[Federal Register Volume 64, Number 127 (Friday, July 2, 1999)]
[Proposed Rules]
[Pages 36216-36219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16846]



[[Page 36215]]

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Part VI





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 200



Single Family Mortgage Insurance; Appraiser Roster Placement and 
Removal Procedures; Proposed Rule

  Federal Register / Vol. 64, No. 127 / Friday, July 2, 1999 / Proposed 
Rules  

[[Page 36216]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 200

[Docket No. FR-4429-P-01]
RIN 2502-AH29


Single Family Mortgage Insurance; Appraiser Roster Placement and 
Removal Procedures

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement one aspect of HUD's 
Homebuyer Protection Plan, which was launched on June 1, 1998. The 
Homebuyer Protection Plan consists, in part, of a number of reforms to 
the appraisal process for the purchase of single family properties 
financed with mortgages insured by the Federal Housing Administration 
(FHA) and certain manufactured homes under the FHA Title I program. 
This proposed rule would establish an independent removal procedure for 
HUD's Appraiser Roster. The Appraiser Roster lists appraisers who are 
eligible to perform FHA single family appraisals. This proposed rule 
would also codify the current placement procedure for the Appraiser 
Roster.

DATES: Comments Due Date: August 2, 1999.

ADDRESSES: Submit your comments about this proposed rule to the Office 
of the General Counsel, Rules Docket Clerk, Room 10276, U.S. Department 
of Housing and Urban Development, 451 Seventh Street, SW, Washington, 
DC 20410-0500. Your comments should refer to the above docket number 
and title. We do not accept facsimile (FAX) comments. A copy of each 
comment submitted will be available for public inspection and copying 
during regular business hours (7:30 a.m. to 5:30 p.m.) at the above 
address.

FOR FURTHER INFORMATION CONTACT: Vance T. Morris, Director, Home 
Mortgage Insurance Division, Office of Insured Single Family Housing, 
Room 9266, U.S. Department of Housing and Urban Development, 451 
Seventh Street, SW, Washington, DC 20410-8000; telephone (202) 708-2700 
(this is not a toll-free number). Hearing or speech-impaired 
individuals may access this number via TTY by calling the toll-free 
Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

a. HUD's Homebuyer Protection Plan

    HUD launched the Homebuyer Protection Plan (the Plan) on June 1, 
1998. Among other innovations, the Plan reforms the appraisal process 
for the purchase of single family properties financed with mortgages 
insured by the Federal Housing Administration (FHA) and certain 
manufactured homes under the FHA Title I program. One aspect of the 
appraisal process that is undergoing reform is HUD's Appraiser Roster. 
The Appraiser Roster lists appraisers who are eligible to perform FHA 
single family appraisals. Lenders must select an appraiser from this 
list for property appraisals involving the FHA single family mortgage 
insurance program. HUD maintains the Appraiser Roster because the 
success of the single family mortgage insurance program and HUD's 
ability to protect its financial interests begin with selecting 
qualified and knowledgeable appraisers.1
---------------------------------------------------------------------------

    \1\ In the future, HUD plans that the Appraiser Roster will be 
administered by HUD's Real Estate Assessment Center.
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b. Appraiser Roster Reforms

    The Appraiser Roster reforms that would be implemented by the 
Homebuyer Protection Plan protect homebuyers by ensuring accurate and 
complete appraisals of homes purchased through the FHA single family 
insurance program. An accurate and complete appraisal protects 
homebuyers by informing them, before they complete the purchase of a 
home, about any extensive repairs that may be needed to make the home 
habitable. It is important to note, however, that while HUD is 
committed to protecting homebuyers, the purpose of an FHA property 
appraisal is to determine the maximum insurable mortgage and to protect 
the FHA insurance funds. Consequently, the inclusion of an appraiser on 
the Appraiser Roster does not create or imply a warranty or endorsement 
to the prospective homebuyer or to any other organization or individual 
by HUD of the listed appraiser nor does it represent a warranty of the 
appraisal performed by the listed appraiser. The inclusion of an 
appraiser on the Appraiser Roster means only that a listed appraiser 
has met the qualifications and conditions, prescribed by the Secretary, 
for placement on the Appraiser Roster.

