[Federal Register Volume 84, Number 152 (Wednesday, August 7, 2019)]
[Notices]
[Pages 38630-38633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16908]


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FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL

[Docket No. AS19-06]


Appraisal Subcommittee; Final Order Granting in Part Temporary 
Waiver Relief

AGENCY: Appraisal Subcommittee of the Federal Financial Institutions 
Examination Council.

ACTION: Final order granting in part, with specified terms and 
conditions,

[[Page 38631]]

and with the Federal Financial Institutions Examination Council (FFIEC) 
concurrence, temporary waiver relief.

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SUMMARY: The Appraisal Subcommittee (ASC) of the FFIEC is issuing a 
final order pursuant to section 1119(b) of Title XI of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989, as amended 
(Title XI) and the rules promulgated thereunder. This order grants in 
part, with specified terms and conditions, and with the FFIEC 
concurrence, a request for temporary waiver relief received from 
Governor Doug Burgum, State of North Dakota, the North Dakota 
Department of Financial Institutions, and the North Dakota Bankers 
Association, notice of which was published in the Federal Register on 
May 30, 2019.

DATES: Applicable August 7, 2019.

FOR FURTHER INFORMATION CONTACT: James R. Park, Executive Director, at 
(202) 595-7575, or Alice M. Ritter, General Counsel, at (202) 595-7577, 
ASC, 1325 G Street NW, Suite 500, Washington, DC 20005.

SUPPLEMENTARY INFORMATION:

I. Background

A. Relevant Statutory Provisions and Regulations

    The ASC was established by Title XI.\1\ The purpose of Title XI is 
``to provide that Federal financial and public policy interests in real 
estate related transactions will be protected by requiring that real 
estate appraisals utilized in connection with federally related 
transactions are performed in writing, in accordance with uniform 
standards, by individuals whose competency has been demonstrated and 
whose professional conduct will be subject to effective supervision.'' 
\2\ Section 1119(b) of Title XI authorizes the ASC to waive, on a 
temporary basis and with concurrence of the FFIEC, ``any requirement 
relating to certification or licensing of a person to perform 
appraisals under [Title XI] upon a written determination that there is 
a scarcity of certified or licensed appraisers to perform appraisals in 
connection with federally related transactions \3\ in a State, or in 
any geographical political subdivision of a State, leading to 
significant delays in the performance of such appraisals.'' \4\ 
Congress intended that the ASC exercise this waiver authority 
``cautiously.'' \5\
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    \1\ The ASC Board consists of seven members. Five members are 
designated by the heads of the FFIEC agencies (Board of Governors of 
the Federal Reserve System [Board], Bureau of Consumer Financial 
Protection [Bureau], Federal Deposit Insurance Corporation [FDIC], 
Office of the Comptroller of the Currency [OCC], and National Credit 
Union Administration [NCUA]). The other two members are designated 
by the heads of the Department of Housing and Urban Development 
(HUD) and the Federal Housing Finance Agency (FHFA).
    \2\ Title XI Sec.  1101, 12 U.S.C. 3331.
    \3\ ``Federally related transaction'' (FRT) refers to any real 
estate related financial transaction which: (a) A federal financial 
institutions regulatory agency engages in, contracts for, or 
regulates; and (b) requires the services of an appraiser. (Title XI 
Sec.  1121 (4), 12 U.S.C. 3350.)
    \4\ 12 U.S.C. 3348(b).
    \5\ House Comm. on Banking, Finance and Urban Affairs, Report 
Together with Additional, Supplemental, Minority, Individual, and 
Dissenting Views, Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989, H.R. Rep. No. 101-54 Part 1, 101st Cong., 
1st Sess., at 482-83.
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    The ASC has promulgated regulations that set forth procedures \6\ 
governing the processing of temporary waiver requests. After receiving 
a waiver request, the ASC is required to issue a public notice in the 
Federal Register requesting comment on the request for a proposed 
temporary waiver. Within 15 days of the close of the 30-day comment 
period, the ASC, by order, must grant or deny a waiver, in whole or in 
part, and with specified terms or conditions, including provisions for 
waiver termination. The ASC's order shall respond to comments received, 
provide reasons for its finding, and be published promptly in the 
Federal Register. Any ASC approval order shall be effective only upon 
FFIEC concurrence.
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    \6\ 12 CFR part 1102, subpart A.
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B. Procedural Status

