Dodd-Frank

A current Fed proposal opens the door for increased litigation of lenders who underwrite loans in which a non-
arm’s length process was evident.

Underwriters are aggressively scrutinizing, cutting, or rejecting Appraisals where originator-Appraiser collaboration
is present.

Appraisers are becoming less tolerant of “originator influence,” given licensing implications and heightened national
exposure regarding need for “non-influence.”

Over the past few years, there have been a number of significant bank regulatory changes. Of those changes, the
community bank’s collateral evaluation program has been specifically emphasized. This “Appraisal Management” involves
the ordering, reviewing, and acceptance of the Appraisal. Examiners must now adhere to a process,where the bank
ensures that the Vendor/Appraiser is qualified and competent, with no conflict of interest. With thes enew regulations, it is clear that as part of the examination process, Regulators/Examiners, will review an Appraisal to ensure that the
methods, assumptions, and value conclusions are reasonable. There are basically two options for compliance:

• Order Appraisals through an Appraisal Management Company (AMC), at the borrower’s expense
• Create an in-house Appraisal Management AND Review Department at the bank’s expense

Community banks can handle the in-house Appraisal and Evaluation Management, while meeting all of the Appraisal
Independence Requirements. Some believe they already have an adequate system established. The question is,”Is your
internal Appraisal Management Department now compliant with the Interagency Appraisal and Evaluation Guidelines?”
What is required now, is much more than simply having your Compliance Officer “order” the Appraisal, and “review” it to ensure that the Appraisal has an Estimate of Value and is signed by the Appraiser. The Appraisal must now meet all of the Uniform Standards of Professional Appraisal Practice (USPAP), as well as federal and the community bank’s Appraisal guidelines. This type of in-house Appraisal Management comes at a cost, including employing the proper staff, and creating all of the necessary policies and procedures required of the next safety and soundness examination team. This cost can be substantial, especially for the typical community bank

The Dodd-Frank Act has broad and deep implications that will touch every corner of
financial services and multitude of other industries. This site, developed and maintained by
attorneys at Leonard, Street and Deinard, is dedicated to making sense of this complex
legislation and helping businesses understand how it will affect them specifically.

To read more about this, go to Dodd-Frank.