c. Placement Procedure

    This proposed rule would codify in regulations the requirements for 
placement on the Appraiser Roster. These requirements are currently in 
place. This rule would merely codify existing practice. To be eligible 
for placement on the Appraiser Roster, an appraiser must be state-
certified or state-licensed and must not be listed on either the 
General Services Administration's Suspension and Debarment List, HUD's 
Limited Denial of Participation List, or HUD's Credit Alert Interactive 
Voice Response System. In addition, the appraiser must also pass a HUD 
test on FHA appraisal methods and reporting.
    To apply for placement on the Appraiser Roster, the appraiser must 
submit an application to HUD. To verify that the appraiser is eligible 
to perform HUD/FHA appraisals, HUD performs a detailed review of the 
appraiser's professional qualifications and checks for any negative 
information. If HUD's review of an appraiser's application demonstrates 
that the appraiser is qualified to be listed on the Roster, the 
appraiser is placed on the Roster. Appraisers that are listed on the 
Appraiser Roster are responsible for obtaining and complying with the 
HUD Appraiser Handbook (4150.2) (and any updates to the handbook) and 
all other instructions and standards issued by HUD.

d. Removal Procedure

    An appraiser who is eligible to perform HUD/FHA appraisals is hired 
by the lender and, therefore, has a contractual responsibility to that 
lender. However, the appraiser also provides services for HUD programs 
and, therefore, the appraiser also has an obligation to perform 
appraisal services that meet HUD's standards and requirements. This 
dual responsibility of the appraiser is recognized in HUD's review and 
reporting requirements. The lender and appraiser must meet their 
respective obligations as prescribed by HUD. Failure to comply with 
appraiser obligations merits removal from the Appraiser Roster.
    This proposed rule would establish an independent procedure by 
which an appraiser listed on HUD's Appraiser Roster may be removed from 
the Roster. HUD is proposing this independent removal procedure, in 
addition to HUD's existing debarment, suspension, and limited denial of 
participation remedies, in order to better safeguard the FHA insurance 
funds and to better protect homebuyers. The removal procedure would 
provide a less lengthy process that would be specifically targeted 
towards the Appraiser Roster and would fully protect appraisers' due 
process rights.

[[Page 36217]]

    It should be noted that HUD had previously issued regulations that 
governed appraiser removal from the Roster at 24 CFR 267.8(d)(3). These 
regulations were revised during HUD's regulation streamlining in 1996. 
HUD had intended to retain a less formal procedure for removal from the 
Roster, but the procedure was not issued during the streamlining. This 
proposed rule would reinstate this less formal procedure. The procedure 
included in this proposed rule, however, would provide greater 
protection for appraisers than the procedure previously located at 24 
CFR 267.8(d)(3).
    This proposed rule would amend HUD's regulations at 24 CFR part 200 
(entitled ``Introduction to FHA Programs'') to add a new subpart G 
(entitled ``Appraiser Roster; Placement and Removal Procedures'') 
covering the placement and removal of appraisers from the Roster. 
Subpart G (which would consist entirely of new Sec. 200.200, entitled 
``Appraiser Roster; placement and removal procedures'') would allow HUD 
to remove an appraiser from the Roster at any time for cause. Cause 
would include, but would not be limited to:

--Significant deficiencies in appraisals;
--Failing to maintain standing as a state-certified or state-licensed 
appraiser;
--Prosecution for committing, attempting to commit, or conspiring to 
commit fraud, misrepresentation, or any other offense that may reflect 
on the appraiser's character or integrity;
--Failing to perform appraisal functions in accordance with 
instructions and standards issued by HUD;
--Failing to comply with any agreement made between the appraiser and 
HUD or with any certification made by the appraiser;
--Being issued a final debarment, suspension, or limited denial of 
participation;
--Failure to maintain eligibility requirements for placement on the 
Appraiser Roster as described in new Sec. 200.200 or any other 
instructions or standards issued by HUD; or
--Failure to comply with HUD-imposed education sanctions within the 
specified period for complying with such education sanctions.

