PART 323—APPRAISALS Authority: 12 U.S.C. 1818, 1819(a)(“Seventh” and “Tenth”), 1831p-1 and 3331 et seq. Source: 55 FR 33888, Aug. 20, 1990, unless otherwise noted. Subpart A—Appraisals Generally § 323.1 Authority, purpose, and scope. (a) Authority. et seq. (b) Purpose and scope. regulated institutions (2) This subpart: (i) Identifies which real estate-related financial transactions require the services of an appraiser; (ii) Prescribes which categories of federally related transactions shall be appraised by a State certified appraiser and which by a State licensed appraiser; and (iii) Prescribes minimum standards for the performance of real estate appraisals in connection with federally related transactions under the jurisdiction of the FDIC. [55 FR 33888, Aug. 20, 1990, as amended at 80 FR 32684, June 9, 2015; 83 FR 15036, Apr. 9, 2018] § 323.2 Definitions. (a) Appraisal (b) Appraisal Foundation (c) Appraisal Subcommittee (d) Business loan (e) Commercial real estate transaction (f) Complex appraisal for a residential real estate transaction means one in which the property to be appraised, the form of ownership, or market conditions are atypical. (g) Federally related transaction (1) The FDIC or any regulated institution engages in or contracts for; and (2) Requires the services of an appraiser. (h) Market value (1) Buyer and seller are typically motivated; (2) Both parties are well informed or well advised, and acting in what they consider their own best interests; (3) A reasonable time is allowed for exposure in the open market; (4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. (i) Real estate real property (j) Real estate-related financial transaction (1) The sale, lease, purchase, investment in or exchange of real property, including interests in property, or the financing thereof; or (2) The refinancing of real property or interests in real property; or (3) The use of real property or interests in property as security for a loan or investment, including mortgage-backed securities. (k) Residential real estate transaction means a real estate-related financial transaction that is secured by a single 1-to-4 family residential property. (l) State certified appraiser (m) State licensed appraiser (n) Tract development (o) Transaction value (1) For loans or other extensions of credit, the amount of the loan or extension of credit; (2) For sales, leases, purchases, and investments in or exchanges of real property, the market value of the real property interest involved; and (3) For the pooling of loans or interests in real property for resale or purchase, the amount of the loan or market value of the real property calculated with respect to each such loan or interest in real property. [55 FR 33888, Aug. 20, 1990, as amended at 57 FR 9049, Mar. 16, 1992; 59 FR 29501, June 7, 1994; 83 FR 15036, Apr. 9, 2018; 84 FR 53598, Oct. 8, 2019] § 323.3 Appraisals required; transactions requiring a State certified or licensed appraiser. (a) Appraisals required. (1) The transaction is a residential real estate transaction that has a transaction value of $400,000 or less; (2) A lien on real estate has been taken as collateral in an abundance of caution; (3) The transaction is not secured by real estate; (4) A lien on real estate has been taken for purposes other than the real estate's value; (5) The transaction is a business loan that: (i) Has a transaction value of $1 million or less; and (ii) Is not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment; (6) A lease of real estate is entered into, unless the lease is the economic equivalent of a purchase or sale of the leased real estate; (7) The transaction involves an existing extension of credit at the lending institution, provided that: (i) There has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the institution's real estate collateral protection after the transaction, even with the advancement of new monies; or (ii) There is no advancement of new monies, other than funds necessary to cover reasonable closing costs; (8) The transaction involves the purchase, sale, investment in, exchange of, or extension of credit secured by, a loan or interest in a loan, pooled loans, or interests in real property, including mortgaged-backed securities, and each loan or interest in a loan, pooled loan, or real property interest met FDIC regulatory requirements for appraisals at the time of origination; (9) The transaction is wholly or partially insured or guaranteed by a United States government agency or United States government sponsored agency; (10) The transaction either: (i) Qualifies for sale to a United States government agency or United States government sponsored agency; or (ii) Involves a residential real estate transaction in which the appraisal conforms to the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation appraisal standards applicable to that category of real estate; (11) The regulated institution is acting in a fiduciary capacity and is not required to obtain an appraisal under other law; (12) The FDIC determines that the services of an appraiser are not necessary in order to protect Federal financial and public policy interests in real estate-related financial transactions or to protect the safety and soundness of the institution; (13) The transaction is a commercial real estate transaction that has a transaction value of $500,000 or less; or (14) The transaction is exempted from the appraisal requirement pursuant to the rural residential exemption under 12 U.S.C. 3356. (b) Evaluations required. (c) Appraisals to address safety and soundness concerns. (d) Transactions requiring a State certified appraiser All transactions of $1,000,000 or more. (2) Commercial real estate transactions of more than $500,000. (3) Complex appraisals for residential real estate transactions of more than $400,000. (i) The regulated institution may ask the licensed appraiser to complete the appraisal and have a certified