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[Federal Register Volume 89, Number 235 (Friday, December 6, 2024)]
[Proposed Rules]
[Pages 96912-96935]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27698]

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 89, No. 235 / Friday, December 6, 2024 / 
Proposed Rules

[[Page 96912]]

FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL

12 CFR Part 1102

[Docket No. AS24-22]
RIN 3139-AA01

Appraisal Subcommittee Enforcement Authority Regarding the 
Effectiveness of State Appraiser and Appraisal Management Company 
Regulatory Programs

AGENCY: Appraisal Subcommittee, Federal Financial Institutions 
Examination Council.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Appraisal Subcommittee (ASC) of the Federal Financial 
Institutions Examination Council invites comment on a proposed rule to 
implement a framework to govern the ASC's enforcement authority 
regarding the effectiveness of Appraiser and Appraisal Management 
Company (AMC) Programs overseen by State Appraiser Regulatory Agencies. 
The proposed rule would codify the existing compliance review process 
with modifications. The proposed rule would require an analysis to 
assess program effectiveness, outline requirements for maintaining 
effective programs, and authorize the ASC to bring enforcement actions 
against such agencies that fail to maintain effective programs.

DATES: Send comments on or before February 4, 2025.

ADDRESSES: Commenters are strongly encouraged to submit comments 
through the Federal eRulemaking Portal or by email, if possible. You 
may submit comments, identified by Docket Number AS24-22, by any of the 
following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include the docket number in the 
subject line of the message.
     Mail: Address to Appraisal Subcommittee--FFIEC, Attn: Lori 
Schuster, Management and Program Analyst, 1325 G Street NW, Suite 500, 
Washington, DC 20005.
     Hand Delivery/Courier: Address to Appraisal Subcommittee--
FFIEC, Attn: Lori Schuster, Management and Program Analyst, 1325 G 
Street NW, Suite 500, Washington, DC 20005.
    Instructions: All submissions must include the agency name and 
docket number for this document. All comments and any supporting 
materials or attachments received will be posted without change to 
https://www.regulations.gov, including any business or personal 
information that you provide, such as name and address information, 
email addresses, or phone numbers. Commenters should submit only 
information that the commenter wishes to make available publicly. 
Please do not enclose any information in your comment or supporting 
materials that you consider confidential or inappropriate for public 
disclosure.
    Docket: To read comments regarding this proposed rulemaking, go to: 
https://www.regulations.gov, insert docket number AS24-22 in the 
``Search'' box, and follow the prompts. You may also personally inspect 
comments at the Appraisal Subcommittee's office, 1325 G Street NW, 
Suite 500, Washington, DC 20005. To make an appointment, please contact 
Lori Schuster at (202) 595-7578 or [email protected].

FOR FURTHER INFORMATION CONTACT: Natalie Lutz, Attorney Advisor, 202-
792-1217, [email protected] or Matt Ponzar, General Counsel, 202-595-
7577, [email protected], Appraisal Subcommittee, 1325 G Street NW, Suite 
500, Washington, DC 20005. The above phone numbers are not toll-free 
numbers. Persons with hearing or speech impairments may access these 
numbers by dialing 7-1-1 to access telecommunications relay services.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The following section discusses the proposed rule's objectives, the 
legal basis for this proposed rule, background information, the 
reasoning behind issuing this proposed rule, and a summary of the 
applicable recommendations made by the Appraisal Subcommittee Advisory 
Committee for the Development of Regulations (ASCAC).

A. Proposed Rule's Objectives

    The proposed rule (proposal or proposed rulemaking) is intended to 
establish an effective and consistent enforcement approach to the 
Appraisal Subcommittee's (ASC) oversight of State Appraiser Regulatory 
Agencies.\1\ The ASC believes that the proposal would significantly 
improve its effectiveness in monitoring and bringing enforcement 
actions against State Appraiser Regulatory Agencies that may not have 
effective Appraiser and Appraisal Management Company (AMC) Programs. 
The ASC also believes that the proposed rulemaking would be beneficial 
in clarifying requirements for State Appraiser Regulatory Agencies to 
promote the effectiveness of their Appraiser and AMC Programs. Finally, 
the proposed rule would provide additional transparency to State 
Appraiser Regulatory Agencies and other stakeholders regarding the 
ASC's procedures for monitoring Appraiser and AMC Programs and the 
potential for enforcement actions against State Appraiser Regulatory 
Agencies. In general, the proposed rule would codify the existing ASC 
compliance review process consistent with the ASC's current practices 
and processes for conducting compliance reviews, with some 
modifications and minor corrections.
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    \1\ 12 U.S.C. 3332(a)(5), uses the term ``State Appraiser 
Regulatory Agencies.'' As discussed further below, for purposes of 
the proposed rule, this term is synonymous with ``State appraiser 
certifying and licensing agency'' as defined in section 1121(1) of 
Title XI (12 U.S.C. 3350(1)).
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B. Statutory Authority

    Title XI of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 was amended by the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act) in 2010 (Title 
XI).\2\
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    \2\ Public Law 111-203, sec. 1473, 124 Stat. 2190-2199 (2010).
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    Section 1103(a)(1)(A) \3\ of Title XI requires the ASC to monitor 
requirements established by State Appraiser Regulatory Agencies for the 
certification and licensing of individuals qualified to perform 
appraisals in connection with federally related transactions,\4\ 
including a code

[[Page 96913]]

of professional responsibility. Section 1103(a)(1)(B) also requires the 
ASC to monitor the requirements established by State Appraiser 
Regulatory Agencies for the registration and supervision of the 
operations and activities of AMCs.\5\
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    \3\ 12 U.S.C. 3332(a)(1)(A).
    \4\ Federally related transaction 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. See 12 
U.S.C. 3350(4).
    \5\ 12 U.S.C. 3332(a)(1)(B).
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    Additionally, section 1118(a) of Title XI requires the ASC to 
monitor State Appraiser Regulatory Agencies to determine whether each 
State Appraiser Regulatory Agency:
    (1) has policies, practices, funding, staffing, and procedures that 
are consistent with Title XI;
    (2) processes complaints and completes investigations in a 
reasonable time period;
    (3) appropriately disciplines sanctioned appraisers and AMCs;
    (4) maintains an effective regulatory program; and
    (5) reports complaints and disciplinary actions on a timely basis 
to the national registries of appraisers and AMCs maintained by the 
ASC.\6\
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    \6\ 12 U.S.C. 3347(a).
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    Section 1118(a) of Title XI further provides that the ASC can 
impose certain sanctions against a State Appraiser Regulatory Agency 
that fails to have an effective appraiser regulatory program.\7\ For 
the purposes of the proposed rule, the term ``enforcement actions'' 
would be used instead of ``sanctions.'' In determining whether a 
program is effective, the ASC must include an analysis of (1) the 
licensing and certification of appraisers, (2) the registration of 
AMCs, (3) the issuance of temporary licenses and certifications for 
appraisers, (4) the receiving and tracking of submitted complaints 
against appraisers and AMCs, (5) the investigation of complaints, and 
(6) enforcement actions against appraisers and AMCs.\8\ Under the 
proposal, the evaluation criteria are referred to as ``program 
functions.''
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    \7\ Id.
    \8\ Id. (numbering of the program functions is added for 
emphasis).
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    Section 1118(a) of Title XI also specifically authorizes the ASC to 
impose interim actions and suspensions against a State Appraiser 
Regulatory Agency as an alternative to, or in advance of, the non-
recognition of a State Appraiser Regulatory Agency.\9\ Under the 
proposed rule, these ``interim actions and suspensions'' would be known 
as ``interim enforcement actions.''
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    \9\ Id.
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    Consistent with section 1118 of Title XI,\10\ the proposal would 
outline three types of enforcement actions: interim actions, 
suspensions, and non-recognition. Title XI refers to non-recognition as 
derecognition.\11\ Under the proposed rule, the term ``non-
recognition'' would be used instead of ``derecognition'' to be 
consistent with subpart B of 12 CFR part 1102, which sets forth the ASC 
rules of practice and procedure governing non-recognition proceedings 
for State Appraiser Regulatory Agencies.
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    \10\ 12 U.S.C. 3347.
    \11\ Id.
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    Finally, section 1106 of Title XI provides that the ASC has, among 
other powers, the authority to promulgate regulations regarding certain 
specified areas, one of which is enforcement.\12\ House Report 111-94 
indicates that the term ``enforcement'' covers the actions the ASC may 
take in evaluating State Appraiser Regulatory Agencies and the gamut of 
sanctions that the ASC may impose against such agencies.\13\ For 
purposes of prescribing regulations, the ASC must establish an advisory 
committee of industry participants, including appraisers, lenders, 
consumer advocates, real estate agents, and government agencies, and 
hold meetings as necessary to support the development of 
regulations.\14\
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    \12\ 12 U.S.C. 3335.
    \13\ See H. Rept. 111-94, at 96 (2009).
    \14\ 12 U.S.C. 3335.
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C. Background

    Congress enacted Title XI in response to concerns that problematic 
appraisals played a major role in the savings and loan crisis of the 
1980s.\15\ The purpose of Title XI is to provide that Federal financial 
and public policy interests in real estate 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.\16\ To help ensure that the purpose 
of Title XI was carried out, Congress established a regulatory 
framework to monitor and oversee the real estate appraisal industry, 
including establishing the ASC.\17\
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    \15\ See Government Accountability Office, GAO-03-404, 
Regulatory Programs: Opportunities to Enhance Oversight of the Real 
Estate Appraisal Industry, at 1 and 6 (2003).
    \16\ 12 U.S.C. 3331.
    \17\ The ASC is composed of seven members, each designated by 
the head of a Federal agency (the Board of Governors of the Federal 
Reserve System (Board), the Consumer Financial Protection Bureau 
(CFPB), the Federal Deposit Insurance Corporation (FDIC), the Office 
of the Comptroller of the Currency (OCC), the National Credit Union 
Administration (NCUA), the Department of Housing and Urban 
Development (HUD), and the Federal Housing Finance Agency (FHFA)). 
See 12 U.S.C. 3310 and 12 U.S.C. 1708(g)(2).
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    Since the enactment of Title XI, one of the ASC's functions has 
been to monitor the requirements established by State Appraiser 
Regulatory Agencies for the certification and licensing of real estate 
appraisers qualified to perform appraisals in connection with federally 
related transactions.\18\ The monitoring is accomplished through 
periodic or accelerated compliance reviews of Appraiser Programs of 
each State \19\ to assess whether the program is operating in a manner 
consistent with Title XI and to assess the implementation of minimum 
requirements for licensing and certifying appraisers as adopted by the 
Appraiser Qualifications Board (AQB) of the Appraisal Foundation \20\ 
pursuant to section 1116 of Title XI.\21\ The ASC also maintains a 
national registry of State licensed and certified appraisers eligible 
to perform appraisals in federally related transactions (Appraiser 
Registry).\22\
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    \18\ 12 U.S.C. 3332(a)(1)(A).
    \19\ All 50 States, the District of Columbia, and four U.S. 
territories have established Appraiser Programs to ensure the 
availability of licensed and certified appraisers and effective 
supervision of their activities. The four territories include Guam, 
Puerto Rico, the Commonwealth of the Northern Mariana Islands, and 
the U.S. Virgin Islands. American Samoa does not have an Appraiser 
Program.
    \20\ The Appraiser Qualifications Board of the Appraisal 
Foundation adopts the ``Real Property Appraiser Qualification 
Criteria'' (AQB Criteria), which establishes the minimum education, 
experience, and examination requirements for the licensure and 
certification of real property appraisers and minimum requirements 
for trainee and supervisory appraisers. See AQB Criteria, available 
at https://www.appraisalfoundation.org/imis/TAF/Standards/Qualification_Criteria/Qualification_Criteria__RP_/TAF/AQB_RPAQC.aspx.
    \21\ 12 U.S.C. 3345.
    \22\ 12 U.S.C. 3332(a)(3).
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    In 2010, Title XI was amended by the Dodd-Frank Act.\23\ Subsection 
1473(f) of the Dodd-Frank Act expanded the ASC's functions to include 
monitoring the requirements established by State Appraiser Regulatory 
Agencies for the registration and supervision of the operations and 
activities of AMCs.\24\

[[Page 96914]]

State Appraiser Regulatory Agencies with an AMC Program are evaluated 
through periodic or accelerated compliance reviews to assess whether 
the program is operating in a manner consistent with Title XI and to 
assess the implementation of the minimum requirements for State 
registration and supervision of AMCs.\25\ Subsection 1473(f) also 
established a parallel Federal system of oversight for an AMC that 
operates as a subsidiary of a financial institution overseen by a 
Federal banking regulator.\26\ These entities are referred to as 
``federally regulated AMCs'' under this proposal. Federally regulated 
AMCs are not required to register with a State Appraiser Regulatory 
Agency.\27\ Finally, subsection 1473(f) required the ASC to maintain a 
national registry of AMCs that are either registered with and subject 
to supervision of a State Appraiser Regulatory Agency or operating 
subsidiaries of a federally regulated financial institution (AMC 
Registry).\28\
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    \23\ See supra note 2.
    \24\ Public Law 111-203, sec. 1473(f), 124 Stat. 2191-2192; 12 
U.S.C. 3332(a)(1)(B). See supra note 13 at 97. Presently, 50 States 
and the District of Columbia have AMC Programs. Hawaii's AMC Program 
sunset on June 30, 2023. However, Hawaii House Bill 2641 was signed 
into law on June 21, 2024, to reenact the version of the AMC Program 
that was originally part of the Hawaii Department of Commerce and 
Consumer Affairs. The Hawaii AMC Program established pursuant to 
House Bill 2641 commenced on September 1, 2024. American Samoa, 
Guam, Puerto Rico, the Commonwealth of the Northern Mariana Islands, 
and the U.S. Virgin Islands do not have AMC Programs.
    \25\ The Dodd-Frank Act added section 1124 to Title XI, 
Appraisal Management Company Minimum Requirements, which required 
the OCC, Board, FDIC, NCUA, FHFA, and CFPB to establish, by rule, 
minimum requirements for the registration and supervision of AMCs by 
State Appraiser Regulatory Agencies that elect to register and 
supervise AMCs pursuant to Title XI. See 12 U.S.C. 3353(a). The 
related final rule was published in the Federal Register on June 9, 
2015, with an effective date of August 10, 2015. See 80 FR 32658 
(June 9, 2015).
    \26\ Public Law 111-203, sec. 1473(f), 124 Stat. 2192; 12 U.S.C. 
3353(c). See supra note 13 at 97.
    \27\ Public Law 111-203, sec. 1473(f), 124 Stat. 2192; 12 U.S.C. 
3353(c).
    \28\ Public Law 111-203, sec. 1473(f), 124 Stat. 2192; 12 U.S.C. 
3332(a)(6).
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    In addition to authorities related to AMCs, subsection 1473(k) of 
the Dodd-Frank Act improved the ASC's ability to oversee State 
Appraiser Regulatory Agencies in several important ways.\29\ First, 
subsection 1473(k) added funding and staffing to the list of criteria 
against which the ASC must evaluate a State Appraiser Regulatory 
Agency.\30\ Second, subsection 1473(k) requires the ASC to evaluate 
whether a State Appraiser Regulatory Agency processes complaints and 
completes its investigations in a reasonable time period, whether a 
State Appraiser Regulatory Agency appropriately disciplines sanctioned 
appraisers and AMCs, whether a State Appraiser Regulatory Agency 
maintains an effective regulatory program, and whether a State 
Appraiser Regulatory Agency reports complaints and disciplinary actions 
to the Appraiser and AMC Registries on a timely basis.\31\ Third, 
subsection 1473(k) permits the ASC to impose interim actions and 
suspensions against State Appraiser Regulatory Agencies under certain 
circumstances.\32\
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    \29\ Public Law 111-203, sec.1473(k), 124 Stat. 2196; 12 U.S.C. 
3347. See supra note 13 at 96-97.
    \30\ Id.
    \31\ Id.
    \32\ Id.
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    Finally, subsection 1473(d) of the Dodd-Frank Act added the 
authority to promulgate regulations concerning ``temporary practice, 
national registry, information sharing, and enforcement.'' \33\ If the 
ASC decides to undertake rulemaking on any of the four areas identified 
above,\34\ subsection 1473(d) further requires the ASC to establish an 
advisory committee of industry participants and hold meetings as 
necessary to support the development of regulations.\35\
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    \33\ Public Law 111-203, sec.1473(d), 124 Stat. 2191; 12 U.S.C. 
3335. See supra note 13 at 96.
    \34\ See Curtis W. Copeland, Cong. Research Serv., R41472, 
Rulemaking Requirements and Authorities in the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, at 59 and 87 (Nov. 3, 
2010).
    \35\ Public Law 111-203, sec.1473(d), 124 Stat. 2191; 12 U.S.C. 
3335.
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D. Reasons for Issuing This Proposed Rule

