The Office of the Comptroller of the Currency (OCC) issued a bulletin to remind banks of the new registration requirement for appraisal management companies (AMC) that became effective Aug. 10, 2019.

Under this requirement, AMCs must register with the state or states in which they do business and must be subject to state supervision, the OCC bulletin stated.

Federal law bars AMCs from providing appraisal management services to financial institutions for consumer credit transactions secured by a consumer’s principal dwelling that are federally related transactions (FRT) if the AMCs are not registered as required. The bulletin discusses considerations for banks with regard to confirming AMC registration as part of sound third-party risk management and suggests alternatives that banks can use when no registered AMCs are available.

The bulletin stated that bank management should be aware of the following:

• No AMC may perform services related to a covered FRT in a state unless the company is registered with that state or subject to oversight by a federal financial institutions regulatory agency.
• Sound third-party risk management should include a process to confirm that AMCs engaged by the bank have registered with the state.

  There are several options for obtaining appraisals for covered FRTs if a state is not registering AMCs, the OCC stated. An AMC that is owned and controlled by an insured depository institution and regulated by the OCC, FRB, or FDIC (referred to as a federally regulated AMC) is not subject to the registration requirement.

  “Section 1473 of Dodd-Frank says states are not required to establish an AMC registration and supervision program. In a state that does not have an AMC registration and supervision program, AMCs are barred from providing appraisal management services for covered FRTs,” the bulletin said. “The Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council is required to maintain an AMC national registry. The registry includes AMCs that (1) are registered with and subject to supervision by a state appraiser certifying and licensing agency or (2) are federally regulated.”

  Considerations also were outlined by the OCC on a bank’s use of third parties. These parties, including AMCs, do not diminish the bank’s responsibility to confirm that activity is performed in a safe and sound manner and in compliance with applicable laws and regulations, the bulletin stated. Bank management should conduct sufficient due diligence to confirm that the bank’s third-party AMCs are registered as required.

  Some methods that banks can use to confirm an AMC’s registration include:

• Check the ASC’s national AMC registry. Any AMC that is listed on the ASC’s national AMC registry can be presumed to have met the AMC registration requirement.
• Check the state’s AMC registry. If an AMC is not listed on the ASC’s national AMC registry, bank management may check the AMC registry of the relevant state to confirm whether the AMC is registered with the state where the property to be appraised is located. Many states have publicly searchable online databases for AMC registrations. Some states make the AMC database available through the same search portal as other business registrations. Other states have a separate search portal for AMCs. A few states have only an online list of registered AMCs. In some cases, bank management may need to call the state agency. The ASC’s website has links to state agencies.
• Request proof of registration directly from the AMC. Several states may not offer the electronic capability to verify the registration status of AMCs. In these cases, bank management is encouraged to request evidence of registration directly from the AMC.

“Bank management should work with AMCs to properly identify transactions that meet the definition of a covered FRT. In determining whether the transaction is a covered FRT, the bank should either notify the AMC that the transaction is a covered FRT or provide sufficient information to enable the AMC to identify the transaction as a covered FRT,” the OCC bulletin said.

“When the bank relies on an AMC’s determination of whether transactions are covered FRTs, bank management should conduct sufficient due diligence as part of sound third-party risk management to confirm that the AMC appropriately identifies covered FRTs as such. If the transaction is not a covered FRT, the AMC registration rule does not apply,” the bulletin added.