19; 8:45 am]
BILLING CODE 6700-01-P