[walley1]

I have a stockholder of our Holding Company that has recently obtained their Residential Appraisal License. I have 2 questions, (1) Is it allowable to allow him to appraise for the bank? (2) Would you have to have any type of Affiliated disclosure?

FYI: All appraisals on ordered and reviewed by the In House appraisal coordinator on a rotation basis, no contact from lenders.

[jholzknecht]

Question 1
Section 1026.42 of Regulation Z contains provisions related to valuation independence. This section applies to any consumer credit transaction secured by the consumer’s principal dwelling.

Section 1026.42(d)(1)(i) states, “No person preparing a valuation or performing valuation management functions for a covered transaction may have a direct or indirect interest, financial or otherwise, in the property or transaction for which the valuation is or will be performed.” The rule specifically mentions employees and affiliates, but does not mention shareholders.

There does not appear to be a direct violation resulting from the shareholder conducting a valuation; however, if there is any indication that the return the appraiser would earn as a shareholder is influencing the valuation, examiners would likely cite a valuation.

Question 2

RESPA and Section 1025.15 of Regulation X place restrictions and require a disclosure for an affiliated business arrangement. Such an arrangement means the relationship among business entities where one entity has effective control over the other by virtue of a partnership or other agreement or is under common control with the other by a third entity or where an entity is a corporation related to another corporation as parent to subsidiary by an identity of stock ownership. “Control” means that a person:

(i) Is a general partner, officer, director, or employer of another person;

(ii) Directly or indirectly or acting in concert with others, or through one or more subsidiaries, owns, holds with power to vote, or holds proxies representing, more than 20 percent of the voting interests of another person;

(iii) Affirmatively influences in any manner the election of a majority of the directors of another person; or

(iv) Has contributed more than 20 percent of the capital of the other person.

Depending on the level of ownership, your shareholder might have control that could result in an affiliated business arrangement. As indicated above “control” requires a significant level of ownership, generally more than 20% of the company’s ownership.

• This reply was modified 2 years, 11 months ago by jholzknecht. Reason: Typo

[walley1]

Thank you so much, I knew you would know.
You are appreciated

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