    On August 1, 2018, a letter requesting a temporary waiver was 
submitted to the ASC by Governor Doug Burgum, State of North Dakota, 
the North Dakota Department of Financial Institutions, and the North 
Dakota Bankers Association (collectively, the Requester). On September 
7, 2018, ASC staff replied to the Requester by letter, in which ASC 
staff described the information required to file a completed waiver 
request pursuant to 12 CFR 1102.2 and 1102.3. The Requester submitted 
additional information in a letter dated April 10, 2019, in response to 
the ASC's September 7, 2018 letter. On April 15, 2019, the ASC convened 
a Special Meeting and determined to publish a notice for comment on the 
request for temporary waiver in the Federal Register. The request seeks 
a waiver of appraiser credentialing requirements for appraisals for 
FRTs under $500,000 for 1-to-4 family residential real estate 
transactions and under $1,000,000 for agricultural and commercial real 
estate transactions throughout the State of North Dakota for a period 
of not less than five years.
    On May 30, 2019, the ASC published a Notice of Received Request for 
a Temporary Waiver giving interested persons 30 days to submit 
comments, including submission of written data, views and arguments.\7\ 
The comment period closed on July 1, 2019. A discussion of the public 
comments received by the ASC concerning the request for temporary 
waiver relief follows in Section III below.
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    \7\ 84 FR 25052 (May 30, 2019).
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    The ASC called a Special Meeting to consider this matter on July 9, 
2019, and voted to approve the issuance of this final order granting in 
part, upon specified terms and conditions, and subject to FFIEC 
concurrence, temporary waiver relief. The FFIEC met via teleconference 
on July 12, 2019, and a quorum of the Council being present, took the 
following action: Pursuant to Sec.  1119(b) of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989, as amended, 
the Council approved the temporary waiver granted by the ASC on July 9, 
2019.

II. Request for a Temporary Waiver

    The Requester sought a temporary waiver of the appraiser 
credentialing requirements for appraisals for FRTs under $500,000 for 
1-to-4 family residential real estate transactions and under $1,000,000 
for agricultural and commercial real estate transactions throughout the 
State of North Dakota for a period of not less than five years. The 
Requester stated that a scarcity of appraisers exists, particularly in 
the rural areas of the western part of the State, indicating that of 
the 53 counties in North Dakota, 29 counties do not have a single 
appraiser residing in the county, and that while the most severe impact 
of the appraiser scarcity has been experienced in western and the most 
rural districts in North Dakota, the population centers are also 
impacted.
    The Requester conducted a survey to assess what lenders deem are 
appropriate turnaround times for residential and commercial appraisals. 
The Requester summarized the results of the survey as follows:
     81 percent reported that up to 30 days is appropriate for 
residential appraisals.
     80 percent reported that up to 60 days is appropriate for 
commercial appraisals.
     65 percent reported a delay in receiving a residential 
real estate appraisal, and 71 percent reported a delay in receiving a 
commercial appraisal.
     57 percent reported unreasonable delays in receiving 
residential real

[[Page 38632]]

estate appraisals in the prior 12 months. 72 percent reported 
unreasonable delays in receiving commercial appraisals in the prior 12 
months.
    The Requester acknowledged that federal banking agencies and NCUA 
have proposed increases to the appraisal thresholds,\8\ stating that 
``[if adopted, it] will have a positive effect that is similar to that 
which can be achieved by the granting of this waiver since both 
approaches will provide much needed relief.''
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    \8\ See 83 FR 63110 (December 7, 2018) (OCC, Board, and FDIC 
proposing to increase the residential real estate appraisal 
threshold level from $250,000 to $400,000); 83 FR 49857 (October 3, 
2018) (NCUA proposing to increase the appraisal threshold for non-
residential real estate transactions from $250,000 to $1,000,000).
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III. Summary of Comments