    Title XI did not originally provide the ASC with the authority to 
issue legislative rulemaking, nor the authority to enforce its own 
standards and pursue incremental improvements in the regulatory 
performance of State Appraiser Regulatory Agencies through interim 
actions and suspensions (interim enforcement actions).\36\
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    \36\ See supra note 13 at 58.
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    Instead of regulations, the ASC has issued and relied on Policy 
Statements with respect to monitoring State Appraiser Regulatory 
Agencies.\37\ The Policy Statements address the requirements of Title 
XI and offer guidance to State Appraiser Regulatory Agencies regarding 
compliance with Title XI and the rules promulgated thereunder.\38\ 
Additionally, prior to the Dodd-Frank Act, the only enforcement action 
that the ASC could take against a State Appraiser Regulatory Agency was 
non-recognition, which would prohibit all licensed and certified 
appraisers from that State from performing appraisals in connection 
with federally related transactions.\39\ Non-recognition is a severe 
enforcement action that could affect the real estate markets and 
financial institutions within the State. To date, the ASC has not 
imposed non-recognition against a State Appraiser Regulatory Agency.
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    \37\ Id. See also Government Accountability Office, GAO-12-147, 
Real estate Appraisals: Appraisal Subcommittee Needs to Improve 
Monitoring Procedures, at 11 and 30 (2012).
    \38\ 83 FR 9144 (Mar. 5, 2018). See also Policy Statements, 
available at https://asc.gov/resources/governance. (hereinafter 
Policy Statements).
    \39\ Public Law 101-73, 103 Stat. 511-519 (1989). See supra note 
13 at 58.
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    As discussed above, the Dodd-Frank Act provided the ASC with 
additional enforcement authorities to take against State Appraiser 
Regulatory Agencies, when appropriate, along with related rulemaking 
authority.\40\ The ASC is now issuing this proposed rule to implement 
these additional enforcement authorities included in the Dodd-Frank 
Act.
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    \40\ See supra note 2.
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E. Recommendations by the ASCAC

    On February 18, 2014, following the enactment of the Dodd-Frank 
Act, the ASC established the ASCAC in accordance with the Federal 
Advisory Committee Act.\41\ The purpose of the ASCAC was to provide 
independent advice and recommendations to the ASC regarding the 
development of regulations that may be prescribed by the ASC concerning 
temporary practice, the Appraiser and AMC Registries, information 
sharing, and enforcement.\42\ The ASCAC was comprised of eighteen 
members nominated by the ASC Executive Director and approved by the ASC 
Chairperson in consultation with the ASC Board members.\43\ The ASCAC 
met four times: April 16-17, July 22-23, and October 15-16, 2014, and 
February
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    \41\ 5 U.S.C. chapter 10. Membership in the ASCAC was determined 
in accordance with the Amended Balanced Membership Plan dated June 
18, 2014. See Balanced Membership Plan, dated February 18, 2014, 
available at https://www.asc.gov/sites/default/files/documents/GeneralCorrespondence/Balanced%20Membership%20Plan%20-%20Final%202014.02.12.pdf. See also Amended Balanced Membership 
Plan, dated June 18, 2014, available at https://www.asc.gov/sites/default/files/documents/GeneralCorrespondence/Amended%20Balanced%20Membership%20Plan%202014.06.18.pdf.
    \42\ 12 U.S.C. 3335.
    \43\ See ASCAC Member List, available at https://www.asc.gov/sites/default/files/2023-03/2014.07.14%20Advisory%20Committee%20Member%20List%20-%20amended%201.21.15.pdf. The ASCAC members represented a balance of 
expertise across a range of industry participants and stakeholders 
as contemplated by section 1106 of Title XI, 12 U.S.C. 3335, 
including appraisers, AMCs, lenders, consumer advocates, real estate 
agents, and government agencies. All ASCAC members had experience 
regarding the appraiser regulatory framework for federally related 
transactions.

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[[Page 96915]]

12-13, 2015.\44\ The ASCAC completed its recommendation report on April 
30, 2015,\45\ and presented its recommendations to the ASC on May 13, 
2015.\46\ The ASCAC's recommendation report stated that most members 
believed the ASC ``must'' codify the ASC Policy Statements through 
rulemaking.\47\
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    \44\ See April 16-17, 2014 ASCAC Meeting Minutes, available at 
https://asc.gov/sites/default/files/documents/GeneralCorrespondence/April%202014%20ASCAC%20Meeting%20Minutes.pdf; July 22-23, 2014 ASCAC 
Meeting Minutes, available at https://asc.gov/sites/default/files/documents/GeneralCorrespondence/Meeting%20Minutes%20-%20July%202014.pdf; October 15-16, 2014 ASCAC Meeting Minutes, 
available at https://asc.gov/sites/default/files/documents/GeneralCorrespondence/October%202014%20ASCAC%20Meeting%20Minutes.pdf; and February 12-13, 
2015 ASCAC Meeting Minutes, available at https://asc.gov/sites/default/files/documents/OtherCorrespondence/February%202015%20Advisory%20Committee%20Minutes.pdf.
    \45\ See ASCAC Final Recommendation Report, available at https://www.asc.gov/sites/default/files/2023-03/2015.04.30%20-%20ASCAC%20Recommendations%20-%20Final.pdf.
    \46\ See May 13, 2015 ASC Meeting Minutes, available at https://asc.gov/sites/default/files/documents/MeetingMinutes/05.13.15%20-%20Open%20Minutes.pdf.
    \47\ See ASCAC Final Recommendation Report, supra note 45 at 3.
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    Given the ASC's intent to promote effective and consistent 
oversight, the ASC is now prepared to implement its statutory authority 
to address the effectiveness of Appraiser and AMC Programs through 
rulemaking. The ASCAC recommendation report covers matters beyond 
enforcement actions against State Appraiser Regulatory Agencies and 
discusses the desirability of codifying all the Policy Statements. For 
this proposed rulemaking, the ASC is responding to only the ASCAC's 
recommendations that apply to its enforcement authority regarding the 
effectiveness of Appraiser and AMC Programs administered by State 
Appraiser Regulatory Agencies and is proposing to codify only portions 
of such Policy Statements pertaining to such enforcement authorities. 
The ASC considers the ASCAC's recommendation report regarding these 
enforcement authorities to be relevant. Some recommendations address 
ongoing issues and problems that the ASC has continued to face since 
the report was issued. Many of the report's underlying observations are 
concerns in the appraiser regulatory framework today. Thus, the ASC has 
considered the ASCAC's recommendations in developing this proposed 
rule.
1. ASCAC's Sanction Matrices
    The ASCAC developed and recommended three sanction matrices to be 
used by the ASC in sanctioning State Appraiser Regulatory Agencies.\48\ 
The three sanction matrices covered temporary practice, Appraiser and 
AMC Registries, and enforcement, and proposed twelve potential types of 
enforcement actions.\49\ However, the ASC proposes not to adopt the 
three sanction matrices recommended by the ASCAC for the following 
reasons.
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    \48\ Id. at 24 and 26-30. The sanction matrices start on page 
26.
    \49\ Id.
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    Section 1118(a) of Title XI authorizes the ASC to impose 
enforcement actions against a State Appraiser Regulatory Agency that 
fails to have an effective regulatory program and includes six program 
functions relevant to making this determination.\50\ The six applicable 
program functions include (1) the licensing and certification of 
appraisers, (2) the registration of AMCs, (3) the issuance of temporary 
licenses and certifications for appraisers, (4) the receiving and 
tracking of submitted complaints against appraisers and AMCs, (5) the 
investigation of complaints, and (6) enforcement actions against 
appraisers and AMCs.\51\ The ASC believes that the ASCAC-recommended 
sanction matrices do not incorporate all six applicable program 
functions, such as the licensing and certification of appraisers and 
the registration of AMCs, in determining whether an Appraiser or AMC 
Program is effective in accordance with section 1118(a) of Title 
XI.\52\ Therefore, the ASC views the matrices as partially incomplete 
and not effective in implementing all the program functions in section 
1118(a).\53\
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    \50\ 12 U.S.C. 3347(a).
    \51\ Id.
    \52\ Id.
    \53\ Id.
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2. ASCAC's Method of Addressing Deficiencies
    The ASCAC recommended that enforcement actions be brought per 
individual deficiency against State Appraiser Regulatory Agencies using 
sanction matrices.\54\ Under this ASCAC recommendation, an enforcement 
action would be imposed for each deficiency of a State Appraiser 
Regulatory Agency. For example, under the ASCAC-recommended temporary 
practice sanction matrix, a State Appraiser Regulatory Agency could 
receive a warning letter for not issuing temporary licenses or 
certifications on an assignment basis and could receive a separate 
suspension for not issuing temporary licenses or certifications within 
five business days.
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    \54\ See ASCAC Final Recommendation Report, supra note 45 at 26-
30.
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    This enforcement approach recommended by the ASCAC would not permit 
the ASC to deviate from the matrices to consider the appropriate 
enforcement action based on the underlying facts of each compliance 
review. The ASC, however, believes that deficiencies should be 
addressed collectively rather than individually to allow for the ASC to 
consider significant variations in the underlying facts of each 
compliance review.
    Therefore, under the proposal, the ASC would bring an enforcement 
action based on the aggregation of deficiencies identified during a 
compliance review. For example, under the proposed rule, the ASC would 
impose only one enforcement action against a State Appraiser Regulatory 
Agency for all deficiencies identified during a compliance review. The 
number of deficiencies, the State Appraiser Regulatory Agency's 
response to the preliminary report, and the presence of any relevant 
mitigating and aggravating factors would guide the ASC's consideration 
of the appropriate enforcement action.
3. ASCAC's Proposed Enforcement Actions
    The ASCAC also recommended twelve potential types of enforcement 
actions to be incorporated into the three sanction matrices.\55\ The 
twelve potential types of enforcement actions included: (1) a warning 
letter, (2) training for State Appraiser Regulatory Agency staff, (3) 
training for State Appraiser Regulatory Agency board members, (4) 
consultation with other State authorities, (5) meeting with affected 
parties, (6) a requirement for a State Appraiser Regulatory Agency to 
use a disciplinary sanction matrix for complaints, (7) expedited or 
follow-up reviews, (8) continuous monitoring, (9) interim removal of 
appraiser(s) from the Appraiser Registry or AMC(s) from the AMC 
Registry, (10) other removal of appraiser(s) from the Appraiser 
Registry or AMC(s) from the AMC Registry, (11) interim derecognition, 
and (12) derecognition.\56\ The proposed rule would directly address 
three of the ASCAC's recommended enforcement actions: warning letters, 
suspension (interim derecognition), and non-recognition. The proposed 
rule would introduce and define a fourth enforcement action: a 
negotiated agreement.
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    \55\ Id. at 24.
    \56\ Id.

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[[Page 96916]]

    For the reasons stated below, the ASC is not planning to explicitly 
include the other nine enforcement actions recommended by the ASCAC. 
The ASC believes some potential enforcement actions suggested by the 
ASCAC, such as training requirements for State Appraiser Regulatory 
Agency staff and board members and the use of a disciplinary sanction 
matrix for appraiser and AMC complaints,\57\ would be implemented more 
effectively through a negotiated agreement, as appropriate, rather than 
as individual enforcement actions. For example, a negotiated agreement 
could specify terms and conditions for training State Appraiser 
Regulatory Agency staff and board members based on the deficiencies 
identified by the ASC.
---------------------------------------------------------------------------

    \57\ Id.
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    Additionally, the ASC does not believe there is a need to include 
other potential enforcement actions recommended by the ASCAC, such as 
expedited reviews or follow-up reviews, continuous monitoring, and 
consultation with State officials or other stakeholders,\58\ as 
explicit enforcement actions in the proposed rule. The ASC plans to 
codify its existing compliance review process consistent with its 
current practices and processes for conducting compliance reviews, such 
as accelerated reviews, follow-up reviews, and additional monitoring. 
Under the proposed rule, the ASC may conduct accelerated reviews, 
follow-up reviews within 6-12 months of the previous review, and 
additional monitoring as part of the compliance review process.\59\ The 
ASC also currently informally consults with State officials and other 
stakeholders, when appropriate, to monitor Appraiser and AMC Programs.
---------------------------------------------------------------------------

    \58\ Id.
    \59\ See Policy Statements, supra note 38 at 9161. The ASC may 
conduct accelerated reviews, follow-up reviews, and additional 
monitoring. A follow-up review focuses on specific areas identified 
during a previous review and typically occurs within 6-12 months of 
the previous review.
---------------------------------------------------------------------------

    With respect to the ASCAC's recommended enforcement actions of 
interim or other removal of an appraiser from the Appraiser Registry or 
an AMC from the AMC Registry, section 1118(a) of Title XI provides that 
the ASC has the authority to remove a State licensed or certified 
appraiser from the Appraiser Registry or a registered AMC from the AMC 
Registry on an interim basis, not to exceed 90 days pending State 
agency action on licensing, certification, registration, and 
disciplinary proceedings.\60\ After careful consideration, the ASC is 
not including in this proposed rulemaking the interim removal of an 
appraiser from the Appraiser Registry or an AMC from the AMC Registry 
as a potential enforcement action as suggested by the ASCAC.\61\
---------------------------------------------------------------------------

    \60\ 12 U.S.C. 3347(a). Note, as reflected by the statutory text 
found in section 1118(a) of Title XI, 12 U.S.C. 3347(a), the ASC's 
authority is limited to removal on an interim basis, not to exceed 
90 days, pending State agency action on licensing, certification, 
registration, and disciplinary proceedings.
    \61\ See ASCAC Final Recommendation Report, supra note 45 at 24.
---------------------------------------------------------------------------

    The scope of this proposed rulemaking is limited to the ASCAC's 
recommended potential enforcement actions that the ASC may take against 
a State Appraiser Regulatory Agency after a compliance review rather 
than actions against individual appraisers or AMCs. Therefore, this 
proposed rule does not address the ASC's authority under section 
1118(a) of Title XI to remove a State licensed or certified appraiser 
from the Appraiser Registry or a registered AMC from the AMC Registry 
on an interim basis, not to exceed 90 days, pending State agency action 
on licensing, certification, registration, and disciplinary 
proceedings.\62\
---------------------------------------------------------------------------

    \62\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------

4. Policy Statements 7 and 10 Recommendations
    The ASCAC also included specific recommendations related to the 
Policy Statements. Policy Statements 7 (State Agency Enforcement for 
Appraiser Programs) and 10 (State Agency Enforcement for AMC Programs) 
state that, absent special documented circumstances, final 
administrative decisions by a State Appraiser Regulatory Agency 
regarding complaints must occur within one year (twelve months) of the 
complaint filing date.\63\ The ASCAC recommended clarifying the 
definition of ``complaint filing date'' \64\ because States have 
different interpretations of this term. The ASCAC noted that some 
States consider the ``complaint filing date'' to be when the State 
Appraiser Regulatory Agency receives the original complaint, while 
others consider it to be when the complaint has been screened and 
approved for investigation.\65\ To address this confusion, the ASCAC 
recommended that the term ``complaint filing date'' be defined as the 
date the State Appraiser Regulatory Agency receives the original 
complaint.\66\ The proposed rule avoids using the term ``complaint 
filing date'' to prevent confusion. Instead, to implement the ASCAC's 
recommendation, this proposed rule would specify that State Appraiser 
Regulatory Agencies must begin the time period for resolving complaints 
based on the date the complaint was received.
---------------------------------------------------------------------------

