[bmelancon]

I would appreciate any feedback on how we currently handle engagement of appraisals based on the situation below.

I know the regulations and 2010 guidance covers both commercial and residential, but for this purpose we are talking commercial. Our typical process is that loan operations receives an approval and based on the property type we send bids to 3 or 4 appraisers. Once those bids come in, we provide the lender and the turn time and cost i.e. 3 weeks $3,200, 2 weeks $4,500 etc. We do not provide the name of the appraiser and all of the bids are from appraisers on our approved list and are deemed qualified.

The lender then works with the borrower to determine how soon they need the results and what the borrower is willing to pay. Once the bid is selected, loan operations engages the appraiser with the winning bid. Lately, an issue has arisen that one firm is winning the majority of the work as they are both the least expensive and provide the quickest turn around. The note dept manager and I believe that since most of our appraisals are going to the same appraiser due to having the best cost and turn around time that we will have problems when we have our next compliance exam.

I would appreciate anyone’s feedback as to if our current approach to selecting and engaging appraisers inline with the 2010 guidance? Is there an issue if there is one firm that is always the quickest and least expensive, assuming they are qualified and we bid it out? Is there anything that we may be overlooking?

[rcooper]

I don’t believe you’ll find anything in the guidelines that specifically spell out an answer to your issue. However, there is plenty of information on independence and selection of an appraiser. Neither the loan production staff or the customer should have an impact on the selection of the appraiser. By allowing the customer to select the appraisal that they are willing to pay for it could be deemed as compromising the independence and validity of the process.

Take a look at the interagency guidelines, specifically sections iv-vi, and compare how your program matches up to those guidelines.

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