appraiser approve and co-sign the appraisal; or (ii) The institution may engage a certified appraiser to complete the appraisal. (e) Transactions requiring either a State certified or licensed appraiser. (f) Effective date. [55 FR 33888, Aug. 20, 1990, as amended at 57 FR 9050, Mar. 16, 1992; 59 FR 29501, June 7, 1994; 80 FR 32684, June 9, 2015; 83 FR 15036, Apr. 9, 2018; 84 FR 53598, Oct. 8, 2019; 85 FR 21317, Apr. 17, 2020; 85 FR 65671, Oct. 16, 2020] § 323.4 Minimum appraisal standards. For federally related transactions, all appraisals shall, at a minimum: (a) Conform to generally accepted appraisal standards as evidenced by the Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board of the Appraisal Foundation, 1029 Vermont Ave., NW., Washington, DC 20005, unless principles of safe and sound banking require compliance with stricter standards; (b) Be written and contain sufficient information and analysis to support the institution's decision to engage in the transaction; (c) Be subject to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice; (d) Analyze and report appropriate deductions and discounts for proposed construction or renovation, partially leased buildings, non-market lease terms, and tract developments with unsold units; (e) Be based upon the definition of market value as set forth in this subpart; and (f) Be performed by State licensed or certified appraisers in accordance with requirements set forth in this subpart. [59 FR 29502, June 7, 1994, as amended at 80 FR 32684, June 9, 2015; 84 FR 53598, Oct. 8, 2019] § 323.5 Appraiser independence. (a) Staff appraisers. (b) Fee appraisers. (2) A regulated institution also may accept an appraisal that was prepared by an appraiser engaged directly by another financial services institution, if: (i) The appraiser has no direct or indirect interest, financial or otherwise, in the property or the transaction; and (ii) The regulated institution determines that the appraisal conforms to the requirements of this subpart and is otherwise acceptable. [55 FR 33888, Aug. 20, 1990, as amended at 59 FR 29502, June 7, 1994; 80 FR 32684, June 9, 2015] § 323.6 Professional association membership; competency. (a) Membership in appraisal organizations. (b) Competency. § 323.7 Enforcement. Institutions and institution-affiliated parties, including staff appraisers and fee appraisers, may be subject to removal and/or prohibition orders, cease and desist orders, and the imposition of civil money penalties pursuant to the Federal Deposit Insurance Act, 12 U.S.C. 1811 et seq., Subpart B—Appraisal Management Company Minimum Requirements Source: 80 FR 32684, June 9, 2015, unless otherwise noted. § 323.8 Authority, purpose, and scope. (a) Authority. et seq. (b) Purpose. (c) Scope. (d) Rule of construction. 1 1 https://www.fdic.gov/regulations/laws/rules/5000-4800.html. § 323.9 Definitions. For purposes of this subpart: (a) Affiliate (b) AMC National Registry (c)(1) Appraisal management company (i) Provides appraisal management services to creditors or to secondary mortgage market participants, including affiliates; (ii) Provides such services in connection with valuing a consumer's principal dwelling as security for a consumer credit transaction or incorporating such transactions into securitizations; and (iii) Within a given 12-month period, as defined in § 323.10(d), oversees an appraiser panel of more than 15 State-certified or State-licensed appraisers in a State or 25 or more State-certified or State-licensed appraisers in two or more States, as described in § 323.12; (2) An AMC does not include a department or division of an entity that provides appraisal management services only to that entity. (d) Appraisal management services (1) Recruiting, selecting, and retaining appraisers; (2) Contracting with State-certified or State-licensed appraisers to perform appraisal assignments; (3) Managing the process of having an appraisal performed, including providing administrative services such as receiving appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and secondary market participants, collecting fees from creditors and secondary market participants for services provided, and paying appraisers for services performed; and (4) Reviewing and verifying the work of appraisers. (e) Appraiser panel (f) Appraisal Subcommittee (g) Consumer credit (h) Covered transaction (i) Creditor (1) A person who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract. (2) A person regularly extends consumer credit if the person extended credit (other than credit subject to the requirements of 12 CFR 1026.32) more than 5 times for transactions secured by a dwelling in the preceding calendar year. If a person did not meet these numerical standards in the preceding calendar year, the numerical standards shall be applied to the current calendar year. A person regularly extends consumer credit if, in any 12-month period, the person originates more than one credit extension that is subject to the requirements of 12 CFR 1026.32 or one or more such credit extensions through a mortgage broker. (j) Dwelling (1) A residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence. (2) A consumer can have only one “principal” dwelling at a time. Thus, a vacation or other second home would not be a principal dwelling. However, if a consumer buys or builds a new dwelling that will become the consumer's principal dwelling within a year or upon the completion of construction, the new dwelling is considered the principal dwelling for purposes of this section. (k) Federally regulated AMC (l) Federally related transaction regulations (m) Person (n) Secondary mortgage market participant (o) States (p) Uniform Standards of Professional Appraisal Practice § 323.10 Appraiser panel—annual size calculation. For purposes of determining whether, within a 12-month period, an AMC oversees an appraiser panel of more than 15 State-certified or State-licensed appraisers