    \63\ See Policy Statements, supra note 38 at 9155 and 9158.
    \64\ See ASCAC Final Recommendation Report, supra note 45 at 8 
and 14.
    \65\ Id. at 14.
    \66\ Id. at 8 and 14.
---------------------------------------------------------------------------

    The ASCAC also recommended that ``special documented 
circumstances,'' as used in Policy Statement 7, should be more 
specifically defined.\67\ Under this proposal, ``special documented 
circumstances'' would mean well-documented and monitored extenuating 
circumstances, evaluated by the ASC, that are beyond the control of the 
State Appraiser Regulatory Agency and result in a complaint processing 
delay. The ASC proposes not to implement a more specific definition of 
``special documented circumstances'' as recommended by the ASCAC 
because a broad definition is more appropriate considering the 
variations in complaint processing among State Appraiser Regulatory 
Agencies. For example, some State Appraiser Regulatory Agencies may 
involve the State's Office of Attorney General in investigating 
complaints, while others may use staff investigators, contractors, or 
advisory committees. Therefore, the ASC proposes a definition of 
``special documented circumstances'' similar to the one in Policy 
Statement 7.\68\ The ASCAC recommended providing more examples of what 
constitutes ``special documented circumstances'' for resolving 
complaints within one year (12 months).\69\ Specifically, the ASCAC 
recommended clarifying the example in Policy Statement 7 that describes 
those periods when State rules require referral of a complaint to 
another State entity for review, and the State Appraiser Regulatory 
Agency is precluded from further processing of the complaint until it 
is returned.\70\ The ASCAC recommended that the example should be 
clarified to refer to a period of time when a case is referred to a 
separate State entity such as the State's Office of Attorney General 
for prosecution, or to an administrative law judge for a hearing.\71\ 
Another example recommended by the ASCAC was the time gap between the 
date the complaint was initially received and the receipt of

[[Page 96917]]

all the necessary information to begin processing it.\72\
---------------------------------------------------------------------------

    \67\ Id. Policy Statement 7 defines ``special documented 
circumstances'' as extenuating circumstances (fully documented) 
beyond the control of the State Appraiser Regulatory Agency that 
delays normal processing of a complaint. See Policy Statements, 
supra note 38 at 9155.
    \68\ See Policy Statements, supra note 38 at 9155 and 9158.
    \69\ See ASCAC Final Recommendation Report, supra note 45 at 8 
and 14.
    \70\ Id. at 14.
    \71\ Id.
    \72\ Id.
---------------------------------------------------------------------------

    The ASC does not plan to incorporate the examples recommended by 
the ASCAC in this proposal or in any revisions to the Policy 
Statements, nor to provide any further examples. The ASC holds the view 
that there must be a legitimate practical challenge limiting the State 
Appraiser Regulatory Agency's ability to resolve complaints within one 
year (12 months) from when the complaint was received, which will be 
evaluated on a case-by-case basis, and that further examples are, 
therefore, not necessary.
    The ASCAC's last recommendation was to clarify what qualifies as an 
``investigation'' of the merits of a complaint.\73\ The ASCAC gave two 
examples from Policy Statement 7 that provide guidance on what 
qualifies as an ``investigation'' of the merits of a complaint. 
Consistent with the ASCAC's first referenced example from Policy 
Statement 7,\74\ the proposed rule would require State Appraiser 
Regulatory Agencies to ensure that individuals analyzing complaints are 
knowledgeable about Title XI, the Uniform Standards of Professional 
Appraisal Practice (USPAP), and appraisal practices. Under the proposed 
rule, these individuals must be qualified and their qualifications must 
be documented, which will be evaluated by the ASC. The proposed rule 
would have a similar requirement for AMC Programs, where individuals 
who analyze complaints against AMCs are required to be knowledgeable 
about Title XI, the AMC Rule,\75\ USPAP, and appraisal practices and 
their qualifications must be documented, which will be evaluated by the 
ASC.
---------------------------------------------------------------------------

    \73\ Id. at 8 and 14-15.
    \74\ Id. at 14.
    \75\ Under the proposed rule, ``AMC Rule'' means regulations 
established by the Office of the Comptroller of the Currency, the 
Board of Governors of the Federal Reserve System, the Federal 
Deposit Insurance Corporation, and the Federal Housing Finance 
Agency regarding the minimum requirements for AMCs under section 
1124 of Title XI (12 U.S.C. 3353). (12 CFR 34.210 through 34.216; 12 
CFR 225.190 through 225.196; 12 CFR 323.8 through 323.14; 12 CFR 
1222.20 through 1222.26).
---------------------------------------------------------------------------

    The proposed rule would also make some modifications to the ASCAC's 
second referenced example from Policy Statement 7.\76\ According to 
Policy Statement 7, State Appraiser Regulatory Agencies must analyze 
each complaint to determine whether additional violations, especially 
those relating to USPAP, should be added to the complaint.\77\ The 
proposed rule would require State Appraiser Regulatory Agencies to 
consider whether any potential violations of USPAP should be 
investigated when examining an appraisal report in connection with a 
complaint, including complaints based solely on value.\78\
---------------------------------------------------------------------------

    \76\ See ASCAC Final Recommendation Report, supra note 45 at 14.
    \77\ See Policy Statements, supra note 38 at 9155.
    \78\ The ASCAC also recommended that complaints that only relate 
to value should not be dismissed solely on that basis, and State 
Appraiser Regulatory Agencies should be obligated to analyze all 
complaints for USPAP compliance, even if a USPAP violation is not 
explicitly alleged. See ASCAC Final Recommendation Report, supra 
note 45 at 14. The ASC believes that this proposal would address the 
ASCAC's recommendations described above. The proposed rule would 
require State Appraiser Regulatory Agencies to consider whether any 
potential violations of USPAP should be investigated when examining 
an appraisal report in connection with a complaint, including 
complaints based solely on value.
---------------------------------------------------------------------------

    Although the ASCAC interpreted ``additional violations'' to include 
violations of Federal and State law,\79\ the proposed rule would only 
require State Appraiser Regulatory Agencies to consider whether any 
potential violations of USPAP should be investigated. This is because 
the ASC is responsible for ensuring that real estate appraisals used in 
federally related transactions are performed according to USPAP by 
State licensed and certified appraisers.\80\ However, the ASC 
encourages State Appraiser Regulatory Agencies to consider whether to 
investigate any violations of Federal and State law not explicitly 
alleged in the complaint in accordance with State law or regulations.
---------------------------------------------------------------------------

    \79\ See ASCAC Final Recommendation Report, supra note 45 at 14.
    \80\ See, e.g., 12 U.S.C. 3331 and 12 U.S.C. 3332(a)(1)(A).
---------------------------------------------------------------------------

    The ASCAC also provided examples of how State Appraiser Regulatory 
Agencies have different definitions of what constitutes an 
``investigation.'' For some State Appraiser Regulatory Agencies, the 
``investigation'' may consist simply of the screening of a complaint by 
a staff member.\81\ If the staff member decides that the complaint has 
no merit or that it needs only a telephone call or letter to the 
appraiser, it is either not opened or opened and closed 
immediately.\82\ For other State Appraiser Regulatory Agencies, a full 
field investigation is conducted on all complaints.\83\ As a result of 
these different definitions, it is challenging to establish a standard 
definition of an investigation because the investigatory process is 
typically governed by State law or regulation. Additionally, each 
investigation is contingent upon the specific facts of the complaint. 
During a compliance review, the ASC examines a sample of complaint 
files to assess whether the State Appraiser Regulatory Agency is 
following the investigatory process governed by State law to ensure 
timely and effective supervision of appraisers. Therefore, the ASC does 
not plan to further clarify what qualifies as an ``investigation'' of 
the merits of a complaint.
---------------------------------------------------------------------------

    \81\ See ASCAC Final Recommendation Report, supra note 45 at 14.
    \82\ Id.
    \83\ Id.
---------------------------------------------------------------------------

5. ASCAC's Mitigating and Aggravating Factors
    The ASCAC also produced a list of mitigating and aggravating 
factors for the sanction matrices.\84\ The ASCAC defined ``a mitigating 
factor'' as any information or evidence regarding the deficiency that 
might result in a decreased sanction.\85\ The ASCAC defined ``an 
aggravating factor'' as any information or evidence regarding the 
deficiency that might result in an increased sanction.\86\ Except as 
discussed below, the ASC has separately included, with some 
modifications, all of the mitigating and aggravating factors 
recommended by the ASCAC in this proposed rule.
---------------------------------------------------------------------------

    \84\ Id. at 25.
    \85\ Id. The mitigating factors recommended by the ASCAC include 
no prior deficiencies of any type; prior deficiencies of another 
type that were minor and have been corrected; understanding and 
acknowledging the deficiency; immediate steps taken to correct the 
issue; personnel issues such as illness or loss of a key staff 
member; change in leadership; the State Appraiser Regulatory Agency 
otherwise has an effective and efficient regulatory program; the 
occurrence of a natural disaster; and a State Appraiser Regulatory 
Agency board member who had a conflict of interest was cleared by a 
State ethics agency before participating in a matter (unless the ASC 
finds the conflict created a bias that affected the outcome).
    \86\ Id. The aggravating factors recommended by the ASCAC 
include a pattern of prior deficiencies of another type that have 
not been corrected; a pattern of prior deficiencies of the same 
type; numerous deficiencies of various types; refusal to acknowledge 
the deficiency; lack of cooperation with the ASC staff; a lack of 
willingness or lack of efforts to correct deficiencies; deficiencies 
are material and, if not corrected in a timely manner, will pose a 
potential risk to the program, licensees, financial institutions or 
agencies or to the public; submission of false statements or 
documents, or other deceptive practices; a State Appraiser 
Regulatory Agency board member involved in a decision who had a 
conflict of interest or bias that affected the outcome of a matter; 
other deficiencies in the program that might indicate systemic 
issues; risk of program failure; and systemic failure to exercise 
reasonable care toward equitable enforcement.
---------------------------------------------------------------------------

    The ASC proposes not to separately include the recommended 
mitigating and aggravating factors relating to a State Appraiser 
Regulatory Agency board member involved in a disciplinary decision who 
had a conflict of interest or bias because the ASC believes such 
circumstance would be

[[Page 96918]]

covered under the proposed mitigating or aggravating factor of whether 
the State Appraiser Regulatory Agency failed to exercise reasonable 
care in equitable, consistent, and timely enforcement. The ASC also 
proposes to include other mitigating and aggravating factors, such as 
the number of State licensed and certified appraisers or registered 
AMCs under the jurisdiction of a State Appraiser Regulatory Agency and 
human-made disasters or emergencies or other government-declared 
orders.
    The ASC believes these factors accurately capture the 
considerations that would allow the ASC to increase or decrease its 
initial assessment of an Appraiser or AMC Program's level of 
effectiveness. These factors would give State Appraiser Regulatory 
Agencies incentives to cooperate with the ASC and timely address any 
deficiencies while still recognizing that certain situations, outside 
of a State Appraiser Regulatory Agency's control, such as a natural 
disaster, can sometimes affect the effectiveness of an Appraiser or AMC 
Program.

II. Proposed Rule

    The ASC is issuing this proposal to implement a framework to govern 
the ASC's enforcement authority regarding the effectiveness of 
Appraiser and AMC Programs overseen by State Appraiser Regulatory 
Agencies. The Dodd-Frank Act strengthened the ASC's oversight of State 
Appraiser Regulatory Agencies and authorized the ASC to impose interim 
enforcement actions against State Appraiser Regulatory Agencies before 
having to impose ``non-recognition.''
    Under this proposal, the ASC would conduct an analysis of the 
applicable program functions, as required by section 1118(a) of Title 
XI,\87\ to assess the effectiveness of an Appraiser or AMC Program. The 
proposed rule would outline the specified requirements for each program 
function that the ASC will examine for program effectiveness.\88\ 
Additionally, the proposed rule would require State Appraiser 
Regulatory Agencies to demonstrate to the ASC's reasonable satisfaction 
that their Appraiser and AMC Programs are operating consistently with 
the specified requirements of each program function. If any 
deficiencies are identified, the ASC would be required to document them 
in both the preliminary and final reports.
---------------------------------------------------------------------------

    \87\ 12 U.S.C. 3347(a).
    \88\ These requirements are currently outlined in the Policy 
Statements. See Policy Statements, supra note 45.
---------------------------------------------------------------------------

    Under the proposal, the ASC would assess the initial effectiveness 
of an Appraiser or AMC Program based on the number of deficiencies per 
program function as identified in the preliminary report. The ASC 
proposes using the number of deficiencies for the initial assessment of 
effectiveness because this approach would provide transparency into the 
ASC's decision-making and help to provide consistent and fair treatment 
between similarly situated State Appraiser Regulatory Agencies.
    The proposed rule would establish four levels of effectiveness: 
effective, moderately effective, slightly effective, and ineffective, 
each specifying the allowable number of deficiencies per program 
function. The effectiveness of Appraiser and AMC Programs would be 
assessed through the four levels mentioned above, which the ASC plans 
to incorporate into the ASC's overall rating criteria to emphasize 
further that a State Appraiser Regulatory Agency is maintaining an 
effective Appraiser or AMC Program.\89\
---------------------------------------------------------------------------

    \89\ See Policy Statements, supra note 38 at 9160-9161. 
Currently, the ASC evaluates overall Title XI compliance of a State 
Appraiser Regulatory Agency's Appraiser or AMC Program by assigning 
one of five ASC Findings at the end of the compliance review 
process. \89\ The ratings, known as ASC Findings, are classified as 
follows: Excellent, Good, Needs Improvement, Not Satisfactory, or 
Poor.
---------------------------------------------------------------------------

    Under the proposed rule, the ASC would consider whether the State 
Appraiser Regulatory Agency's response to the preliminary report and 
any relevant mitigating and aggravating factors justify an increase or 
decrease in the level of the regulatory program's effectiveness 
identified in the preliminary report for the final report.
    If a State Appraiser Regulatory Agency fails to have an effective 
Appraiser or AMC Program, the ASC would have the authority, under the 
proposed rule, to impose an enforcement action. This approach would 
enable the ASC to evaluate the underlying facts of each compliance 
review and take appropriate enforcement action against the State 
Appraiser Regulatory Agency for not maintaining an effective Appraiser 
or AMC Program. The proposed rule would set forth four enforcement 
actions: warning letters, negotiated agreements, suspensions, and non-
recognition. This section provides a section-by-section analysis of the 
proposed rule.

A. Key Definitions

    This proposal would define several terms consistent with their use 
in Title XI, Federal regulations promulgated thereunder, or the Policy 
Statements. For example, the proposed rule would include definitions 
from the AMC Rule in their entirety for the following terms: AMC, 
appraisal management services, appraiser panel, consumer credit, 
covered transaction, dwelling, federally regulated AMC, person, and 
USPAP. Therefore, this section highlights key definitions included in 
the proposal. AQB Criteria. Pursuant to section 1116 of Title XI,\90\ 
the AQB establishes the minimum requirements for real estate appraisers 
to obtain a State license or certification as well as ``Trainee 
Appraiser'' and ``Supervisory Appraiser'' requirements. The proposed 
rule would define ``AQB Criteria'' as the minimum requirements for the 
licensure and certification of real estate appraisers and the minimum 
requirements for trainee and supervisory appraisers established by the 
AQB. The proposed definition is consistent with section 1116 of Title 
XI,\91\ as well as substantively similar to the AQB's Real Property 
Appraiser Qualification Criteria, which set forth the minimum 
education, experience, and examination requirements for real property 
appraisers.\92\
---------------------------------------------------------------------------

    \90\ 12 U.S.C. 3345.
    \91\ Id.
    \92\ See AQB Criteria, supra note 20.
---------------------------------------------------------------------------

    Assignment. Section 1106 of Title XI confers rulemaking authority 
to the ASC in the area of temporary practice.\93\ For purposes of 
issuing a temporary license or certification,\94\ the proposal would 
define ``assignment'' as one or more real estate appraisals and written 
appraisal report(s) covered by a single contract. The proposed 
definition here is intended to be consistent with the use of the term 
``assignment'' in the statutory definition of ``AMC'' but solely in the 
context of temporary practice.\95\
---------------------------------------------------------------------------

    \93\ 12 U.S.C. 3335.
    \94\ The term ``license'' as defined under the Administrative 
Procedure Act, 5 U.S.C. 551(8), encompasses a wide range of forms of 
permission, including agency permits, certificates, approvals, 
registrations, charters, memberships, statutory exemptions, and 
others. This definition under the Administrative Procedure Act, 5 
U.S.C. 551(8), is consistent with many State Administrative 
Procedure Acts, such as the State Administrative Procedure Acts of 
Arizona (Ariz. Rev. Stat. Ann. Sec.  41-1001(13) (2024)), Arkansas 
(Ark. Code Ann. Sec.  25-15-202(4) (2024)), Colorado (Colo. Rev. 
Stat. Sec.  24-4-102(7) (2024)), Delaware (Del. Code Ann. 29 Sec.  
10102(5) (2023), District of Columbia (D.C. Code Sec.  2-502(12) 
(2024)), Indiana (Ind. CodeSec.  4-21.5-1-8 (2024)), Iowa (Iowa 
Code. Sec.  17A.2(6) (2024)), Kansas (Kan. Stat. Ann. Sec.  77-
502(c) (2024)), Maine (Me. Rev. Stat. 5 Sec.  8002(5) (2023)), and 
Massachusetts (Mass. Gen. Laws. 30A Sec.  13) (2024)). Furthermore, 
most State Appraiser Regulatory Agencies issue temporary practice 
permits.
    \95\ 12 U.S.C. 3350(11)(B) (defining AMC as any ``external third 
party . . . [that, in part,] contract[s] with licensed and certified 
appraisers to perform appraisal assignments'').

