[Federal Register Volume 76, Number 135 (Thursday, July 14, 2011)]
[Proposed Rules]
[Pages 41441-41444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-17498]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 200

[Docket No. FR-5458-P-01]
RIN 2502-AI96


Federal Housing Administration (FHA) Appraiser Roster: Appraiser 
Qualifications for Placement on the FHA Appraiser Roster

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule updates HUD's regulations to conform to the 
statutory requirement that appraisers must be certified, rather than 
licensed, by a state appraisal licensing board in order to appear on 
the FHA Appraiser Roster. This requirement was established by the 
Housing and Economic Recovery Act of 2008. Although current HUD 
practice is in compliance with the statutory mandate, the regulations 
reflect outdated prior policy of permitting state-licensed appraisers 
to be listed on the FHA Appraiser Roster. In addition, HUD has taken 
this opportunity to update the FHA Appraiser Roster by replacing the 
obsolete references to the Credit Alert Interactive Voice Response 
System with references to its successor, the online-based Credit Alert 
Verification Reporting System.

DATES: Comment Due Date: September 12, 2011.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 7th Street, 
SW., Room 10276, Washington, DC 20410-0500. Communications must refer 
to the above docket number and title. There are two methods for 
submitting public comments. All submissions must refer to the above 
docket number and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street, SW., Room 10276, 
Washington, DC 20410-0001.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
http://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule. No Facsimile Comments. Facsimile (FAX) comments are not 
acceptable.

    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance

[[Page 41442]]

appointment to review the public comments must be scheduled by calling 
the Regulations Division at 202-708-3055 (this is not a toll-free 
number). Individuals with speech or hearing impairments may access this 
number via TTY by calling the toll-free Federal Relay Service at 800-
877-8339. Copies of all comments submitted are available for inspection 
and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Karin Hill, Director, Office of Single 
Family Program Development, Office of Housing, Department of Housing 
and Urban Development, 451 7th Street, SW., Room 9278, Washington, DC 
20410-8000; telephone number 202-708-2121 (this is not a toll-free 
number). Persons with hearing or speech impairments may access this 
number via TTY by calling the Federal Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

A. The FHA Appraiser Roster

    To qualify for FHA insurance for a single-family mortgage, a lender 
must obtain an appraisal of the property that is to be the security for 
the loan. Only an appraiser listed on HUD's FHA Appraiser Roster may 
perform the appraisal. Under HUD's current regulation in 24 CFR 
200.202(b), an applicant who wishes to be included on the FHA Appraiser 
Roster must be a state-licensed or state-certified appraiser under the 
minimum criteria issued by the Appraiser Qualifications Board (AQB) of 
the Appraisal Foundation, a not-for-profit, private educational 
foundation. The applicant must not be listed on the General Services 
Administration's Suspension and Debarment list, on HUD's Limited Denial 
of Participation list, or in HUD's Credit Alert Interactive Voice 
Response System (CAIVRS). HUD's regulations for the Appraiser Roster 
are codified in subpart G of 24 CFR part 200 (consisting of Sec. Sec.  
200.200-200.206).