    The removal procedure proposed by this rule would be an independent 
removal procedure. The removal procedure would apply only to removal 
actions taken under Sec. 200.200. The procedure would not apply in any 
way to removal actions taken under any other authority available to 
HUD, nor would the procedure set forth in Sec. 200.200(d)(2) (entitled 
``Procedure for removal'') be available to appraisers in debarment, 
suspension, or limited denial of participation actions. Furthermore, 
the proposed rule would require the automatic removal from the 
Appraiser Roster of an appraiser, if the appraiser has been issued a 
final debarment, suspension, or limited denial of participation. Under 
these circumstances, the procedure set forth in Sec. 200.200(d)(2) 
would not be applicable.
    Except in the above case, the removal procedure proposed by this 
rule would require HUD to give an appraiser written notice of a 
proposed decision to remove the appraiser from the Roster. This notice 
would include the reasons for the removal and the duration of the 
removal. The appraiser would then be given 20 days from the date of the 
removal notice to submit a written response. During this period, the 
appraiser would also have the right to request a conference. Requests 
for a conference would have to be in writing and submitted along with a 
written response.
    Within 30 days of receiving a written response, or if the appraiser 
requests a conference, within 30 days of the completion of the 
conference, a HUD official, designated by the Secretary, would review 
the appraiser's appeal and send the appraiser a final decision either 
affirming, modifying, or cancelling the removal from the Appraiser 
Roster. The HUD official designated by the Secretary to review the 
appraiser's appeal would not be someone involved in HUD's initial 
removal decision nor would it be someone who reports to a person 
involved in that initial decision.
    If the appraiser does not submit a written response within 20 days, 
the removal would become effective 20 days after the date of HUD's 
initial removal notice. If the appraiser submits a written response, 
and the removal decision is affirmed or modified, the removal would 
become effective on the date of HUD's notice affirming or modifying its 
initial removal decision.
    The proposed addition of Sec. 200.200 would not prohibit HUD from 
debarring, suspending, issuing a limited denial of participation, 
seeking a false claims action, taking such other action against an 
appraiser as provided for in 24 CFR part 24 (entitled ``Government 
Debarment and Suspension and Governmentwide Requirements for Drug-Free 
Workplace (Grants)''), or from seeking any other remedy against an 
appraiser available to HUD by statute or otherwise. In some cases, 
where there is evidence that an appraiser is deficient in FHA appraisal 
requirements, HUD may require an appraiser to undergo professional 
training and retake the HUD test on FHA appraisal methods and 
reporting.
    With respect to removing an appraiser from the Appraiser Roster, or 
taking other appropriate enforcement action against an appraiser, HUD 
is cognizant that section 222 of the Small Business Regulatory 
Enforcement Fairness Act of 1996 (Public Law 104-121, 110 Stat. 
847)(''SBREFA'') requires the Small Business and Agriculture Regulatory 
Enforcement Ombudsman to ``work with each agency with regulatory 
authority over small businesses to ensure that small business concerns 
that receive or are subject to an audit, on-site inspection, compliance 
assistance effort or other enforcement related communication or contact 
by agency personnel are provided with a means to comment on the 
enforcement activity conducted by this personnel.'' To implement this 
statutory provision, the Small Business Administration has requested 
that agencies include the following language on agency publications and 
notices that are provided to small businesses concerns at the time the 
enforcement action is undertaken. The language is as follows:

Your Comments Are Important

    The Small Business and Agriculture Regulatory Enforcement 
Ombudsman and 10 Regional Fairness Boards were established to 
receive comments from small businesses about federal agency 
enforcement actions. The Ombudsman will annually evaluate the 
enforcement activities and rate each agency's responsiveness to 
small business. If you wish to comment on the enforcement actions of 
[insert agency name], call 1-888-REG-FAIR (1-888-734-3247).