---------------------------------------------------------------------------

[[Page 96919]]

    Deficiency. A State Appraiser Regulatory Agency would be deemed to 
have a deficiency if the State Appraiser Regulatory Agency's Appraiser 
or AMC Program is not in compliance with any specified requirements of 
the applicable program functions required by section 1118(a) of Title 
XI.\96\ The ASC would analyze and consider the initial effectiveness of 
Appraiser or AMC Programs based on the number of deficiencies per 
program function as identified in the preliminary report to provide for 
a consistent and transparent enforcement approach. The ASC then would 
have the option to impose an enforcement action, such as a warning 
letter that describes the deficiency or deficiencies, or enter into a 
negotiated agreement with a State Appraiser Regulatory Agency if the 
agency fails to address the deficiency or deficiencies identified in a 
previously issued warning letter or the final report indicates that the 
regulatory program is slightly effective or ineffective.
---------------------------------------------------------------------------

    \96\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------

    Final order. The proposed rule would require the ASC to issue a 
final order to suspend a State Appraiser Regulatory Agency. The 
proposed definition of ``final order'' would include findings of fact, 
conclusions of law, and, if applicable, the terms of the enforcement 
action imposed against a State Appraiser Regulatory Agency for failing 
to have an effective Appraiser or AMC Program. A ``final order'' is one 
type of document that the ASC is required to make public via computer 
telecommunications.\97\
---------------------------------------------------------------------------

    \97\ 12 CFR 1102.305(a)(2)(i)(A).
---------------------------------------------------------------------------

    Final report. After the State Appraiser Regulatory Agency has had 
an opportunity to respond to the preliminary report, it is current 
practice that the ASC prepares and issues a final report on its 
monitoring findings. The ``final report'' would, under the proposed 
rule, include the ASC's final analysis of the regulatory program's 
effectiveness, identifying any deficiencies. In preparing the final 
report, the ASC would consider whether the State Appraiser Regulatory 
Agency's response to the preliminary report and any relevant mitigating 
or aggravating factors support a change to the level of the regulatory 
program's effectiveness. A ``final report'' is considered one type of 
record \98\ that must be made publicly available.\99\
---------------------------------------------------------------------------

    \98\ 12 CFR 1102.301(i). A ``record'' includes ``records, files, 
documents . . . or any portion thereof, in any form the ASC 
regularly maintains them.''
    \99\ 12 CFR 1102.305(a)(2)(i)(D). One type of document that must 
be made publicly available is a copy of ``all records (regardless of 
form or format), such as correspondence relating to field reviews or 
other regulatory subjects, released to any person under Sec.  
1102.306 [(``Procedures for requesting records'')] that, because of 
the nature of their subject matter, the ASC has determined are 
likely to be subject of subsequent requests.'' Under this proposal, 
field reviews are referred to as ``compliance reviews.''
---------------------------------------------------------------------------

    Negotiated agreement. The proposal defines ``negotiated agreement'' 
to mean a written agreement signed between the ASC and a State 
Appraiser Regulatory Agency to correct deficiencies that negatively 
impact the regulatory program's effectiveness. The proposed definition 
would specify that the agreement may provide that the State Appraiser 
Regulatory Agency commits to taking a certain action or actions or 
refraining from a certain action or actions by a specified time. For 
example, these agreements could require mandatory training of State 
Appraiser Regulatory Agency staff and/or board members to address 
certain findings, weaknesses, and deficiencies or submission of a 
commitment letter or board resolution to take corrective action in 
response to the State Appraiser Regulatory Agency's deficiencies. A 
``negotiated agreement'' is considered one type of record \100\ that 
must be made publicly available.'' \101\
---------------------------------------------------------------------------

    \100\ See supra note 98.
    \101\ See supra note 99.
---------------------------------------------------------------------------

    Non-recognition. Section 1118 of Title XI authorizes the ASC to 
impose non-recognition on a State Appraiser Regulatory Agency.\102\ 
Subpart B of 12 CFR part 1102 prescribes rules of practice and 
procedure governing non-recognition proceedings under section 1118 of 
Title XI.\103\ The proposed definition of ``non-recognition'' reflects 
the statutory text of section 1118 of Title XI,\104\ which states that 
the ASC and all agencies, instrumentalities, and federally recognized 
entities under Title XI shall not recognize appraiser certifications 
and licenses from States whose appraisal policies, practices, funding, 
staffing, or procedures are found to be inconsistent with Title XI. The 
proposed rule would define ``non-recognition'' as the ASC and all 
agencies, instrumentalities, and federally recognized entities under 
Title XI shall not recognize or accept appraiser licenses and 
certifications issued by a State Appraiser Regulatory Agency whose 
policies, practices, funding, staffing, or procedures are found to be 
inconsistent with Title XI and Federal regulations promulgated 
thereunder. ``Non-recognition'' is synonymous with ``derecognition,'' 
which is referenced in section 1118 of Title XI.\105\ Under the 
proposed rule, ``non-recognition'' would be used instead of 
``derecognition'' to be consistent with the language of subpart B of 12 
CFR part 1102.
---------------------------------------------------------------------------

    \102\ 12 U.S.C. 3347.
    \103\ Id.
    \104\ Id.
    \105\ Id.
---------------------------------------------------------------------------

    Preliminary report.\106\ After the examination of records and 
interviews with State Appraiser Regulatory Agency representatives, it 
is the current practice that the ASC provides a staff report or 
preliminary report to the State Appraiser Regulatory Agency detailing 
the initial monitoring findings. Under the proposed definition, the 
preliminary report would also include an initial analysis of the 
regulatory program's effectiveness, identifying any deficiencies, and 
the ASC's initial assessment of the level of effectiveness of the 
regulatory program.
---------------------------------------------------------------------------

    \106\ Note, section 1104(b) of Title XI, 12 U.S.C. 3333(b), 
refers to ``preliminary State audit reports,'' which is synonymous 
with the term ``preliminary report'' under this proposal.
---------------------------------------------------------------------------

    Program functions. As previously discussed, section 1118(a) of 
Title XI specifies a list of criteria that the ASC must include in its 
analysis of a regulatory program's effectiveness.\107\ The proposal 
would define ``program functions'' as those responsibilities of a State 
Appraiser Regulatory Agency that the ASC will examine and include in 
its analysis of the effectiveness of a State Appraiser Regulatory 
Agency's regulatory program consistent with section 1118(a) of Title XI 
(12 U.S.C. 3347(a)). The proposed rule would outline five program 
functions for Appraiser Programs that will be considered in the ASC's 
analysis: (1) licensing and certification of appraisers, (2) issuance 
of temporary licenses and certifications for appraisers, (3) receiving 
and tracking of submitted complaints against appraisers, (4) 
investigation of complaints against appraisers, and (5) enforcement 
actions against appraisers. For AMC Programs, the proposed rule would 
outline four program functions that will be considered in the ASC's 
analysis: (1) registration of AMCs, (2) receiving and tracking of 
submitted complaints against AMCs, (3) investigation of complaints 
against AMCs, and (4) enforcement actions against AMCs.
---------------------------------------------------------------------------

    \107\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------

    Special documented circumstances. The proposed rule would define

[[Page 96920]]

``special documented circumstances'' as well-documented and monitored 
extenuating circumstances, evaluated by the ASC, that are beyond the 
control of the State Appraiser Regulatory Agency and result in a 
complaint processing delay. Special documented circumstances are 
relevant when considering the effectiveness of State Appraiser 
Regulatory Agencies' supervision in resolving complaints filed against 
trainee appraisers, State licensed appraisers, State certified 
appraisers, and AMCs within one year from the date the complaint was 
received.
    State Appraiser Regulatory Agency. Section 1103(a)(5) of Title XI 
uses the term ``State Appraiser Regulatory Agencies.'' \108\ The 
proposed rule would define ``State Appraiser Regulatory Agency'' as a 
State agency that certifies and licenses real estate appraisers and 
registers and supervises AMCs or otherwise regulates real estate 
appraisers and AMCs who operate in that State, consistent with section 
1121(1) of Title XI (12 U.S.C. 3350(1)). ``State Appraiser Regulatory 
Agency'' is synonymous with ``State appraiser certifying and licensing 
agency'' as defined in section 1121(1) of Title XI.\109\ To the extent 
that the registration and supervision of AMCs is carried out by a 
separate and distinct agency or agencies within a State, each such 
agency is also a State Appraiser Regulatory Agency. For example, the 
District of Columbia has two separate and distinct agencies that 
administer the Appraiser and AMC Programs. The Department of Licensing 
and Consumer Protection administers the Appraiser Program, and the 
Department of Insurance, Securities and Banking administers the AMC 
Program. The Department of Licensing and Consumer Protection and the 
Department of Insurance, Securities and Banking in the District of 
Columbia would each be considered a State Appraiser Regulatory Agency 
under the proposed rule, and the ASC would monitor each of their 
respective regulatory programs.
---------------------------------------------------------------------------

    \108\ 12 U.S.C. 3332(a)(5).
    \109\ 12 U.S.C. 3350(1).
---------------------------------------------------------------------------

    Suspension. The proposed definition of ``suspension'' is that the 
State Appraiser Regulatory Agency would be prohibited from performing 
certain task(s) as part of the State Appraiser Regulatory Agency's 
responsibilities under Title XI for a specified period of time. This 
definition is consistent with section 1118(a) of Title XI, which 
authorizes the ASC to impose ``interim actions and suspensions,'' 
against a State Appraiser Regulatory Agency as an alternative to, or in 
advance of, the non-recognition of a State Appraiser Regulatory 
Agency.\110\ Some examples of possible prohibited tasks include adding 
appraisers to the Appraiser Registry or AMCs to the AMC Registry, 
renewing licenses or certifications, and issuing temporary licenses or 
certifications to appraisers. The proposed rule would provide that a 
suspension would be effective until the ASC lifts the suspension.
---------------------------------------------------------------------------

    \110\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------

    Warning letter. Section 1118(a)(4) of Title XI requires the ASC to 
monitor State Appraiser Regulatory Agencies to determine whether each 
State Appraiser Regulatory Agency maintains an effective regulatory 
program.\111\ If a State Appraiser Regulatory Agency fails to have an 
effective appraiser regulatory program, section 1118(a) authorizes the 
ASC to impose enforcement actions.\112\ One example of an enforcement 
action is a ``warning letter,'' which the proposed rule would define as 
a letter issued by the ASC informing a State Appraiser Regulatory 
Agency of a deficiency or deficiencies relating to its regulatory 
program. The proposed definition also provides that if the deficiency 
is not addressed, it could negatively impact the effectiveness of the 
State Appraiser Regulatory Agency's regulatory program.
---------------------------------------------------------------------------

    \111\ 12 U.S.C. 3347(a)(4).
    \112\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------

B. Compliance Reviews

    One of the ASC's functions is to monitor State Appraiser Regulatory 
Agencies' Appraiser and AMC Programs for compliance with Title XI.\113\ 
Monitoring these programs is accomplished through periodic or 
accelerated compliance reviews of each State Appraiser Regulatory 
Agency's Appraiser and AMC Programs.\114\ Proposed Sec.  1102.602 would 
codify the existing compliance review process consistent with the ASC's 
current practices and processes for conducting compliance reviews but 
would propose a few changes that are discussed below.
---------------------------------------------------------------------------

    \113\ 12 U.S.C. 3332(a)(1) and 3347(a)(1)-(5).
    \114\ Compliance reviews are conducted by the ASC, on a periodic 
or accelerated basis, to determine whether an Appraiser or AMC 
Program administered by a State Appraiser Regulatory Agency is 
operating in a manner consistent with Title XI and Federal 
regulations promulgated thereunder. The proposed rule does not 
specify that compliance reviews must occur on-site. Instead, the 
proposed rule would provide flexibility to the ASC to determine the 
most appropriate means of conducting a compliance review.
---------------------------------------------------------------------------

    The ASC is proposing this approach because the ASC has generally 
found in its supervisory experience that these practices for conducting 
compliance reviews are effective and efficient. Currently, the 
compliance review process is outlined in the Policy Statements.\115\ 
The ASC intends to revise the Policy Statements before the proposed 
implementation period, discussed in section III below, ends. These 
revisions would address any potential inconsistencies between the 
Policy Statements and any final rule based on this proposal.
---------------------------------------------------------------------------

    \115\ See Policy Statements, supra note 38 at 9160-9161.
---------------------------------------------------------------------------

1. Compliance Review Cycles
    The proposal would provide that the ASC has two primary review 
cycles: two-year and one-year. This is the same standard frequency as 
the ASC's current practice outlined in the Policy Statements.\116\ Most 
State Appraiser Regulatory Agencies are scheduled on a two-year review 
cycle, but some may be moved to a one-year review cycle if the ASC 
determines more frequent reviews are needed to ensure that the State 
Appraiser Regulatory Agency maintains an effective Appraiser or AMC 
Program. The ASC is proposing this frequency for compliance reviews 
because, based on its supervisory experience, the ASC has generally 
found that these two primary review cycles provide sufficient 
monitoring. The two review cycles would allow for early identification 
of deficiencies to prevent or minimize their impact on the 
effectiveness of Appraiser and AMC Programs. Additionally, the ASC has 
generally found that the two review cycles are not burdensome and do 
not strain the resources of the ASC or State Appraiser Regulatory 
Agencies. The proposed rule would also allow the ASC to use alternate 
compliance review cycles at its sole discretion. This discretion would 
allow the ASC to monitor the performance and effectiveness of the 
frequency of compliance reviews. After evaluation, the ASC could, for 
example, modify the standard frequency of the primary two review cycles 
to three years and two years.
---------------------------------------------------------------------------

    \116\ Id.
---------------------------------------------------------------------------

    In addition to the two primary review cycles, the proposal would 
provide that the ASC may conduct follow-up reviews and additional 
monitoring. Consistent with the ASC's current practice, a follow-up 
review would focus only on specific areas identified during the 
previous review and would occur within 6 to 12 months of the previous 
review. Under the proposed rule, the ASC may also conduct accelerated 
compliance reviews when there are indications that an Appraiser or AMC 
Program might not be operating