B. The Housing and Economic Recovery Act of 2008

    Section 1404 of the Housing and Economic Recovery Act of 2008 
(HERA) (Pub. L. 110-289, approved July 30, 2008) amended section 202 of 
the National Housing Act (12 U.S.C. 1708) to revise qualification 
standards for FHA-approved appraisers. HERA amended what is now section 
202(g) of the National Housing Act \1\ to mandate that all appraisers 
chosen or approved to conduct appraisals of properties that will be 
security for FHA-insured mortgages must be ``certified'': (1) By the 
state in which the property to be appraised is located, or by a 
nationally recognized professional appraisal organization; and (2) have 
demonstrated verifiable education in the appraisal requirements 
established by FHA. Under amended section 202(g) of the National 
Housing Act, licensed appraisers are no longer authorized to conduct 
appraisals of properties securing an FHA-insured mortgage.
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    \1\ Before HERA was enacted on July 30, 2008, the statutory 
provisions regarding FHA appraiser qualifications were codified in 
section 202(e) of the National Housing Act. Besides amending the FHA 
appraiser qualifications, HERA, in section 2116, redesignated 
section 202(e) as 202(f). Section 203(b) of the Helping Families 
Save Their Homes Act of 2009 (Pub. L. 111-22, approved May 20, 2009) 
added a new subsection (d) to section 202 of the National Housing 
Act entitled ``Limitations on Participation in Origination and 
Mortgagee Approval.'' Consequently, the provision regarding FHA 
appraisers was redesignated as section 202(g) of the National 
Housing Act, the section where the provision is contained at the 
time of this writing.
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    In order to comply with HERA's requirements governing who qualifies 
as an FHA-approved appraiser, HUD issued a Mortgagee Letter, ML 2008-
39, on December 17, 2008. The mortgagee letter advised appraisers of 
the revised eligibility requirements to qualify for placement on the 
FHA Appraiser Roster and provided a timeline for implementation of 
those requirements. Despite the fact that HERA's provisions were made 
effective upon enactment, FHA determined that the loss of available FHA 
Roster appraisers in certain locations would impede its ability to 
support affordable mortgage financing in those areas and hinder use of 
FHA single-family programs at a time when use of those programs has 
increased significantly. Therefore, in order to implement this change 
in appraiser eligibility requirements in a manner that was not 
disruptive to the FHA mortgage lending process, ML 2008-39 provided a 
deadline of October 1, 2009, for all FHA appraisers on the Appraisal 
Roster to become state-certified. In addition, the mortgage letter 
indicated that FHA had ceased to accept applications by state-licensed 
appraisers on October 1, 2008, in order to comply with HERA.\2\
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    \2\ Copies of the mortgagee letters referenced in this final 
rule may be downloaded from: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/.
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    Given the need to implement the new HERA requirements as quickly as 
possible, HUD chose the HERA option that FHA appraisers must be state-
certified rather than the option that would permit appraisers to be 
certified by appraisal organizations. HUD recognized that it would take 
time for HUD to decide upon which nationally recognized professional 
appraisal organizations HUD would designate as organizations acceptable 
for certification of appraisers who would be approved for the FHA 
Appraiser Roster. HUD would need to review the organization's appraiser 
approval criteria and ensure that the organization, in fact, issues 
certifications. Since HERA allowed for FHA-approved appraisers to be 
state-certified appraisers, HUD determined, as is more fully discussed 
in the next section, that state-certified appraisers not only meet the 
higher education and experience standards that HERA sought to be used 
for FHA-insured transactions (all states provide for higher education 
and experience standards for state-certified appraisers than are 
provided for state-licensed appraisers) but also that utilizing only 
state-certified appraisers is a more efficient and expedient approach 
to ensure the availability of highly qualified appraisers to serve as 
FHA-approved appraisers.

C. Nationally Recognized Professional Appraiser Organizations

    HERA provides that appraisers may either be state-certified or 
certified by a ``nationally recognized professional appraisal 
organization'' in order to appear on the Roster. FHA recognizes the 
potential benefits of the flexibility of accepting either form of 
certification. However, FHA has determined that in order to prevent 
disruption and to ensure efficient processing of mortgage insurance, 
FHA will accept only state certification and not the certification of a 
``nationally recognized professional appraisal organization.''
    Currently, there are approximately 55,000 appraisers on the Roster, 
and all of these appraisers are state-certified and would already be in 
compliance with the changes this proposed rule would make. Accordingly, 
choice of appraisers who are state-certified would mean no interruption 
of processing mortgage insurance. FHA recognizes that in ML 2008-39 it 
was announced that FHA considered the Appraisal Foundation to be a 
nationally recognized professional appraisal organization and that FHA 
would publish a notice in the Federal Register requesting comments on 
what FHA should consider in examining nationally recognized 
professional appraisal organizations. Upon further consideration, FHA 
has determined that while the Appraisal Foundation may be a nationally 
recognized professional appraisal organization, it does not issue 
certifications. In addition, because state certification sufficiently 
accomplishes

[[Page 41443]]

the statutory purpose of ensuring higher quality appraisals, it is 
unnecessary to request comments on nationally recognized professional 
appraisal organizations.

D. Credit Alert Interactive Voice Response System (CAIVRS)

    CAIVRS was implemented in 1988 as an FHA loan origination aid. 
CAIVRS is used to determine if a potential borrower has a federal debt 
that is currently in default or foreclosure or has had a claim paid by 
the reporting agency within the last 3 years. Federally approved 
lenders use CAIVRS to prescreen all applicants for federally insured 
loans. Since 1997, FHA-approved lenders have had Internet access to 
CAIVRS via the FHA Connection online system to check the Social 
Security Number of each borrower and coborrower or nonprofit agency 
acting as a borrower listed on a new FHA loan application. As noted 
above, under the existing FHA Appraiser Roster regulations, an 
appraiser will not be approved by FHA if the appraiser is listed on 
CAIVRS and thus has a federal debt that is currently in default or 
foreclosure or has had a claim paid by the reporting agency within the 
last 3 years.
    On July 11, 2008, HUD issued ML 2008-18, stating that HUD was 
discontinuing telephone access to CAIVRS because the hardware 
supporting the telephone access was obsolete and could no longer be 
repaired or maintained. Access to CAIVRS is now available solely 
through the Internet, and CAIVRS is now known as the Credit Alert 
Verification Reporting System, although the acronym remains the same.

