Common use of Appraiser Oversight Clause in Contracts

Appraiser Oversight. ‌ The purpose of the review of Appraisals by the PFI during its post-Closing QC process is to determine the quality of the Appraisal itself as well as the quality of the work of the appraiser. Therefore, the QC plan must include requirements for the monitoring and assessment of the quality of work performed by appraisers used for Mortgage Loans sold under the MPF Program. A PFI must also develop and maintain a documented process to monitor the appraisers it uses. The process, at a minimum, must include an annual review of an appraiser’s state licensing or certification status and a procedure for suspending or terminating business with individual appraisers. Additionally, the PFI must have a procedure for referring appraisers to the applicable state licensing and regulatory board if necessary. The MPF Bank may refuse to accept an Appraisal prepared by a specific appraiser or may notify a PFI that it will no longer accept Appraisals prepared by a given appraiser based on its QC reviews. PFIs are accountable for the quality of the QC Appraisal reviews regardless of whether the work is performed by the PFI itself or by an outsourced QC service provider or vendor. Field Reviews‌ The field review Appraisal must be written on one of the following forms, based on the property type: • One-Unit Residential Appraisal Field Review Report (FNMA Form 2000 / FHLMC Form 1032); or • Two-to-Four Unit Residential Appraisal Field Review Report (FNMA Form 2000A / FHLMC Form 1072). A field review Appraisal is required for ten percent (10%) of the Mortgage Loans selected in the random sampling process that have an Appraisal. The ten percent (10%) sample may be selected using a random or targeted sampling methodology, allowing PFIs to choose certain loans or Appraisals. The field review Appraisal must be performed by a qualified, appropriately licensed or certified appraiser independent of the original appraiser or appraisal firm. A field review Appraisal must include at least the following: • Clear and detailed copied, digital, or electronically imaged photographs of: o the Mortgaged Property (front, back and street scene); o the comparables used in the Appraisal under review; o any additional comparables used in the field review Appraisal. • All addenda and explanations. • A location map that shows the location of: o the subject property; o all comparables included in the Appraisal report under review; o any additional comparable sales provided by the review appraiser. • A review of the accuracy of the factual data in the original Appraisal report. Desk Review‌ A desk review of the original Appraisal for the remaining 90% of the Mortgage Loans in a PFI’s post-Closing QC random sample must be performed. It is acceptable for the desk review to be completed by an individual who is not a licensed or certified appraiser. However, the Appraisal reviewer must be competent in the application of basic appraisal theory for the following: • Assessing market risk; • Determining if a property meets eligibility requirements, including the LTV, TLTV and HTLTV ratios; • Determining that the value and marketability established as of the date of the original Appraisal are acceptable; • Assessing the quality of the original Appraisal; and • Prescribing corrective actions in the underwriting process when defects are identified. The use of an automated valuation model as a tool in the completion of the valuation assessment is also permitted. However, it is not to be used as a replacement for a desk review. The related documentation must be retained in the Mortgage Loan File or in the PFI’s QC records. Audit Review‌ The PFI must have an audit process in place to ensure that its QC processes and procedures are followed by the QC staff, and that assessments and conclusions are recorded and consistently applied. The findings must be accurately recorded and consistent with the defects noted in the PFI’s system of record. Results of the audit of QC processes and procedures must be distributed to senior management. Senior management must then distribute the results to the appropriate areas within the organization and an action plan must be put in place for remediation or changes to any policies or processes, if necessary. The PFI must provide a copy of the audits of the QC processes and procedures to the MPF Provider or its MPF Bank upon request.