[[Page 96921]]

consistently with Title XI or Federal regulations promulgated 
thereunder. For example, an accelerated compliance review could be 
warranted when the ASC receives multiple complaints alleging inadequate 
enforcement by a State Appraiser Regulatory Agency. This is consistent 
with the ASC's current practice which is to identify potential Title XI 
compliance concerns before they occur and take appropriate action to 
prevent the occurrence or minimize the impact on the effectiveness of 
an Appraiser or AMC Program. The proposed rule would also provide that 
if a single State Appraiser Regulatory Agency oversees both Appraiser 
and AMC Programs, the compliance reviews for each regulatory program 
may have the same or different review cycles. This is also consistent 
with current practice, which has been proven to be effective based on 
the ASC's supervisory experience.
2. Compliance Review Process
    Paragraph (c) of proposed Sec.  1102.602 would set forth the 
general process of a compliance review. Similar to current practice, 
compliance reviews would consist of an examination of records and 
interviews with State Appraiser Regulatory Agency representatives. 
After completing the examination, the ASC would prepare a preliminary 
report that includes the initial monitoring findings, which is 
consistent with current practice.
    However, the preliminary report would, under the proposed rule, 
include an initial analysis of the effectiveness of the regulatory 
program, as required in proposed Sec.  1102.603, identifying any 
deficiencies. The preliminary report would also, under the proposed 
rule, include the ASC's initial assessment of the level of 
effectiveness of the regulatory program. This would be a modification 
of the ASC's current practice; under Policy Statement 12, this analysis 
of the regulatory program's effectiveness occurs after the ASC 
concludes the compliance review and issues an overall ASC Finding of 
Poor.\117\ The ASC believes that analyzing the effectiveness of the 
regulatory program earlier during the compliance review process would 
improve efficiency and streamline the process, so the ASC proposes to 
utilize this approach instead. Additionally, the proposed rule would 
include new interim enforcement actions that can be used if the ASC 
makes the assessment that an Appraiser or AMC Program is not effective. 
These interim enforcement actions are an additional tool that can be 
used in conjunction with more frequent compliance reviews or additional 
monitoring.
---------------------------------------------------------------------------

    \117\ Id. at 9159. See also supra note 89.
---------------------------------------------------------------------------

    Under the proposed rule, a State Appraiser Regulatory Agency may 
respond within 60 business days from the date of the preliminary 
report. This is consistent with the current practice, which has been 
proven to be effective, based on the ASC's supervisory experience, to 
give State Appraiser Regulatory Agencies adequate time to consider and 
respond with any relevant information showing the State Appraiser 
Regulatory Agency's efforts to remedy any deficiencies. After 
considering the State Appraiser Regulatory Agency's response along with 
any mitigating and aggravating factors, the final report would, under 
the proposed rule, include the final analysis of the effectiveness of 
the regulatory program, as required in proposed Sec.  1102.603, 
identifying any deficiencies. The final report would also, under the 
proposed rule, include the ASC's final assessment of the level of 
effectiveness of the regulatory program in accordance with paragraph 
(b)(2) of proposed Sec.  1102.603.
    Similar to the current compliance review process, under the 
proposed rule, State Appraiser Regulatory Agencies would be required to 
maintain sufficient documentation to demonstrate that their Appraiser 
and AMC Programs operate consistently with Title XI. ASC staff reviews 
a representative sampling of documentation in each of the compliance 
areas to assess the efficiency of the State Appraiser Regulatory 
Agency's Appraiser or AMC Program. The proposed rule would further 
provide that documentation must be made available for inspection, as 
requested by the ASC, including access to the information stored in any 
electronic system or providing access to the electronic system itself. 
The electronic access requirement is not included in the Policy 
Statements, but it is consistent with current ASC practice.

C. Analysis of the Effectiveness of Appraiser and AMC Programs

    To determine whether an Appraiser or AMC Program is effective, the 
amendments to section 1118(a) of Title XI by the Dodd-Frank Act require 
the ASC to perform an analysis of previously specified key program 
functions.\118\ The proposed rule would incorporate the analysis, as 
required by section 1118(a) of Title XI,\119\ earlier in the compliance 
review process and provide the analysis in the preliminary and final 
reports. Under paragraph (a) of proposed Sec.  1102.603, the ASC would 
examine whether the State Appraiser Regulatory Agency is complying with 
all specified requirements of each program function and, if not, 
document any identified deficiencies in the preliminary and final 
reports.
---------------------------------------------------------------------------

    \118\ 12 U.S.C. 3347(a).
    \119\ Id.
---------------------------------------------------------------------------

1. Assessment of Program Effectiveness
    The deficiencies identified in the preliminary report would serve 
as the starting point for the ASC's initial assessment of the 
regulatory program's effectiveness. Under paragraph (b)(1) of proposed 
Sec.  1102.603, the ASC would assess the regulatory program's initial 
effectiveness based on the corresponding number of deficiencies per 
program function identified in the preliminary report. The ASC proposes 
using the number of deficiencies for the initial assessment of 
effectiveness because this approach would provide transparency into the 
ASC's decision-making and help to provide consistent and fair treatment 
between similarly situated State Appraiser Regulatory Agencies.
    Paragraph (b)(1) of proposed Sec.  1102.603 would establish four 
levels of effectiveness: effective, moderately effective, slightly 
effective, and ineffective, each specifying the allowable number of 
deficiencies per program function. The effectiveness of Appraiser and 
AMC Programs will be assessed through the four levels mentioned above. 
Currently, the ASC evaluates overall Title XI compliance of a State 
Appraiser Regulatory Agency's Appraiser or AMC Program by assigning one 
of five ASC Findings at the end of the compliance review process.\120\ 
The ratings, known as ASC Findings, are classified as follows: 
Excellent, Good, Needs Improvement, Not Satisfactory, or Poor.\121\ The 
ASC plans to incorporate the four levels of program effectiveness into 
the ASC's overall rating criteria of the ASC Findings to emphasize 
further that a State Appraiser Regulatory Agency is maintaining an 
effective Appraiser or AMC Program.
---------------------------------------------------------------------------

    \120\ See Policy Statements, supra note 38 at 9160-9161.
    \121\ Id.
---------------------------------------------------------------------------

    The following example illustrates how this approach would work. The 
ASC might identify three deficiencies under the same program function 
of licensing and certification of appraisers. The first deficiency 
could be that the licensing and certification requirements do not meet 
the minimum requirements in Title XI. The second deficiency could be 
that the State Appraiser Regulatory

[[Page 96922]]

Agency does not have a reciprocity policy. The third deficiency could 
be that the State Appraiser Regulatory Agency fails to ensure that 
approved applicants meet the applicable minimum requirements of the AQB 
Criteria. The initial assessment of the Appraiser Program's level of 
effectiveness would be deemed ``slightly effective'' in the preliminary 
report under proposed Sec.  1102.603(b)(1)(iii)(A) because the ASC 
found three deficiencies in one program function.
    Due to the difference in the number of program functions between 
Appraiser and AMC Programs, the allowable number of deficiencies per 
program function for each level of effectiveness would be different for 
the Appraiser and AMC Programs under the proposed rule. However, this 
initial assessment would be performed in an equivalent manner for both 
program types.
    Under paragraph (b)(2) of proposed Sec.  1102.603, the ASC would 
consider whether the State Appraiser Regulatory Agency's response to 
the preliminary report and any relevant mitigating and aggravating 
factors in proposed Sec.  1102.604 justify an increase or decrease in 
the level of the regulatory program's effectiveness for the final 
report. This analysis would allow the ASC to consider the totality of 
the circumstances for its final assessment of the regulatory program's 
level of effectiveness. The ASC has generally found from its 
supervisory experience that mitigating and aggravating factors could 
arise in each compliance review because there can be significant 
variations in the underlying facts of each compliance review. The ASC 
is proposing this approach because it would allow the ASC flexibility 
to ensure that the level of effectiveness is truly representative of 
the State Appraiser Regulatory Agency's regulatory program. If the ASC 
considers the regulatory program's level of effectiveness to be 
appropriately mitigated or aggravated, the relevant factors, including 
a description of how the factors were applied, will be documented in 
the final report.
2. Program Functions for Appraiser and AMC Programs
    Paragraphs (c)(1) and (2) of proposed Sec.  1102.603 would outline 
the specified requirements for each program function that the ASC will 
examine to assess the effectiveness of an Appraiser or AMC Program. The 
ASC proposes these requirements under paragraphs (c)(1) and (2) of 
proposed Sec.  1102.603 because they are currently included in the 
Policy Statements and provide guidance to State Appraiser Regulatory 
Agencies in complying with Title XI and the rules promulgated 
thereunder.\122\ The ASC believes that these requirements are fair and 
manageable because State Appraiser Regulatory Agencies are familiar 
with these requirements already and have been implementing them. 
Additionally, the ASC believes this approach should reduce any 
challenges that State Appraiser Regulatory Agencies may face in 
implementing any final rule based on this proposal. These requirements 
under paragraphs (c)(1) and (2) of proposed Sec.  1102.603 are listed 
below, starting with the Appraiser Program under paragraph (c)(1) of 
proposed Sec.  1102.603.
---------------------------------------------------------------------------

    \122\ See Policy Statements, supra note 38.
---------------------------------------------------------------------------

3. Specified Requirements for an Appraiser Program
    Under paragraph (c)(1) of proposed Sec.  1102.603, a State 
Appraiser Regulatory Agency must demonstrate to the ASC's reasonable 
satisfaction that its Appraiser Program is operating consistently with 
the specified requirements of each program function as listed below.
    Paragraph (c)(1)(i) of proposed Sec.  1102.603 would specify eleven 
requirements for the program function of licensing and certification of 
appraisers. These eleven requirements are:
    (1) the State Appraiser Regulatory Agency's licensing and 
certification requirements must meet the minimum requirements set forth 
in section 1116 of Title XI (12 U.S.C. 3345); \123\
---------------------------------------------------------------------------

    \123\ See Policy Statement 1, supra note 38 at 9147-9149.
---------------------------------------------------------------------------

    (2) the State Appraiser Regulatory Agency's trainee and supervisory 
appraiser requirements, if applicable, must meet the minimum 
requirements set forth in section 1116 of Title XI (12 U.S.C. 3345); 
\124\
---------------------------------------------------------------------------

    \124\ Id. at 9148-9149.
---------------------------------------------------------------------------

    (3) the State Appraiser Regulatory Agency must use the designations 
for trainee appraisers, State licensed appraisers, and State certified 
appraisers in accordance with section 1116 of Title XI (12 U.S.C. 
3345); \125\
---------------------------------------------------------------------------

    \125\ Id. at 9147-9149.
---------------------------------------------------------------------------

    (4) the State Appraiser Regulatory Agency must use permitted scopes 
of practice for State licensed and certified appraisers in accordance 
with sections 1113 and 1114 of Title XI (12 U.S.C. 3342 and 3343); 
\126\
---------------------------------------------------------------------------

    \126\ Id.
---------------------------------------------------------------------------

    (5) the State Appraiser Regulatory Agency must process applications 
in a timely, consistent, equitable, and well-documented manner in 
accordance with Title XI; \127\
---------------------------------------------------------------------------

    \127\ See Policy Statement 4, supra note 38 at 9151 and 9153.
---------------------------------------------------------------------------

    (6) the State Appraiser Regulatory Agency must ensure that 
individuals who process applications are knowledgeable about section 
1116 of Title XI (12 U.S.C. 3345) as evaluated by the ASC; \128\
---------------------------------------------------------------------------

    \128\ Id. at 9152-9153.
---------------------------------------------------------------------------

    (7) the State Appraiser Regulatory Agency must have a reciprocity 
policy for issuing a reciprocal license or certification for an 
individual from another State in accordance with section 1122(b) of 
Title XI (12 U.S.C. 3351(b)); \129\
---------------------------------------------------------------------------

    \129\ See Policy Statement 5, supra note 38 at 9153-9154.
---------------------------------------------------------------------------

    (8) the State Appraiser Regulatory Agency must ensure that all 
approved applicants meet the applicable minimum requirements of the AQB 
Criteria; \130\
---------------------------------------------------------------------------

    \130\ See Policy Statements 4 and 6, supra note 38 at 9151-9153 
and 9154.
---------------------------------------------------------------------------

    (9) the State Appraiser Regulatory Agency must ensure that 
appraiser education courses are consistent with the AQB Criteria; \131\
---------------------------------------------------------------------------

    \131\ See Policy Statement 6, supra note 38 at 9154.
---------------------------------------------------------------------------

    (10) the State Appraiser Regulatory Agency must obtain and maintain 
sufficient documentation pertaining to all applications, including 
initial licenses or certifications, upgrades, renewals, reinstatements, 
and supervisory approvals, to create a record of facts and 
determinations and the reasons for those determinations made by the 
State Appraiser Regulatory Agency; \132\ and
---------------------------------------------------------------------------

    \132\ See Policy Statements 4, 5 and 6, supra note 38 at 9151-
9154.
---------------------------------------------------------------------------

    (11) the State Appraiser Regulatory Agency must report appraiser 
data on the issuance and renewal of licenses and certifications on a 
timely basis to the Appraiser Registry in accordance with section 
1109(a)(2) of Title XI (12 U.S.C. 3338(a)(2)).\133\
---------------------------------------------------------------------------

    \133\ See Policy Statement 3, supra note 38 at 9150-9151.
---------------------------------------------------------------------------

    Paragraph (c)(1)(ii) of proposed Sec.  1102.603 would specify nine 
requirements for the issuance of temporary licenses and certifications 
for appraisers. These nine requirements are:
    (1) the State Appraiser Regulatory Agency must recognize the 
license or certification of an appraiser issued by another State 
Appraiser Regulatory Agency on a temporary basis in accordance with 
section 1122(a)(1) of Title XI (12 U.S.C. 3351(a)(1)); \134\
---------------------------------------------------------------------------

    \134\ See Policy Statement 2, supra note 38 at 9149.
---------------------------------------------------------------------------

    (2) the State Appraiser Regulatory Agency must not impose excessive 
fees for a temporary license or certification in accordance with 
section 1122(a)(2) of Title XI (12 U.S.C. 3351(a)(2)); \135\
---------------------------------------------------------------------------

    \135\ Id.

---------------------------------------------------------------------------

[[Page 96923]]

    (3) the State Appraiser Regulatory Agency must not impose 
burdensome requirements, as determined by the ASC, for temporary 
practice in accordance with section 1122(a)(2) of Title XI (12 U.S.C. 
3351(a)(2)); \136\
---------------------------------------------------------------------------

    \136\ Id.
---------------------------------------------------------------------------

    (4) the State Appraiser Regulatory Agency must issue temporary 
licenses or certifications within five business days after receiving a 
complete application for such issuance in accordance with section 
1122(a) of Title XI (12 U.S.C. 3351(a)); \137\
---------------------------------------------------------------------------

    \137\ Id. The requirement for temporary licenses or 
certifications to be issued within five business days was determined 
based on the ASC's supervisory experience. This timeframe has been 
in place under Policy Statement 2, and the ASC has generally found 
the requirement to be a fair balance. The requirement allows 
appraisers to quickly obtain temporary licenses or certifications 
for temporary assignments related to federally related transactions 
while also giving the State Appraiser Regulatory Agency sufficient 
time to review and process these temporary practice applications.
---------------------------------------------------------------------------

    (5) the State Appraiser Regulatory Agency must issue temporary 
licenses or certifications on an assignment basis and must allow for at 
least one extension through a streamlined process in accordance with 
section 1122(a) of Title XI (12 U.S.C. 3351(a)); \138\
---------------------------------------------------------------------------

    \138\ Id. Title XI prohibits State Appraiser Regulatory Agencies 
from imposing excessive fees or burdensome requirements for 
temporary practice, as determined by the ASC. 12 U.S.C. 3351(a)(2). 
These practices for issuing temporary licenses or certifications are 
based on the ASC's supervisory experience and have been in place 
under Policy Statement 2. The ASC has generally found that when 
State Appraiser Regulatory Agencies adhere to these practices, it 
helps to avoid placing burdensome requirements on applicants for 
temporary practice.
---------------------------------------------------------------------------

    (6) the State Appraiser Regulatory Agency must issue temporary 
licenses or certifications designating the effective date in accordance 
with section 1122(a) of Title XI (12 U.S.C. 3351(a)); \139\
---------------------------------------------------------------------------

    \139\ Id. Title XI requires that appraisers obtain a temporary 
license or certification from the State Appraiser Regulatory Agency 
in the State where they will temporarily conduct appraisal 
assignments related to federally related transactions. This 
requirement for issuing temporary licenses or certifications with an 
effective date was established based on the ASC's supervisory 
experience and has been in place under Policy Statement 2. The ASC 
considers this requirement to be a fair balance between the need for 
public protection from unauthorized appraisal practices and the 
necessity for appraisers to be aware of the validity period of their 
temporary licenses or certifications.
---------------------------------------------------------------------------