II. This Proposed Rule

    This proposed rule conforms the FHA Appraiser Roster regulations 
regarding eligibility requirements of appraisers to qualify for 
placement and retention on the Appraiser Roster by making the 
regulations consistent with both HERA's mandate that all FHA approved 
appraisers be state-certified and HUD's current policy regarding state-
certification of appraisers as set forth in ML 2008-39. In order to 
make the Appraiser Roster regulations consistent with current statute, 
all references to state licensing and state-licensed appraisers are 
removed from the regulations in Sec.  200.202 and Sec.  200.204. This 
final rule also eliminates the reference to the Credit Alert 
Interactive Voice Response System in Sec.  200.202. Because the Credit 
Alert Interactive Voice Response System no longer exists, the phrase 
has been replaced with ``Credit Alert Verification Reporting System,'' 
the new appraiser alert system put in place by ML 2008-18.

III. Findings and Certification

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities.
    The proposed rule would not add any new regulatory burdens on FHA-
approved appraisers or applicants for FHA approval. HERA requires that 
an appraiser be state-certified to be approved by FHA to be on the 
Appraiser Roster. HUD ceased accepting applications from state-licensed 
appraisers on October 1, 2008, and all appraisers already on the 
Appraiser Roster must have become state-certified by October 1, 2009, 
to remain on the Appraiser Roster. This proposed rule will not create 
new costs for small entities of appraisers or of lenders because the 
rule does not impose any new requirements on appraisers. In addition, 
FHA's Appraisal Roster pertains solely to individuals, not to entities. 
Individual appraisers must apply to be on the FHA Appraiser Roster. 
Therefore, the undersigned certifies that this rule will not have a 
significant impact on a substantial number of small entities.
    Notwithstanding HUD's view that this rule will not have a 
significant effect on a substantial number of small entities, HUD 
specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This rule will not have federalism 
implications and would not impose substantial direct compliance costs 
on state and local governments or preempt state law within the meaning 
of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments, and on the private sector. This rule does not 
impose any federal mandates on any state, local, or tribal governments, 
or on the private sector, within the meaning of UMRA.

Environmental Impact

    This proposed rule does not direct, provide for assistance or loan 
and mortgage insurance for, or otherwise govern or regulate, real 
property acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this rule 
is categorically excluded from environmental review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321).

Paperwork Reduction Act

    The information collection requirements for this rule have been 
approved by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB 
control number 2502-0538. In accordance with the Paperwork Reduction 
Act, 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 currently valid OMB control number.

Catalogue of Federal Domestic Assistance

    The Catalogue of Federal Domestic Assistance Number for the 
principal FHA single-family mortgage insurance program is 14.117.

List of Subjects in 24 CFR Part 200

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

    Accordingly, for the reasons discussed in the preamble, HUD 
proposes to amend 24 CFR part 200 to read as follows:

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PART 200--INTRODUCTION TO FHA PROGRAMS

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

    Authority:  12 U.S.C. 1702-1715-z-21; 42 U.S.C. 3535(d).

    2. In Sec.  200.202, revise paragraphs (b)(1) and (b)(2)(iii) as 
follows:


Sec.  200.202  How do I apply for placement on the Appraiser Roster?

* * * * *
    (b) * * *
    (1) You must be a state-certified appraiser with credentials that 
complied with the applicable certification criteria established by the 
Appraiser Qualification Board (AQB) of the Appraisal Foundation and in 
effect at the time the certification was awarded by the issuing 
jurisdiction; and
    (2) * * *
    (iii) HUD's Credit Alert Verification Reporting System.
    3. In Sec.  200.204, revise paragraphs (a)(1)(ii), (c)(1) and (2) 
as follows:


Sec.  200.204  What actions may HUD take against unsatisfactory 
appraisers on the Appraiser Roster?

* * * * *
    (a) * * *
    (1) * * *
    (ii) Losing standing as a state-certified appraiser due to 
disciplinary action in any state in which the appraiser is certified;
* * * * *
    (c) * * *
    (1) Appraisers subject to state disciplinary action. An appraiser 
whose state certification in any state has been revoked, suspended, or 
surrendered as a result of a state disciplinary action is automatically 
suspended from the Appraiser Roster and prohibited from conducting FHA 
appraisals in any state until HUD receives evidence demonstrating that 
the state-imposed sanction has been lifted.
    (2) Expirations not due to state disciplinary action. An appraiser 
whose certification in a state has expired is automatically suspended 
from the Appraiser Roster in that state and may not conduct FHA 
appraisals in that state until HUD receives evidence that demonstrates 
renewal, but may continue to perform FHA appraisals in other states in 
which the appraiser is certified.
* * * * *

    Dated: June 14, 2011.
Robert C. Ryan,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2011-17498 Filed 7-13-11; 8:45 am]
BILLING CODE 4210-67-P