    The ASC received 109 \9\ comment letters in response to the 
published Notice of Received Request for a Temporary Waiver and request 
for comment. These comment letters were received from State appraiser 
certifying and licensing agencies, appraiser and mortgage lending 
associations, professional associations, appraisal firms, appraisers, 
and several banks and financial institution associations in the State 
of North Dakota.
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    \9\ Regulations.gov shows 109 comments received in total with 
105 viewable comments due to duplicates and 2 withdrawals.
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    While a few commenters supported the granting of a temporary 
waiver, the majority of comments received were from appraisers opposing 
the granting of a temporary waiver. Associations representing insured 
depository institutions in North Dakota (banks and credit unions) 
meanwhile argued that the waiver would provide some measure of relief 
in local communities without increasing any safety and soundness risks. 
Several other commenters disputed that there was a shortage of 
appraisers in North Dakota and that there are significant delays. 
Specifically, commenters offered data showing that the number of 
appraisers in North Dakota is consistent with other similarly populated 
States. Commenters also stated that the turn time of appraisals in 
North Dakota average within the Requester's range of appropriate turn 
times. Commenters also noted decreased economic activity in North 
Dakota and that turn times have improved in recent years. Several 
commenters also expressed varying concerns about the long term impact a 
waiver would have on appraisers and the appraisal profession, consumers 
and the safety and soundness of the North Dakota banking system. 
Several commenters reported making attempts to be added to lender lists 
of approved appraisers without success. Several commenters asked if a 
waiver were granted, who would be qualified to perform a Uniform 
Standards of Professional Appraisal Practice (USPAP)-compliant 
appraisal without the training and education a credentialed appraiser 
is required to have, and with whom consumers and other parties would 
file a complaint. Commenters also expressed concern over the loss of 
protection to the public if a waiver is granted. The ASC acknowledges 
these concerns and emphasizes that this is a temporary waiver while 
more long-term solutions are researched and implemented by the 
Requester and interested stakeholders in the State of North Dakota. In 
the interim, lenders are still required to obtain USPAP-compliant 
appraisals for FRTs and should review appraisals for compliance with 
USPAP. Several commenters challenged the ASC's authority to exercise 
temporary waiver discretion at this point in time, commenting that the 
statutory provision was meant to be applied when States were first 
setting up appraiser regulatory programs and were perhaps not going to 
be able to meet the statutory deadline to establish a program. The ASC 
notes that the statute includes no expiration of the waiver provisions 
in the statute.
    The North Dakota Real Estate Appraiser Qualifications and Ethics 
Board (Appraiser Board) provided a letter in which they recommend 
denying the request. The Appraiser Board reported a 44 percent increase 
in appraisers since 2009 and submitted data in support of their 
position. The letter from the Appraiser Board also addressed recent 
regulatory changes that have been made or are being considered that 
address many of the concerns in the request.