    (7) the State Appraiser Regulatory Agency must track all temporary 
licenses or certifications using a permit log or system; \140\
---------------------------------------------------------------------------

    \140\ Id.
---------------------------------------------------------------------------

    (8) the State Appraiser Regulatory Agency must supervise all 
individuals to whom the State Appraiser Regulatory Agency issues a 
temporary license or certification while performing assignments in its 
State, must discipline such individuals, when appropriate, for 
misconduct or wrongdoing, and must report each disciplinary action to 
the ASC and other appropriate State Appraiser Regulatory Agencies to 
ensure effective supervision in accordance with sections 1117, 1118, 
and 1122(a) of Title XI (12 U.S.C. 3346, 3347, and 3351(a)); \141\ and
---------------------------------------------------------------------------

    \141\ Id.
---------------------------------------------------------------------------

    (9) the State Appraiser Regulatory Agency must obtain and maintain 
documentation sufficient to create a record of the basis for the 
determinations made by the State Appraiser Regulatory Agency in 
processing and issuing temporary licenses or certifications.\142\
---------------------------------------------------------------------------

    \142\ Id.
---------------------------------------------------------------------------

    Paragraph (c)(1)(iii) of proposed Sec.  1102.603 would specify two 
requirements for the program function of receiving and tracking of 
submitted complaints against appraisers as follows:
    (1) the State Appraiser Regulatory Agency must have a system for 
processing and investigating complaints and sanctioning trainee 
appraisers, State licensed appraisers, and State certified appraisers 
in a timely, effective, consistent, equitable, and well-documented 
manner; \143\ and
---------------------------------------------------------------------------

    \143\ See Policy Statement 7, supra note 38 at 9155.
---------------------------------------------------------------------------

    (2) the State Appraiser Regulatory Agency must track and monitor 
all complaints using a complaint log or system.\144\
---------------------------------------------------------------------------

    \144\ Id.
---------------------------------------------------------------------------

    Paragraph (c)(1)(iv) of proposed Sec.  1102.603 would specify five 
requirements for the program function of investigations of complaints 
against appraisers. These five requirements are:
    (1) the State Appraiser Regulatory Agency must require appraisals 
to be performed in accordance with the latest version of USPAP in 
accordance with sections 1101 and 1103(a)(1)(A) of Title XI (12 U.S.C. 
3331 and 3332(a)(1)(A)); \145\
---------------------------------------------------------------------------

    \145\ See Policy Statement 1, supra note 38 at 9148.
---------------------------------------------------------------------------

    (2) when examining an appraisal report in connection with a 
complaint, including complaints based solely on value, the State 
Appraiser Regulatory Agency must consider whether any potential 
violations of USPAP should be investigated; \146\
---------------------------------------------------------------------------

    \146\ See Policy Statement 7, supra note 38 at 9155.
---------------------------------------------------------------------------

    (3) to ensure effective supervision, the State Appraiser Regulatory 
Agency must resolve all complaints filed against trainee appraisers, 
State licensed appraisers, and State certified appraisers within one 
year (12 months) from the date the complaint was received except in 
special documented circumstances; \147\
---------------------------------------------------------------------------

    \147\ Id. The requirement that all complaints be resolved within 
12 months was determined based on the ASC's supervisory experience. 
This timeframe has been in place under Policy Statement 7. The ASC 
has generally found that the 12-month limit has provided adequate 
time for State Appraiser Regulatory Agencies to investigate and 
adjudicate complaints while still ensuring that appraisers are 
timely disciplined for misconduct or wrongdoing. Maintaining this 
12-month requirement would help reduce the burden on State Appraiser 
Regulatory Agencies.
---------------------------------------------------------------------------

    (4) the State Appraiser Regulatory Agency must ensure that 
individuals who analyze complaints are knowledgeable about Title XI, 
USPAP, and appraisal practices and must document how such individuals 
are qualified, which will be evaluated by the ASC; \148\ and
---------------------------------------------------------------------------

    \148\ Id. at 9155-9156.
---------------------------------------------------------------------------

    (5) the State Appraiser Regulatory Agency must obtain and maintain 
documentation sufficient to create a record of the facts and 
determinations made by the State Appraiser Regulatory Agency in 
processing and investigating a complaint and the reasons for its final 
disposition.\149\
---------------------------------------------------------------------------

    \149\ Id. at 9155.
---------------------------------------------------------------------------

    Paragraph (c)(1)(v) of proposed Sec.  1102.603 would specify two 
requirements for the program function of enforcement actions against 
appraisers as follows:
    (1) the State Appraiser Regulatory Agency must supervise trainee 
appraisers, State licensed appraisers, and State certified appraisers 
and must discipline such individuals, when appropriate, for misconduct 
and wrongdoing; \150\ and
---------------------------------------------------------------------------

    \150\ Id. at 9155-9156.
---------------------------------------------------------------------------

    (2) the State Appraiser Regulatory Agency must report all 
disciplinary actions against State licensed and certified appraisers to 
the ASC within five business days after the disciplinary action is 
final as determined by State law.\151\
---------------------------------------------------------------------------

    \151\ See Policy Statement 3, supra note 38 at 9150-9151.
---------------------------------------------------------------------------

4. Specified Requirements for an AMC Program
    Under paragraph (c)(2) of proposed Sec.  1102.603, a State 
Appraiser Regulatory Agency must demonstrate to the ASC's reasonable 
satisfaction that its AMC Program is operating consistently with the 
specified requirements of each program function as listed below.
    Paragraph (c)(2)(i) of proposed Sec.  1102.603 would specify seven 
requirements for the program function of registration of AMCs. These 
seven requirements are:
    (1) the State Appraiser Regulatory Agency must establish and 
maintain an

[[Page 96924]]

AMC regulatory program with legal authority and mechanisms consistent 
with Title XI, the AMC Rule, and the AMC Registry Fee Rule; \152\
---------------------------------------------------------------------------

    \152\ See Policy Statement 8, supra note 38 at 9156-9157. Under 
the proposed rule, ``AMC Registry Fee Rule'' means the ASC's 
regulations on the collection and transmission of AMC Registry fees 
as codified in subpart E of this part.
---------------------------------------------------------------------------

    (2) the State Appraiser Regulatory Agency must impose requirements 
on AMCs that are consistent with Title XI and the AMC Rule; \153\
---------------------------------------------------------------------------

    \153\ Id.
---------------------------------------------------------------------------

    (3) the State Appraiser Regulatory Agency must enforce and document 
ownership limitations for AMCs in a manner consistent with Title XI and 
the AMC Rule; \154\
---------------------------------------------------------------------------

    \154\ Id.
---------------------------------------------------------------------------

    (4) the State Appraiser Regulatory Agency must process AMC 
applications in a timely, consistent, equitable, and well-documented 
manner in accordance with Title XI, the AMC Rule, and the AMC Registry 
Fee Rule;
    (5) the State Appraiser Regulatory Agency must ensure that 
individuals who process applications are knowledgeable about Title XI 
and the AMC Rule as evaluated by the ASC;
    (6) the State Appraiser Regulatory Agency must obtain and maintain 
documentation sufficient to create a record of the basis for its 
determinations for AMC eligibility for the AMC Registry, including the 
appraiser panel requirements, ownership limitations, and AMC Registry 
fee collection and submission to the ASC; and
    (7) the State Appraiser Regulatory Agency must report AMCs eligible 
for the AMC Registry on a timely basis in accordance with section 
1109(a)(3) of Title XI (12 U.S.C. 3338(a)(3)) and the AMC Registry Fee 
Rule.\155\
---------------------------------------------------------------------------

    \155\ See Policy Statement 9, supra note 38 at 9157-9158.
---------------------------------------------------------------------------

    Paragraph (c)(2)(ii) of proposed Sec.  1102.603 would specify two 
requirements for the program function of receiving and tracking of 
submitted complaints against AMCs as follows:
    (1) the State Appraiser Regulatory Agency must have a system for 
processing and investigating complaints and sanctioning AMCs (other 
than federally regulated AMCs) in a timely, effective, consistent, 
equitable, and well-documented manner; \156\ and
---------------------------------------------------------------------------

    \156\ See Policy Statement 10, supra note 38 at 9158.
---------------------------------------------------------------------------

    (2) the State Appraiser Regulatory Agency must track and monitor 
all complaints against AMCs using a complaint log or system.\157\
---------------------------------------------------------------------------

    \157\ Id.
---------------------------------------------------------------------------

    Paragraph (c)(2)(iii) of proposed Sec.  1102.603 would specify 
three requirements for the program function of investigation of 
complaints against AMCs. These three requirements are:
    (1) to ensure effective supervision, the State Appraiser Regulatory 
Agency must resolve all complaints filed against AMCs (other than 
federally regulated AMCs) within one year (12 months) from the date the 
complaint was received except in special documented circumstances; 
\158\
---------------------------------------------------------------------------

    \158\ Id. The requirement that all complaints be resolved within 
12 months was determined based on the ASC's supervisory experience. 
This timeframe has been in place under Policy Statement 10. The ASC 
has generally found that the 12-month limit has provided adequate 
time for State Appraiser Regulatory Agencies to investigate and 
adjudicate complaints while still ensuring that AMCs are timely 
disciplined for misconduct or wrongdoing. Maintaining this 12-month 
requirement would help reduce the burden on State Appraiser 
Regulatory Agencies.
---------------------------------------------------------------------------

    (2) the State Appraiser Regulatory Agency must ensure that 
individuals who analyze complaints are knowledgeable about Title XI, 
the AMC Rule, USPAP, and appraisal practices and must document how such 
individuals are qualified, which will be evaluated by the ASC; and
    (3) the State Appraiser Regulatory Agency must obtain and maintain 
documentation sufficient to create a record of the facts and 
determinations made by the State Appraiser Regulatory Agency in 
processing and investigating a complaint and the reasons for its final 
disposition.\159\
---------------------------------------------------------------------------

    \159\ Id.
---------------------------------------------------------------------------

    Paragraph (c)(2)(iv) of proposed Sec.  1102.603 would specify two 
requirements for the program function of enforcement actions against 
AMCs as follows:
    (1) the State Appraiser Regulatory Agency must supervise AMCs 
(other than federally regulated AMCs) and must discipline such 
entities, when appropriate, for misconduct and wrongdoing; \160\ and
---------------------------------------------------------------------------

    \160\ Id.
---------------------------------------------------------------------------

    (2) the State Appraiser Regulatory Agency must report all 
disciplinary actions against AMCs (other than federally regulated AMCs) 
to the ASC within five business days after the disciplinary action is 
final as determined by State law.\161\
---------------------------------------------------------------------------

    \161\ See Policy Statement 9, supra note 38 at 9157-9158.
---------------------------------------------------------------------------

D. Mitigating and Aggravating Factors

    Under proposed Sec.  1102.604, the ASC would consider mitigating 
and aggravating factors as appropriate in adjusting the ASC's initial 
assessment of the regulatory program's level of effectiveness 
identified in the preliminary report for a State Appraiser Regulatory 
Agency. Proposed Sec.  1102.604 would allow the ASC to increase or 
decrease its initial assessment of the level of effectiveness depending 
upon the presence of these individualized factors in this section.
    As previously mentioned, the ASC believes it is not feasible to 
predetermine all the mitigating and aggravating factors that could 
arise in each compliance review because there can be significant 
variations in the underlying facts of each compliance review. 
Therefore, proposed Sec.  1102.604 would include common factors to be 
considered when adjusting a regulatory program's level of 
effectiveness. The ASCAC recommended categorizing the factors as either 
solely mitigating or aggravating. The ASC believes from its supervisory 
experience that these factors should be classified into categories 
because they could have different effects depending on the specific 
circumstances, either mitigating or aggravating. Under proposed Sec.  
1102.604, the mitigating and aggravating factors would be classified 
together into four categories: (1) the nature and extent of the 
deficiency; (2) prior compliance history by the State Appraiser 
Regulatory Agency; (3) the structure, stability, and responsiveness of 
the State Appraiser Regulatory Agency; and (4) other situations or 
circumstances such as natural or human-made disasters or emergencies or 
other government-declared orders. The ASC has found in conducting 
compliance reviews, based on its supervisory experience, that most 
mitigating and aggravating factors could fit into one of the four 
categories under proposed Sec.  1102.604.
    Except as discussed below, the four categories would encompass 
almost all of the ASCAC's recommendations regarding mitigating and 
aggravating factors.\162\ Some changes would be made to the wording of 
certain mitigating and aggravating factors to enhance clarity and style 
and to avoid duplication. Further, the ASC proposes not to include the 
recommended mitigating and aggravating factors relating to a State 
Appraiser Regulatory Agency board member involved in a disciplinary 
decision who had a conflict of interest or bias because the ASC 
believes such circumstance would be covered under the proposed 
mitigating or aggravating factor of whether the State Appraiser 
Regulatory Agency failed to exercise reasonable care toward equitable, 
consistent, and timely enforcement.\163\
---------------------------------------------------------------------------

    \162\ See ASCAC Final Recommendation Report, supra note 45 at 
25.
    \163\ Id.

---------------------------------------------------------------------------

[[Page 96925]]

    Given the complexity of some events and significant variations in 
the underlying facts of each compliance review, it is not feasible to 
predetermine the outcome or the relative weights of potential 
mitigating and aggravating factors for every compliance review. The 
presence of mitigating or aggravating factors does not automatically 
lead to the conclusion that a departure from the ASC's initial 
assessment of the regulatory program's level of effectiveness 
identified in the preliminary report is justified. The factors must be 
weighed against each other and the facts and circumstances of the 
deficiency itself. The presence of one or more mitigating 
circumstances, along with one or more aggravating circumstances, may or 
may not offset each other. Where mitigating factors predominate, the 
ASC may consider increasing the regulatory program's level of 
effectiveness. Conversely, where aggravating factors predominate, the 
ASC may consider decreasing the regulatory program's level of 
effectiveness.
    If the ASC considers the regulatory program's level of 
effectiveness to be appropriately mitigated or aggravated, the relevant 
factors, including a description of how the factors were applied, would 
be documented in the final report.