    As HUD stated in its notice describing HUD's actions on the 
implementation of SBREFA, which was published on May 21, 1998 (63 FR 
28214), HUD intends to work with the Small Business Administration to 
provide small entities with information on the Fairness Boards and 
National Ombudsman program, at the time enforcement actions are taken, 
to ensure that small entities have the full means to comment on the 
enforcement activity conducted by HUD.

II. Justification for 30-Day Public Comment Period

    In accordance with HUD's regulations concerning rulemaking at 24 
CFR part 10 (entitled ``Rulemaking: Policy and Procedures''), it is 
HUD's policy that the public comment period for notices of proposed 
rulemaking should be 60 days. In the case of this proposed rule,

[[Page 36218]]

however, we have determined that there is good cause to reduce the 
public comment period to 30 days.
    This proposed rule would implement part of the Homebuyer Protection 
Plan, which was launched on June 1, 1998. This Plan reforms FHA's 
single family home appraisal process and will benefit 800,000 families 
who obtain FHA-insured mortgage financing each year. One goal of the 
Plan is to provide these families with the best protection against bad 
appraisals ever available in the public or private sector.
    In light of this important goal, HUD has previously made the public 
and members of affected industries, including appraisers, aware of the 
reforms outlined in the Homebuyer Protection Plan. For example, we 
provided, through HUD Press Release No. 98-206, a thorough overview of 
the Homebuyer Protection Plan on June 1, 1998. We also met routinely 
with industry representatives to discuss the details of the Plan and to 
seek comment and opinion regarding the Plan. While these meetings were 
held for discussion purposes only, and were not held to reach agreement 
on HUD policy, they served to make a significant number of affected 
parties aware of the changes HUD is proposing.
    Finally, HUD has made a handbook available that describes the Plan 
in detail. This handbook has been widely available through the HUD Web 
Page (http://www.hud.gov/reac/reasfappr.html). Through these means, HUD 
has alerted appraisers of the changes that would be brought about by 
the Homebuyer Protection Plan, including the processes by which 
appraisers may be removed from HUD's Appraiser Roster.
    Given the broad exposure of the reforms contained in the Homebuyer 
Protection Plan, and considering the importance of the Plan's efficient 
implementation, HUD has determined that a 30-day comment period for 
this proposed rule should provide sufficient notice and opportunity for 
interested parties to comment.

III. Findings and Certifications

Paperwork Reduction Act Statement

    The information collection requirements contained in this rule have 
been submitted to the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) and are pending OMB 
approval. The information collection requirements were previously 
published for comment in a separate notice in the Federal Register on 
May 26, 1999 (64 FR 28502). An agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless the collection displays a valid control number.

Environmental Impact

    This proposed rule would establish placement and removal procedures 
for HUD's Appraiser Roster. Accordingly, under 24 CFR 50.19(c)(1), this 
proposed rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (Pub. L. 91-190, 83 Stat. 
852, codified as amended at 42 U.S.C. 4321-4347).