IV. ASC Discussion

    In order to grant a temporary waiver, the ASC must make a 
determination that a scarcity of credentialed appraisers is leading to 
significant delays in obtaining appraisals for FRTs in the geographic 
area \10\ specified in the request. In considering this request, the 
ASC examined both evidence of a scarcity of appraisers in North Dakota, 
and evidence of scarcity leading to significant delay. The ASC noted 
that North Dakota's appraisal turnaround time is one of the slowest in 
the country. In this case, while data provided to the ASC by the 
Requester and the Appraiser Board and included in public comments, was 
not consistent and sometimes conflicted, the majority of the ASC 
members concluded that a scarcity of appraisers does exist in North 
Dakota and that the scarcity is leading to a significant delay in 
appraisal services for FRTs. Therefore, by majority vote, the ASC 
determined to grant in part, subject to specified terms and conditions, 
and subject to FFIEC concurrence, temporary waiver relief as follows:
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    \10\ The ASC's section 1119(b) temporary waiver authority is 
with respect to a State or any geographical political subdivision of 
a State.
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     A temporary waiver of appraiser credentialing requirements 
for appraisals of FRTs under $500,000 for 1-to-4 family residential 
real estate transactions throughout the State of North Dakota for a 
period of one year, unless the federal banking agencies issue a rule 
increasing appraisal exemption threshold limits for residential real 
estate transactions,\11\ in which case the residential waiver will 
terminate 60 days after the effective date of that threshold increase.
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    \11\ 83 FR 63110 (December 7, 2018).
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     A temporary waiver of appraiser credentialing requirements 
for appraisals of FRTs under $1,000,000 for commercial real estate 
transactions \12\ throughout the State of North Dakota for a period of 
one year.
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    \12\ The request was for commercial and agricultural, but 
agricultural loans are already included in either commercial or 
business loans.
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     During the one-year period, the Requester is expected to 
develop a plan through continued dialogue with North Dakota 
stakeholders, including the Appraiser Board, to identify potential 
solutions to address appraiser scarcity and appraisal delay.
     At least 30 days prior to the expiration of the one-year 
period, the Requester should provide (1) a status report to the ASC on 
the plan that was developed in collaboration with stakeholders and any 
implementation progress made on that plan toward identifying meaningful 
solutions to resolve appraiser scarcity and delay issues faced in North 
Dakota; and (2) supporting data showing that appraiser scarcity leading 
to significant delays continues to exist, which may include information 
to identify specific localities affected by appraiser scarcity. The ASC 
will consider the information as presented by the Requester, and by 
vote in open session, may extend the temporary waiver for an additional 
one-year period.
     The ASC at any time may terminate a waiver order on a 
finding that significant delay in the receipt of appraisals for FRTs no 
longer exists, or

[[Page 38633]]

that the terms and conditions of the order are not being satisfied.

V. Order

    For the reasons stated above, and pursuant to section 1119(b) of 
Title XI and 12 CFR part 1102, subpart A, the ASC grants temporary 
waiver relief to the Requester, subject to the following specified 
terms and conditions:
     A temporary waiver of appraiser credentialing requirements 
for appraisals of FRTs under $500,000 for 1-to-4 family residential 
real estate transactions throughout the State of North Dakota for a 
period of one year, unless the federal banking agencies issue a rule 
increasing appraisal exemption threshold limits for residential real 
estate transactions,\13\ in which case the residential waiver will 
terminate 60 days after the effective date of that threshold increase.
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    \13\ 83 FR 63110 (December 7, 2018).
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     A temporary waiver of appraiser credentialing requirements 
for appraisals of FRTs under $1,000,000 for commercial real estate 
transactions throughout the State of North Dakota for a period of one 
year.
     During the one-year period, the Requester is expected to 
develop a plan through continued dialogue with North Dakota 
stakeholders, including the Appraiser Board, to identify potential 
solutions to address appraiser scarcity and appraisal delay.
     At least 30 days prior to the expiration of the one-year 
period, the Requester should provide (1) a status report to the ASC on 
the plan that was developed in collaboration with stakeholders and any 
implementation progress made on that plan toward identifying meaningful 
solutions to resolve appraiser scarcity and delay issues faced in North 
Dakota; and (2) supporting data showing that appraiser scarcity leading 
to significant delays continues to exist, which may include information 
to identify specific localities affected by appraiser scarcity. The ASC 
will consider the information as presented by the Requester, and by 
vote in open session, may extend the temporary waiver for an additional 
one-year period.
     The ASC at any time may terminate a waiver order on a 
finding that significant delay in the receipt of appraisals for FRTs no 
longer exists, or that the terms and conditions of the order are not 
being satisfied.
* * * * *

    By the Appraisal Subcommittee.

    Dated: August 2, 2019.
Arthur Lindo,
Chairman.
[FR Doc. 2019-16908 Filed 8-6-19; 8:45 am]
BILLING CODE 6700-01-P