in a State or 25 or more State-certified or State-licensed appraisers in two or more States pursuant to § 323.9(c)(1)(iii)— (a) An appraiser is deemed part of the AMC's appraiser panel as of the earliest date on which the AMC: (1) Accepts the appraiser for the AMC's consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions; or (2) Engages the appraiser to perform one or more appraisals on behalf of a creditor for a covered transaction or secondary mortgage market participant in connection with a covered transaction. (b) An appraiser who is deemed part of the AMC's appraiser panel pursuant to paragraph (a) of this section is deemed to remain on the panel until the date on which the AMC: (1) Sends written notice to the appraiser removing the appraiser from the appraiser panel, with an explanation of its action; or (2) Receives written notice from the appraiser asking to be removed from the appraiser panel or notice of the death or incapacity of the appraiser. (c) If an appraiser is removed from an AMC's appraiser panel pursuant to paragraph (b) of this section, but the AMC subsequently accepts the appraiser for consideration for future assignments or engages the appraiser at any time during the twelve months after the AMC's removal, the removal will be deemed not to have occurred, and the appraiser will be deemed to have been part of the AMC's appraiser panel without interruption. (d) The period for purposes of counting appraisers on an AMC's appraiser panel may be the calendar year or a 12-month period established by law or rule of each State with which the AMC is required to register. § 323.11 Appraisal management company registration. Each State electing to register AMCs pursuant to paragraph (b)(1) of this section must: (a) Establish and maintain within the State appraiser certifying and licensing agency a licensing program that is subject to the limitations set forth in § 323.12 and with the legal authority and mechanisms to: (1) Review and approve or deny an AMC's application for initial registration; (2) Review and renew or review and deny an AMC's registration periodically; (3) Examine the books and records of an AMC operating in the State and require the AMC to submit reports, information, and documents; (4) Verify that the appraisers on the AMC's appraiser panel hold valid State certifications or licenses, as applicable; (5) Conduct investigations of AMCs to assess potential violations of applicable appraisal-related laws, regulations, or orders; (6) Discipline, suspend, terminate, or deny renewal of the registration of an AMC that violates applicable appraisal-related laws, regulations, or orders; and (7) Report an AMC's violation of applicable appraisal-related laws, regulations, or orders, as well as disciplinary and enforcement actions and other relevant information about an AMC's operations, to the Appraisal Subcommittee. (b) Impose requirements on AMCs that are not owned and controlled by an insured depository institution and not regulated by a Federal financial institution regulatory agency to: (1) Register with and be subject to supervision by the State appraiser certifying and licensing agency; (2) Engage only State-certified or State-licensed appraisers for Federally regulated transactions in conformity with any Federally related transaction regulations; (3) Establish and comply with processes and controls reasonably designed to ensure that the AMC, in engaging an appraiser, selects an appraiser who is independent of the transaction and who has the requisite education, expertise, and experience necessary to competently complete the appraisal assignment for the particular market and property type; (4) Direct the appraiser to perform the assignment in accordance with USPAP; and (5) Establish and comply with processes and controls reasonably designed to ensure that the AMC conducts its appraisal management services in accordance with the requirements of section 129E(a)-(i) of the Truth in Lending Act, 15 U.S.C. 1639e(a)-(i), and regulations thereunder. § 323.12 Ownership limitations for State-registered appraisal management companies. (a) Appraiser certification or licensing of owners. (2) An AMC subject to State registration pursuant to this section is not barred by § 323.11(a)(1) from being registered by a State or included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for a substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (b) Good moral character of owners. (1) Is determined by the State appraiser certifying and licensing agency not to have good moral character; or (2) Fails to submit to a background investigation carried out by the State appraiser certifying and licensing agency. § 323.13 Requirements for Federally regulated appraisal management companies. (a) Requirements in providing services. (b) Ownership limitations. (2) A Federally regulated AMC is not barred by § 323.12(b) from being included on the AMC National Registry if the license or certificate of the appraiser with an ownership interest was not revoked for a substantive cause and has been reinstated by the State or States in which the appraiser was licensed or certified. (c) Reporting information for the AMC National Registry. § 323.14 Information to be presented to the Appraisal Subcommittee by participating States. Each State electing to register AMCs for purposes of permitting AMCs to provide appraisal management services relating to covered transactions in the State must submit to the Appraisal Subcommittee the information required to be submitted by Appraisal Subcommittee regulations or guidance concerning AMCs that operate in the State. Subpart C—Quality Control Standards for Automated Valuation Models Used for Mortgage Lending Purposes Source: 89 FR 64574, Aug. 7, 2024, unless otherwise noted. § 323.15 Authority, purpose, and scope. (a) Authority. (b) Purpose and scope. (2) This subpart does not apply to the use of automated valuation models in: (i) Monitoring of the quality or performance of mortgages or mortgage-backed securities; (ii) Reviews of the quality of already completed determinations of the value of collateral; or (iii) The development of an appraisal by a certified or licensed appraiser. § 323.16 Definitions. As used in this subpart: Automated valuation model Control systems Covered securitization determination (1) Whether to waive an appraisal requirement for a mortgage origination in connection with its potential sale or transfer to a secondary market issuer; or (2) Structuring, preparing disclosures for, or marketing initial offerings of mortgage-backed securitizations. Credit decision Dwelling Mortgage Mortgage originator (1) Any person who, for direct or indirect compensation or gain, or in the expectation of direct or indirect compensation or gain— (i) Takes a mortgage application; (ii) Assists a consumer in obtaining or applying to obtain a mortgage; or (iii) Offers or negotiates terms of a mortgage; (2) Includes any person who represents to the public, through advertising or other means of communicating or providing information (including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items), that such person can or will provide any of the services or perform any of the activities described in paragraph (1) of this definition; (3) Does not include any person who is— (i) Not otherwise described in paragraph (1) or (2) of this definition and who performs purely administrative or clerical tasks on behalf of a person who is described in any such paragraph; or (ii) A retailer of manufactured or modular homes or an employee of the retailer if the retailer or employee, as applicable— (A) Does not receive compensation or gain for engaging in activities described in paragraph (1) of this definition that is in excess of any compensation or gain received in a comparable cash transaction; (B) Discloses to the consumer— (1) In writing any corporate affiliation with any creditor; and (2) If the retailer has a corporate affiliation with any creditor, at least 1 unaffiliated creditor; and (C) Does not directly negotiate with the consumer or lender on loan terms (including rates, fees, and other costs); (4) Does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable State law, unless such person or entity is compensated by a lender, a mortgage broker, or other mortgage originator or by any agent of such lender, mortgage broker, or other mortgage originator; (5) Does not include a person that meets all of the following criteria: (i) The person provides seller financing for the sale of three or fewer properties in any 12-month period to purchasers of such properties, each of which is owned by the person and serves as security for the financing; (ii) The person has not constructed, or acted as a contractor for the construction of, a residence on the property in the ordinary course of business of the person; (iii) The person provides seller financing that meets the following requirements: (A) The financing is fully amortizing; (B) The financing is one that the person determines in good faith the consumer has a reasonable ability to repay; (C) The financing has a fixed rate or an adjustable rate that is adjustable after five or more years, subject to reasonable annual and lifetime limitations on interest rate increases. If the financing agreement has an adjustable rate, the rate is determined by the addition of a margin to an index rate and is subject to reasonable rate adjustment limitations. The index the adjustable rate is based on is a widely available index such as indices for U.S. Treasury securities or SOFR. (6) Does not include a natural person, estate, or trust that meets all of the following criteria: (i) The natural person, estate, or trust provides seller financing for the sale of only one property in any 12-month period to purchasers of such property, which is owned by the natural person, estate, or trust and serves as security for the financing; (ii) The natural person, estate, or trust has not constructed, or acted as a contractor for the construction of, a residence on the property in the ordinary course of business of the person; (iii) The natural person, estate, or trust provides seller financing that meets the following requirements: (A) The financing has a repayment schedule that does not result in negative amortization; (B) The financing has a fixed rate or an adjustable rate that is adjustable after five or more years, subject to reasonable annual and lifetime limitations on interest rate increases. If the financing agreement has an adjustable rate, the rate is determined by the addition of a margin to an index rate and is subject to reasonable rate adjustment limitations. The index the adjustable rate is based on is a widely available index such as indices for U.S. Treasury securities or SOFR. (7) Does not include a servicer or servicer employees, agents and contractors, including but not limited to those who offer or negotiate terms of a mortgage for purposes of renegotiating, modifying, replacing and subordinating principal of existing mortgages where borrowers are behind in their payments, in default or have a reasonable likelihood of being in default or falling behind. Person Secondary market issuer § 323.17 Quality control standards. Mortgage originators and secondary market issuers that engage in credit decisions or covered securitization determinations themselves, or through or in cooperation with a third-party or affiliate, must adopt and maintain policies, practices, procedures, and control systems to ensure that automated valuation models used in these transactions adhere to quality control standards designed to: (a) Ensure a high level of confidence in the estimates produced; (b) Protect against the manipulation of data; (c) Seek to avoid conflicts of interest; (d) Require random sample testing and reviews; and (e) Comply with applicable nondiscrimination laws.