Regulatory Flexibility Act

    The Secretary has reviewed this proposed rule before publication, 
and by approving it certifies, in accordance with the Regulatory 
Flexibility Act (5 U.S.C. 605(b)), that this proposed rule would not 
have a significant economic impact on a substantial number of small 
entities. The proposed rule would establish the procedure by which an 
appraiser, who has violated FHA single family mortgage insurance 
program requirements, may be removed from HUD's Appraiser Roster. 
Accordingly, to the extent that this proposed rule would impact small 
entities it will be as a result of actions taken by small entities 
themselves--that is, violation of single family program regulations and 
requirements.
    Generally, HUD expects that the number of removal proceedings 
initiated under this proposed rule would be relatively low. For 
example, in fiscal year 1998, of the over 30,000 appraisers listed on 
the Appraiser Roster, HUD initiated enforcement proceedings against 
only 36 appraisers (most of these enforcement proceedings were Limited 
Denial of Participation proceedings).
    Further, the proposed rule would provide several procedural 
safeguards designed to minimize any potential impact on small entities. 
For example, the rule grants appraisers, selected for removal from the 
Appraiser Roster, with the opportunity to provide a written response 
and to request a conference regarding a proposed removal. The rule also 
specifies that the official designated by HUD to review an appeal may 
not be the same HUD official involved in the initial removal decision.
    While HUD has determined that this rule would not have a 
significant economic impact on a substantial number of small entities, 
HUD welcomes any comments regarding alternatives to this rule that 
would meet HUD's objectives, as described in this preamble, and would 
be less burdensome to small entities.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4, 109 Stat. 48, 64, codified at 2 U.S.C. 1531-1538) (UMRA) requires 
Federal agencies to assess the effects of their regulatory actions on 
State, local, and tribal governments and on the private sector. This 
proposed rule does not impose, within the meaning of the UMRA, any 
Federal mandates on any State, local, or tribal governments or on the 
private sector.

Federalism Impact

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612 (entitled ``Federalism''), has determined that 
the policies contained in this rule will not have substantial direct 
effects on States or their political subdivisions, on the relationship 
between the Federal Government and the States, or on the distribution 
of power and responsibilities among the various levels of government.

List of Subjects in 24 CFR Part 200

    Administrative practice and procedure, Claims, Equal employment 
opportunity, Fair housing, Home improvement, Housing standards, 
Incorporation by reference, Lead poisoning, Loan programs--housing and 
community development, Minimum property standards, Mortgage insurance, 
Organization and functions (Government agencies), Penalties, Reporting 
and recordkeeping requirements, Social security, Unemployment 
compensation, Wages.

    For the reasons stated in the preamble, HUD proposes to amend 24 
part 200 as follows:

PART 200--INTRODUCTION TO FHA PROGRAMS

    1. The authority citation for part 200 continues to read as 
follows:

    Authority: 12 U.S.C. 1701-1715z-18; 42 U.S.C. 3535(d).

    2. Add subpart G, consisting of Sec. 200.200, to read as follows:

[[Page 36219]]

Subpart G--Appraiser Roster; Placement and Removal Procedures

Sec.
200.200  Appraiser Roster; placement and removal procedures.

Subpart G--Appraiser Roster; Placement and Removal Procedures


Sec. 200.200  Appraiser Roster; placement and removal procedures.