E. Enforcement Actions

    As stated earlier, section 1118(a) of Title XI authorizes the ASC 
to impose certain specified enforcement actions against a State 
Appraiser Regulatory Agency that fails to have an effective appraiser 
regulatory program.\164\ Proposed Sec.  1102.605 would specify the 
enforcement actions that could be taken against State Appraiser 
Regulatory Agencies to establish an effective and consistent 
enforcement approach.
---------------------------------------------------------------------------

    \164\ 12 U.S.C. 3347(a).
---------------------------------------------------------------------------

1. Interim Enforcement Actions
    Section 1118(a) of Title XI specifically authorizes the ASC to 
impose interim actions and suspensions against a State Appraiser 
Regulatory Agency as an alternative to, or in advance of, the non-
recognition of a State Appraiser Regulatory Agency.\165\ Under 
paragraph (a) of proposed Sec.  1102.605, the ASC would include three 
types of potential interim enforcement actions against State Appraiser 
Regulatory Agencies when the final report indicates that the level of 
the regulatory program is less than effective: warning letters, 
negotiated agreements, and suspensions.
---------------------------------------------------------------------------

    \165\ Id.
---------------------------------------------------------------------------

    Paragraph (a)(1) of proposed Sec.  1102.605 would include a warning 
letter as a potential interim enforcement action against State 
Appraiser Regulatory Agencies. A warning letter would be the least 
severe form of an interim enforcement action and would communicate to a 
State Appraiser Regulatory Agency any deficiencies in its regulatory 
program. If the deficiencies are not addressed, the regulatory 
program's effectiveness could be negatively impacted. Under paragraph 
(a)(1) of proposed Sec.  1102.605, the ASC could consider issuing a 
warning letter to a State Appraiser Regulatory Agency when the final 
report indicates that the level of the regulatory program's 
effectiveness is moderately effective or slightly effective.
    The ASC would also include a negotiated agreement, under paragraph 
(a)(2) of proposed Sec.  1102.605, as a potential interim enforcement 
action. A negotiated agreement would involve a State Appraiser 
Regulatory Agency agreeing to address deficiencies that hinder the 
effectiveness of the regulatory program by taking certain actions or 
refraining from certain actions within a specified timeframe. For 
example, a negotiated agreement could involve the State Appraiser 
Regulatory Agency preparing and submitting compliance plans, approved 
by the ASC, outlining the corrective actions to be taken, specifying 
the individuals responsible for the actions, and setting a timeframe 
for completion. Under paragraph (a)(2) of proposed Sec.  1102.605, a 
negotiated agreement could be employed when the final report indicates 
that the regulatory program is slightly effective or ineffective. A 
negotiated agreement could also be employed, under paragraph (a)(2) of 
proposed Sec.  1102.605, when the State Appraiser Regulatory Agency 
fails to rectify the identified deficiencies outlined in a previously 
issued warning letter. The ASC believes a negotiated agreement would 
provide the ASC with the flexibility to address and correct 
deficiencies while working cooperatively with the State Appraiser 
Regulatory Agency to rectify any deficiencies.
    The last potential interim enforcement action included under 
paragraph (a)(3) of proposed Sec.  1102.605 would be suspension, which 
would be the most severe form of an interim enforcement action. Under 
paragraph (a)(3) of proposed Sec.  1102.605, the ASC could potentially 
prohibit a State Appraiser Regulatory Agency from performing certain 
task(s) as part of its responsibilities under Title XI for a specified 
time period. The tasks may involve, but are not limited to: (1) the 
addition of State licensed or certified appraisers to the Appraiser 
Registry or AMCs to the AMC Registry; (2) the issuance of upgrades of 
individuals' level of licensure or certification to perform appraisals 
in connection with federally related transactions; (3) renewal of 
licenses or certifications of State licensed or certified appraisers 
for the performance of appraisals in connection with federally related 
transactions; or (4) the issuance of temporary licenses or 
certifications to individuals who are licensed or certified in another 
State to perform appraisals in connection with federally related 
transactions in the suspended State Appraiser Regulatory Agency's 
State, as set forth in section 1122(a) of Title XI (12 U.S.C. 3351(a)). 
Under paragraph (a)(3) of proposed Sec.  1102.605, the ASC could apply 
a suspension when the final report indicates that the regulatory 
program is ineffective. The ASC could also apply a suspension, under 
proposed Sec.  1102.605(a)(3), when a State Appraiser Regulatory Agency 
refuses to enter into a negotiated agreement or a State Appraiser 
Regulatory Agency fails to meet its obligations under the negotiated 
agreement. This interim enforcement action is supported by the 
statutory text found in section 1118(a) of Title XI that the ASC has 
the authority to impose suspensions of a State Appraiser Regulatory 
Agency as an alternative to, or in advance of, the non-recognition of a 
State Appraiser Regulatory Agency.\166\ The proposed rule would also 
provide a cross-reference to the procedures governing suspension 
proceedings found at proposed Sec.  1102.606.
---------------------------------------------------------------------------

    \166\ Id.
---------------------------------------------------------------------------

2. Non-Recognition
    As referenced above, prior to the Dodd-Frank Act, Title XI 
authorized the ASC to take only one enforcement action--non-
recognition--against a State Appraiser Regulatory Agency not operating 
its Appraiser Program in a manner consistent with Title XI.\167\ Non-
recognition is the most severe enforcement action that the ASC could 
impose against a State Appraiser Regulatory Agency. As noted in the 
ASCAC meeting minutes dated April 17, 2014, the ASC should carefully 
consider the economic impact of non-recognition before imposing such 
action.\168\ To date, the ASC has not imposed non-recognition against a 
State Appraiser Regulatory Agency.
---------------------------------------------------------------------------

    \167\ See supra note 39.
    \168\ See supra note 44.

---------------------------------------------------------------------------

[[Page 96926]]

    Under paragraph (b) of proposed Sec.  1102.605, the ASC could 
impose non-recognition when the ASC issues a written finding under 
section 1118(b) of Title XI (12 U.S.C. 3347(b)) and a State Appraiser 
Regulatory Agency fails to comply with the final order of suspension. 
The ASC could also impose non-recognition under paragraph (b) of 
proposed Sec.  1102.605 when the ASC issues a written finding pursuant 
to section 1118(b) of Title XI (12 U.S.C. 3347(b)) and the final report 
indicates that the regulatory program is ineffective.

F. Procedures Governing Suspension Proceedings

    Proposed Sec.  1102.606 would codify, with some modifications and 
minor non-substantive corrections, the procedures found in Policy 
Statement 12 for the procedures governing suspension proceedings.\169\ 
Policy Statement 12 states the due process procedures that the ASC must 
follow to exercise its authority to impose interim sanctions on State 
Appraiser Regulatory Agencies.\170\ Consistent with the ASC's current 
procedures in Policy Statement 12, the proposal would provide a written 
notice of intention to suspend that is published in the Federal 
Register and give the State Appraiser Regulatory Agency the opportunity 
to respond to the notice.\171\ Under paragraph (a) of proposed Sec.  
1102.606, the ASC would issue a written notice of intention (Notice) to 
suspend the State Appraiser Regulatory Agency, which would be published 
in the Federal Register. Policy Statement 12 states that the ASC would 
verify the State Appraiser Regulatory Agency's date of receipt of the 
Notice and publish the Notice in the Federal Register along with the 
State Appraiser Regulatory Agency's date of receipt of the Notice.\172\ 
The ASC recognizes that verifying a State Appraiser Regulatory Agency's 
date of receipt of the Notice could be problematic if a State Appraiser 
Regulatory Agency refuses to acknowledge receipt of the Notice. 
Therefore, paragraph (a)(2) of proposed Sec.  1102.606 would alleviate 
this potential problem by requiring the ASC to serve notice upon the 
State Appraiser Regulatory Agency by sending a copy of the Notice to 
either the last known email or mailing address of the State Appraiser 
Regulatory Agency's office and deeming the service complete upon 
sending.
---------------------------------------------------------------------------

    \169\ See Policy Statement 12, supra note 38 at 9159-9160.
    \170\ Id.
    \171\ Id. at 9159.
    \172\ Id.
---------------------------------------------------------------------------

    To ensure timely enforcement decisions, proposed Sec.  1102.606 
would modify the procedural timeframes and deadlines applicable to a 
State Appraiser Regulatory Agency or the ASC in Policy Statement 12 
\173\ for a suspension proceeding. The ASC believes the procedural 
timeframes and deadlines in proposed Sec.  1102.606 are reasonable for 
several reasons. The proposal would permit the State Appraiser 
Regulatory Agency to receive advance notice of the deficiencies through 
the issuance of both preliminary and final reports. The proposed 
timeframes would also allow the State Appraiser Regulatory Agency to 
have approximately one month for each information-gathering phase of a 
suspension proceeding, based on an estimated 20 business days in a 
month. Finally, the proposed rule would authorize the ASC to grant a 
waiver extending any time limit in connection with a suspension 
proceeding on its own or for good cause shown.
---------------------------------------------------------------------------

    \173\ Id. at 9159-9160.
---------------------------------------------------------------------------

    Furthermore, the ASC believes that timely enforcement decisions 
will help build and maintain public confidence in the appraiser 
regulatory framework while promoting transparency and accountability. 
This approach would also enhance the ASC's reputation by fostering 
trust and credibility among State Appraiser Regulatory Agencies, 
appraisers, AMCs, financial institutions, and the public.
    Under paragraph (b) of proposed Sec.  1102.606, the State Appraiser 
Regulatory Agency would have the opportunity to respond to the Notice 
by submitting a response or a notice not to contest within 20 business 
days after publication of the Notice in the Federal Register. 
Currently, Policy Statement 12 states the State Appraiser Regulatory 
Agency may submit a response within 15 business days of receipt of the 
Notice.\174\ The ASC is proposing to extend the response timeframe by 
an additional five business days, so the State Appraiser Regulatory 
Agency would effectively have a month to reply to the Notice. 
Consistent with the ASC's current procedures in Policy Statement 12, 
the ASC may consider the facts presented in the Notice to be true and 
issue a final order if a State Appraiser Regulatory Agency does not 
submit a response or a notice not to contest.\175\
---------------------------------------------------------------------------

    \174\ Id. at 9159.
    \175\ Id.
---------------------------------------------------------------------------

    Under paragraph (c) of proposed Sec.  1102.606, the State Appraiser 
Regulatory Agency may file a written brief, memorandum, or other 
statement presenting factual data, as well as policy and legal 
arguments related to the matters outlined in the Notice. This 
submission, under the proposed rule, must occur within 40 business days 
following the publication of the Notice in the Federal Register. 
According to Policy Statement 12, the State Appraiser Regulatory Agency 
may file this documentation within 45 days after the date of receipt by 
the State Appraiser Regulatory Agency of the Notice as published in the 
Federal Register.\176\ The ASC is proposing to shorten the timeframe 
for the reasons stated above.
---------------------------------------------------------------------------

    \176\ Id.
---------------------------------------------------------------------------

    The State Appraiser Regulatory Agency could also, under paragraph 
(d) of proposed Sec.  1102.606, request an oral presentation to further 
present, emphasize, and clarify the facts, policies, and laws regarding 
the issues outlined in the Notice. Such a request must be made within 
40 business days after publication of the Notice in the Federal 
Register. Policy Statement 12 states that a State Appraiser Regulatory 
Agency may request an oral presentation 45 business days after the date 
of receipt by the State Appraiser Regulatory Agency of the Notice as 
published in the Federal Register.\177\ The ASC is proposing to shorten 
the timeframe for the reasons stated above.
---------------------------------------------------------------------------

    \177\ Id.
---------------------------------------------------------------------------

    Under paragraph (d) of proposed Sec.  1102.606, if a State 
Appraiser Regulatory Agency requests an oral presentation, the ASC must 
hear the matter within 20 business days of receiving the request. 
Policy Statement 12 states the ASC must hear the matter within 45 
business days of receiving the request.\178\ However, the ASC believes 
that enforcement decisions should be made expeditiously to ensure the 
soundness and effectiveness of the appraiser regulatory framework, so 
the ASC is proposing a shorter 20-day timeframe to hear the oral 
presentation.
---------------------------------------------------------------------------

    \178\ Id.
---------------------------------------------------------------------------

    Under paragraph (f) of proposed Sec.  1102.606, the ASC must make a 
final decision on the matter by issuing a final order, within 80 
business days after publication of the Notice in the Federal Register 
or within 100 business days after publication of the Notice in the 
Federal Register if the ASC receives a timely request for an oral 
presentation. Policy Statement 12 states that the ASC must issue a 
final order within 90 business days after the date of receipt by the 
State Appraiser Regulatory Agency of the Notice as published in the 
Federal Register or in the case of oral presentation having been 
granted,

[[Page 96927]]

within 30 days after presentation.\179\ However, the ASC believes that 
enforcement decisions should be made expeditiously to ensure the 
soundness and effectiveness of the appraiser regulatory framework, so 
the ASC is proposing a shorter general 80-day timeframe. The ASC also 
believes a 100-day timeframe in the event of a timely submitted request 
for an oral presentation is reasonable because the timeframe would 
allow the ASC additional time to consider the State Appraiser 
Regulatory Agency's oral presentation in its deliberations.
---------------------------------------------------------------------------

    \179\ Id. at 9160.
---------------------------------------------------------------------------

    Finally, paragraph (e)(3) of proposed Sec.  1102.606 would 
authorize the ASC to grant a waiver extending any time limit in 
connection with a suspension proceeding if the ASC deems such a waiver 
to be appropriate. According to Policy Statement 12, the ASC may allow 
the filing of a response by the State Appraiser Regulatory Agency after 
the designated deadline for good cause shown.\180\ The ASC believes 
that extending the timeframe for any part of a suspension proceeding--
beyond just the State Appraiser Regulatory Agency's response 
timeframe--is fair and reasonable. The ASC would consider extensions 
justified in cases that are unanticipated, unforeseeable, and beyond 
the control of the State Appraiser Regulatory Agency or the ASC.
---------------------------------------------------------------------------

    \180\ Id. at 9159.
---------------------------------------------------------------------------

G. Procedures Governing Non-Recognition Proceedings

    Proposed Sec.  1102.607 would cross-reference the existing 
procedures governing non-recognition proceedings as set forth in 
subpart B of 12 CFR part 1102 to impose the enforcement action of non-
recognition against a State Appraiser Regulatory Agency.

III. Proposed Implementation Period

    The ASC proposes a 12-month implementation period from the 
effective date of any final rule based on this proposal. The ASC 
understands that, if finalized, the proposed rule would impact the 
Policy Statements. Accordingly, the ASC plans to revise the Policy 
Statements to be consistent with any final rule based on this proposal 
before the expiration of the proposed implementation period. However, 
during the proposed implementation period, the existing Policy 
Statements would continue to apply until revised. This compliance 
period would also give State Appraiser Regulatory Agencies time to 
comply with the rule.

IV. Request for Comment

    The ASC is requesting comments on all aspects of this proposal. In 
addition, the ASC requests comments on the following questions:
    Question 1. What are the advantages and disadvantages of the ASC's 
plan to extend the review cycle for Appraiser or AMC Programs overseen 
by State Appraiser Regulatory Agencies from a two-year cycle to a 
three-year cycle, particularly for those State Appraiser Regulatory 
Agencies with an overall ASC Finding of Good or Excellent? What factors 
should the ASC consider when deciding whether to extend the review 
cycle to three years for Appraiser or AMC Programs overseen by State 
Appraiser Regulatory Agencies, particularly when there is an overall 
ASC Finding of Good or Excellent?
    Question 2. Section 1118(a)(2) of Title XI \181\ requires the ASC 
to monitor State Appraiser Regulatory Agencies to ensure that the 
processing of complaints and completing investigations occurs in a 
reasonable time period. The proposed rule would require that State 
Appraiser Regulatory Agencies resolve all complaints against appraisers 
and AMCs within one year (12 months) from the date the complaint is 
received, except in special documented circumstances. What are the 
benefits and challenges of the ASC's plan to reduce the complaint 
resolution timeframe for State Appraiser Regulatory Agencies to a 
period of time between 8 and 11 months? What factors should the ASC 
consider when deciding whether to implement this reduction in the 
complaint resolution timeframe?
---------------------------------------------------------------------------

    \181\ 12 U.S.C. 3347(a)(2).
---------------------------------------------------------------------------

    Question 3. Are there other mitigating or aggravating factors, such 
as a legitimate threat to the integrity of the appraiser regulatory 
framework, intentionally-caused unreasonable delays, or reasonable 
reliance on competent legal advice, that the ASC should consider when 
deciding whether to adjust the initial level of effectiveness of 
Appraiser and AMC Programs as determined by the number of deficiencies 
identified in the preliminary report?
    Question 4. What barriers, if any, might prevent a State Appraiser 
Regulatory Agency from responding to a written notice of intention to 
suspend within 20 business days after its publication in the Federal 
Register? If such barriers exist, what benefits or challenges could 
arise from extending the response timeframe to a period of time between 
30 and 60 business days?
    Question 5. What barriers, if any, might prevent a State Appraiser 
Regulatory Agency from submitting a written brief, memorandum, or other 
statement within 40 business days after the written notice of intention 
to suspend is published in the Federal Register? If such barriers 
exist, what benefits or challenges could result from extending the 
timeframe for filing a written brief, memorandum, or other statement to 
a period of time between 50 and 100 business days?
    Question 6. What barriers, if any, might prevent a State Appraiser 
Regulatory Agency from requesting an oral presentation within 40 
business days after the written notice of intention to suspend is 
published in the Federal Register? If such barriers exist, what 
benefits or challenges could result from extending the timeframe to a 
period of time between 50 and 100 business days?
    Question 7. What factors should the ASC consider when deciding 
whether to extend the timeframe for issuing the final order from within 
80 business days after the written notice of intention to suspend is 
published in the Federal Register? Additionally, what are the 
advantages and disadvantages of the ASC's plan to extend this timeframe 
to a period of time between 90 and 180 business days?
    Question 8. What factors should the ASC consider when deciding 
whether to extend the timeframe for issuing the final order in response 
to a request for an oral presentation within 100 business days after 
the written notice of intention to suspend is published in the Federal 
Register? Additionally, what are the advantages and disadvantages of 
extending this timeframe to a period of time between 120 and 200 
business days?
    Question 9. What aspects of the proposed rule, if any, will be 
challenging for State Appraiser Regulatory Agencies to implement within 
12 months? To the extent such challenges exist, what benefits or 
obstacles could result from extending the implementation period to a 
period of time between 15 and 18 months? What factors should the ASC 
consider when deciding whether to extend the implementation period to a 
period of time greater than 12 months?

