The federal government proposed Monday to bring appraisal management firms under the supervision of state licensing agencies.
The action, taken jointly by six financial regulators, represents a step forward for one of dozens of yet-unfinished regulations required by the 2010 Dodd-Frank Wall Street reform law.
The draft rule sets standards for the establishment of state agencies charged with certifying, licensing and supervising the go-between firms.
Under the proposal, states are not obligated to create the agencies, and would face no penalties for declining to do so.
“However, an AMC is barred ... from providing appraisal management services for federally related transactions in a state that has not established such a regulatory structure,” the agencies said.
Under the draft rule, participating states would require AMCs to use only state-certified appraisers for any federally related transaction and require that all appraisals comply with existing appraisal industry standards, including those set forth in the Truth in Lending Act.
The agencies would have authority to approve or deny applications from AMCs to operate in the state, as well as powers to investigate and discipline bad actors, according to the proposal.
States would have three years to impose the new standards after enactment of the rule, drafted jointly by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, the Federal Housing Finance Agency and the National Credit Union Administration.
Interested parties and members of the public will have 60 days to comment on the proposed rule, once it is published in the Federal Register.