    (a) Appraiser Roster. HUD maintains a roster of appraisers, and a 
mortgagee must select an appraiser from this list for the appraisal of 
properties involving the FHA single family mortgage insurance program.
    (b) Disclaimer. Since an appraisal is performed to determine the 
maximum insurable mortgage and to protect the FHA insurance funds, the 
inclusion of an appraiser on the Appraiser Roster does not create or 
imply a warranty or endorsement to a prospective homebuyer or to any 
other organization or individual by HUD of the listed appraiser nor 
does it represent a warranty of any appraisal performed by the listed 
appraiser. The inclusion of an appraiser on the Appraiser Roster means 
only that a listed appraiser has met the qualifications and conditions, 
prescribed by the Secretary, for inclusion on the Appraiser Roster.
    (c) Placement on the Appraiser Roster--(1) Application. To apply 
for placement on the Appraiser Roster, you must submit an application 
to HUD.
    (2) Eligibility. To be eligible for placement on the Appraiser 
Roster you must be a state-licensed or state-certified appraiser, pass 
a HUD test on FHA appraisal methods and reporting, and you must not be 
listed on:
    (i) The General Services Administration's Suspension and Debarment 
List;
    (ii) HUD's Limited Denial of Participation List; or
    (iii) HUD's Credit Alert Interactive Voice Response System.
    (d) Removal from the Appraiser Roster. HUD officials, as designated 
by the Secretary, may at any time remove a listed appraiser from the 
Appraiser Roster for cause under the provisions of this section. The 
provisions of this section apply only to removal actions taken under 
this section. These provisions do not apply to removal actions taken 
under any section in 24 CFR part 24 nor to any other remedy against an 
appraiser available to HUD by statute or otherwise.
    (1) Cause for removal. Cause for removal under the provisions of 
this section include, but are not limited to:
    (i) Significant deficiencies in appraisals;
    (ii) Failure to maintain standing as a state-certified or state-
licensed appraiser;
    (iii) Prosecution for committing, attempting to commit, or 
conspiring to commit fraud, misrepresentation, or any other offense 
that may reflect on the appraiser's character or integrity;
    (iv) Failure to perform appraisal functions in accordance with 
instructions and standards issued by HUD;
    (v) Failure to comply with any agreement made between the appraiser 
and HUD or with any certification made by the appraiser;
    (vi) Being issued a final debarment, suspension, or limited denial 
of participation;
    (vii) Failure to maintain eligibility requirements for placement on 
the Appraiser Roster as set forth under this section or any other 
instructions or standards issued by HUD; or
    (viii) Failure to comply with HUD-imposed education sanctions 
within the specified period for complying with such education 
sanctions.
    (2) Procedure for removal. If you are a listed appraiser and HUD 
decides to remove you for cause from the Appraiser Roster under the 
provisions of this section, the following procedure applies to you 
unless you have been issued a final debarment, suspension, or limited 
denial of participation:
    (i) You will be given written notice of your proposed removal. The 
notice will include the reasons for your proposed removal and the 
duration of your proposed removal.
    (ii) You will have 20 days from the date of your notice of proposed 
removal to submit a written response appealing the proposed removal and 
to request a conference. A request for a conference must be in writing 
and must be submitted along with a written response.
    (iii) Within 30 days of receiving your written response, or if you 
have requested a conference, within 30 days after the completion of 
your conference, a HUD official, designated by the Secretary, will 
review your appeal and will send you a final decision either affirming, 
modifying, or canceling your removal from the Appraiser Roster. HUD may 
extend this time upon giving you notice. The HUD official designated by 
the Secretary to review your appeal will not be someone involved in 
HUD's initial removal decision nor will it be someone who reports to a 
person involved in that initial decision.
    (iv) If you do not submit a written response, your removal will be 
effective 20 days after the date of HUD's initial removal notice. If 
you submit a written response, and the removal decision is affirmed or 
modified, your removal or modification will be effective on the date of 
HUD's notice affirming or modifying the initial removal decision.
    (3) Automatic removal for issuance of final debarment, suspension, 
or limited denial of participation. If you are a listed appraiser and 
you have been issued either a final debarment, suspension, or limited 
denial of participation, you will be automatically removed from the 
Appraiser Roster. The provisions of this section do not apply to you, 
and you may not appeal the removal action under the provisions of this 
section.
    (e) Compliance with HUD-issued instructions and standards. All 
appraisers listed on the Appraiser Roster are responsible for obtaining 
and complying with the HUD Appraiser Handbook (4150.2) (and any updates 
to the handbook) and all other instructions and standards issued by 
HUD. The handbook can be obtained through the HUD Web Page (http://
www.hud.gov/reac/reasfappr.html).
    (f) Education sanctions. Where there is evidence that an appraiser 
is deficient in FHA appraisal requirements, HUD may require an 
appraiser to undergo professional training and retake the HUD test on 
FHA appraisal methods and reporting.
    (g) Re-application. Appraisers removed from the Roster must re-
apply to HUD in accordance with instructions provided by HUD.
    (h) Other action. Nothing in this section prohibits HUD from taking 
such other action, against an appraiser, as provided under 24 CFR part 
24, or from seeking any other remedy against an appraiser available to 
HUD by statute or otherwise.

    Dated: June 10, 1999.
William C. Apgar,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 99-16846 Filed 7-1-99; 8:45 am]
BILLING CODE 4210-27-P