[[Page 96928]]

    Question 10. In addition to providing time for implementation, in 
what other ways should the ASC facilitate implementation for State 
Appraiser Regulatory Agencies?

IV. Regulatory Requirements

A. Providing Accountability Through Transparency Act of 2023

    The Providing Accountability Through Transparency Act of 2023 \182\ 
requires that a notice of proposed rulemaking include the internet 
address of a summary of not more than 100 words in length of a proposed 
rule, in plain language, that shall be posted on the internet website 
under section 206(d) of the E-Government Act of 2002 \183\ (commonly 
known as regulations.gov).
---------------------------------------------------------------------------

    \182\ 5 U.S.C. 553(b)(4).
    \183\ 44 U.S.C. 3501 note.
---------------------------------------------------------------------------

    The Appraisal Subcommittee (ASC) of the Federal Financial 
Institutions Examination Council invites comment on a proposed rule to 
implement a framework to govern the ASC's enforcement authority 
regarding the effectiveness of Appraiser and Appraisal Management 
Company (AMC) Programs overseen by State Appraiser Regulatory Agencies. 
The proposed rule would codify the existing compliance review process 
with modifications. The proposed rule would require an analysis to 
assess program effectiveness, outline requirements for maintaining 
effective programs, and authorize the ASC to bring enforcement actions 
against such agencies that fail to maintain effective programs. The 
proposed rule and summary are available at https://www.regulations.gov.

B. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (PRA),\184\ 
and its implementing regulations,\185\ the ASC has reviewed this 
proposed rule and has determined that the information collection 
required by this proposed rule is exempt from the coverage of the PRA. 
Each compliance review is an audit dependent on the specific facts 
involved because each State Appraiser Regulatory Agency has the 
flexibility to design its Appraiser or AMC Programs to meet its Title 
XI responsibilities. Each State Appraiser Regulatory Agency may face 
different legal, fiscal, regulatory, or other factors that can 
influence its governance structure. Under the proposed rule, the 
collection of information would occur during the performance of an 
audit involving the ASC against specific entities.\186\
---------------------------------------------------------------------------

    \184\ 44 U.S.C. 3501 et seq.
    \185\ 5 CFR part 1320.
    \186\ 5 CFR 1320.4(a)(2).
---------------------------------------------------------------------------

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency, 
in connection with a proposed rule, to prepare and make available for 
public comment an initial regulatory flexibility analysis that 
describes the impact of a proposed rule on small entities.\187\ 
However, the regulatory flexibility analysis is not required if an 
agency certifies that the proposed rule would not, if adopted, have a 
significant economic impact on a substantial number of small entities 
and publishes its certification and a brief explanatory statement in 
the Federal Register with the proposed rule.\188\ For the reasons 
stated below, the ASC believes that the proposed rule, if adopted, 
would not have a significant economic impact on a substantial number of 
small entities.
---------------------------------------------------------------------------

    \187\ 5 U.S.C. 601 et seq.
    \188\ Id.
---------------------------------------------------------------------------

    Title XI requires the ASC to monitor the requirements established 
by States that (1) license, certify, and supervise appraisers qualified 
to perform appraisals in connection with federally related transactions 
and (2) register and supervise the operations and activities of 
AMCs.\189\ The ASC monitors States that have established Appraiser and 
AMC Programs through periodic or accelerated compliance reviews. Under 
the proposal, the ASC would conduct an analysis as part of its 
compliance review process to assess the effectiveness of Appraiser and 
AMC Programs administered by State Appraiser Regulatory Agencies. The 
ASC would be authorized to bring an enforcement action against a State 
Appraiser Regulatory Agency if the agency fails to have an effective 
Appraiser or AMC Program.
---------------------------------------------------------------------------

    \189\ See, e.g., 12 U.S.C. 3331, 3332(a)(1), 3346 and 3347(a).
---------------------------------------------------------------------------

    This proposed rule would apply to all States that have established 
Appraiser and AMC Programs under Title XI. All 50 States and the 
District of Columbia have Appraiser and AMC Programs.\190\ The District 
of Columbia has two separate and distinct agencies--the Department of 
Licensing and Consumer Protection and the Department of Insurance, 
Securities and Banking--that administer the Appraiser and AMC Programs. 
The Commonwealth of Puerto Rico, the Commonwealth of the Northern 
Mariana Islands, Guam, and the U.S. Virgin Islands only have Appraiser 
Programs and not AMC Programs. American Samoa does not have a 
regulatory oversight structure for appraisers because real estate can 
only be inherited.\191\ As a result, 56 State Appraiser Regulatory 
Agencies would be subject to this proposed rule.
---------------------------------------------------------------------------

    \190\ Hawaii's AMC Program sunset on June 30, 2023. However, 
House Bill 2641 was signed into law on June 21, 2024, to reenact the 
version of the AMC Program that was originally part of the Hawaii 
Department of Commerce and Consumer Affairs. The AMC Program 
established pursuant to House Bill 2641 commenced September 1, 2024.
    \191\ Government Accountability Office, GAO-03-404, Regulatory 
Programs: Opportunities to Enhance Oversight of the Real Estate 
Appraisal Industry, at 2 (2003).
---------------------------------------------------------------------------

    Given the definition of ``small entities'' under the RFA,\192\ the 
ASC analyzed the population data from the U.S. Census Bureau \193\ for 
all 50 States, the District of Columbia, and the Commonwealth of Puerto 
Rico to determine whether any State Appraiser Regulatory Agencies could 
be considered ``small governmental jurisdictions.'' Wyoming was the 
least populated.\194\ Wyoming's population was estimated to be 576,850 
on April 1, 2020, and has increased to 584,057 on July 1, 2023.\195\ 
The ASC also analyzed the population data from the Central Intelligence 
Agency's (CIA) World Factbook website \196\ for the U.S. territories of 
American Samoa,\197\ Guam,\198\ the Commonwealth of the Northern 
Mariana Islands,\199\ and the U.S. Virgin Islands.\200\ American Samoa 
and the Commonwealth of the Northern Mariana Islands were the least 
populated. According to the CIA's World Factbook website, American 
Samoa's total population was 43,895, and the Commonwealth of the 
Northern

[[Page 96929]]

Mariana Islands' total population was 51,118.\201\ Only American Samoa 
meets the definition of a ``small governmental jurisdiction'' under the 
RFA, with a population of less than 50,000.\202\ However, American 
Samoa is not subject to the proposed rule because American Samoa has 
not established Appraiser and AMC Programs for the reasons stated 
above.\203\ Therefore, an analysis under the RFA is not required 
because the 56 State Appraiser Regulatory Agencies are not considered 
small entities \204\ under RFA.
---------------------------------------------------------------------------

    \192\ The RFA defines ``small entities'' as small businesses, 
small not-for-profit organizations, and small government 
jurisdictions. See 5 U.S.C. 601(6). A ``small business'' is 
determined by applying Small Business Administration regulations and 
referencing the North American Industry Classification System 
(NAICS) classifications and size standards. See 5 U.S.C. 601(3). A 
``small organization'' is any ``not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
See 5 U.S.C. 601(4). A ``small governmental jurisdiction'' means 
``governments of a city, county, town, township, village, school 
district, or special district with a population of less than 
50,000.'' See 5 U.S.C. 601(5).
    \193\ U.S. Census Bureau, Population Division, Annual Estimates 
of the Resident Population for the United States, Regions, States, 
District of Columbia, and Puerto Rico: Apr. 1, 2020, to July 1, 2023 
(NST-EST2023-POP) (December 2023).
    \194\ Id.
    \195\ Id.
    \196\ Central Intelligence Agency, The World Factbook, available 
at https://www.cia.gov/the-world-factbook (visited on Nov. 4, 2024).
    \197\ Id. American Samoa's total population was 43,895.
    \198\ Id. Guam's total population was 169,532.
    \199\ Id. The Commonwealth of the Northern Mariana Islands' 
total population was 51,118.
    \200\ Id. The U.S. Virgin Island's total population was 104,377.
    \201\ Id.
    \202\ See supra note 192.
    \203\ See supra note 191.
    \204\ See supra note 192.
---------------------------------------------------------------------------

    Any economic impact of the proposed rule, if adopted, on State 
licensed and certified appraisers and registered AMCs would be indirect 
because real estate appraisers and AMCs are not subject to the proposed 
rule. The ASC does not also directly oversee or regulate the 91,670 
State licensed and certified real estate appraisers listed on the 
Appraiser Registry \205\ reporting from 55 State Appraiser Regulatory 
Agencies, or 4,943 AMCs listed on the AMC Registry \206\ reporting from 
50 State Appraiser Regulatory Agencies.\207\ California issues the most 
licenses and certifications for real estate appraisers (7,803), and the 
Commonwealth of the Northern Mariana Islands issues the fewest 
(5).\208\ As for AMC registrations, Florida registers the most (198), 
and Kentucky registers the fewest (28).\209\
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    \205\ The actual number of State licensed or certified real 
appraisers is probably less because it is not uncommon for the same 
appraiser to hold multiple licenses or certifications from the same 
State or different States. The total number of State licensed and 
certified appraisers was current as of November 1, 2024.
    \206\ The actual number of AMCs is probably significantly less 
because most AMCs are registered in multiple States. The total 
number of registered AMCs was current as of November 1, 2024.
    \207\ Since Hawaii's AMC Program sunset on June 30, 2023, Hawaii 
has not submitted data to the AMC Registry. The ASC anticipates that 
Hawaii will begin collecting registry fees and submitting data to 
the AMC Registry once Hawaii has completed its implementation phase 
to re-establish the process for collecting AMC registry fees and 
submitting data to the AMC Registry.
    \208\ This data was current as of November 1, 2024.
    \209\ Id.
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    Additionally, this proposed rule would not create additional 
recordkeeping, reporting, and compliance requirements on State licensed 
and certified appraisers and registered AMCs. Any recordkeeping, 
reporting, and compliance requirements are imposed by State law, not 
this proposed rule. The ASC regulates State licensed and certified 
appraisers and registered AMCs only indirectly by monitoring and 
enforcing the requirements and practices of State Appraiser Regulatory 
Agencies.\210\ In American Trucking Associations, Inc., v. the United 
States Environmental Protection Agency, the United States Court of 
Appeals stated, ``[w]e have consistently interpreted the RFA, [. . .], 
to impose no obligation upon an agency [`]to conduct a small entity 
impact analysis of effects on entities which it does not regulate.[']'' 
\211\ The United States Court of Appeals further stated, ``an agency 
may justify its certification under the RFA upon the [`]factual 
basis[']that the rule does not directly regulate any small entities.'' 
\212\
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    \210\ The ASC's authority under 12 U.S.C. 3347(a) regarding the 
interim removal of an appraiser or AMC from their respective 
registry is distinguishable because the ASC is only authorized to do 
so pending State agency action and State Appraiser Regulatory 
Agencies directly oversee and regulate such appraisers and AMCs. In 
addition, that authority is outside of the scope of this rulemaking.
    \211\ American Trucking Associations, Inc. v. U.S. E.P.A., 175 
F.3d 1027, 1044 (1999) (quoting Motor & Equipment Manufacturers. 
Association v. Nichols, 142 F.3d 449, 467 & n. 18 (1998)).
    \212\ Id. at 1045.
---------------------------------------------------------------------------

    Based on this analysis, the ASC believes that the proposed rule, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. Therefore, the ASC certifies that the 
proposed rule, if adopted, would not have a significant economic impact 
on a substantial number of small entities. Accordingly, an initial 
regulatory flexibility analysis is not required. The ASC requests 
comment on all aspects of this analysis.

D. The Unfunded Mandates Reform Act of 1995 Determination

    Although the Unfunded Mandates Reform Act of 1995 (UMRA) \213\ does 
not apply to independent agencies, the ASC voluntarily analyzed the 
proposed rule under the factors in the UMRA. Under this analysis, the 
ASC considered whether the proposed rule includes a Federal mandate 
that may result in the expenditure by State, local, and Tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year (adjusted annually for inflation). For 
the following reason, the ASC finds that the proposed rule does not 
trigger the $100 million UMRA thresholds. First, the costs specifically 
related to requirements set forth in law are excluded from expenditures 
under the UMRA. Given that the proposed rule reflects requirements 
arising from section 1118 of Title XI,\214\ the UMRA cost estimate for 
the proposal, if implemented, is zero. Second, such costs to State, 
local, and Tribal governments may be paid with Federal financial 
assistance. Section 1109(b)(5) of Title XI \215\ allows the ASC to make 
grants to State Appraiser Regulatory Agencies to support the efforts of 
such agencies to comply with Title XI, such as the complaint process, 
complaint investigations, appraiser enforcement activities, and the 
submission of data on State licensed and certified appraisers to the 
Appraiser Registry or AMCs to the AMC Registry. For these reasons, the 
ASC has determined that this proposed rule will not result in 
expenditures by State, local, and Tribal governments, or the private 
sector, of $100 million or more in any one year. Accordingly, this 
proposal is not subject to section 202 of the UMRA.
---------------------------------------------------------------------------

    \213\ 2 U.S.C. 1532.
    \214\ 12 U.S.C. 3347.
    \215\ 12 U.S.C. 3338(b)(5).
---------------------------------------------------------------------------

List of Subjects in 12 CFR Part 1102

    Administrative practice and procedure, Appraisal management 
companies, Appraisal management company registry fees, Appraisers, 
Banks, banking, Enforcement actions, Freedom of information, 
Investigations, Licensing and registration, Mortgages, Organization and 
functions (Government agencies), Privacy, Reporting and recordkeeping 
requirements, and State and local governments.

Authority and Issuance

    For the reasons set forth in the preamble, the Federal Financial 
Institutions Examination Council proposes to amend 12 CFR part 1102 as 
follows:

PART 1102--APPRAISER REGULATION

0
1. The authority citation for part 1102 is revised to read as follows:

    Authority:  12 U.S.C. 3332, 3335, 3338(a)(4)(B), 3347, 3348(a), 
3348(b), 3348(c), 5 U.S.C. 552a, 553(e); E.O. 12600, 52 FR 23781, 3 
CFR, 1987 Comp., p. 235.
0
2. Subpart F to part 1102 is added to read as follows:

Subpart F--Appraisal Subcommittee Enforcement Authority Regarding 
the Effectiveness of State Appraiser and Appraisal Management 
Company Regulatory Programs

Sec.
1102.600 Authority, purpose, and scope.
1102.601 Definitions.
1102.602 Compliance reviews.
1102.603 Analysis of a regulatory program's effectiveness.
1102.604 Mitigating and aggravating factors.
1102.605 Enforcement actions.

[[Page 96930]]

1102.606 Procedures governing suspension proceedings.
1102.607 Procedures governing non-recognition proceedings.

Sec.  1102.600  Authority, purpose, and scope.

    (a) Authority. This subpart is issued by the Appraisal Subcommittee 
(ASC) under sections 1103, 1106, and 1118 of Title XI of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (Pub. L. 
101-73, 103 Stat. 183 (1989)), as amended by the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act) (Pub. L. 111-203, 
124 Stat. 1376 (2010)), 12 U.S.C. 3332, 3335, and 3347 (Title XI).
    (b) Purpose and scope. The purpose of this subpart is to implement 
the ASC's monitoring and enforcement authority pursuant to section 1118 
of Title XI (12 U.S.C. 3347) regarding the effectiveness of appraiser 
and appraisal management company regulatory programs administered by 
State Appraiser Regulatory Agencies. This subpart applies to all State 
Appraiser Regulatory Agencies.

Sec.  1102.601  Definitions.

    For the purposes of this subpart:
    AMC Registry means the national registry maintained by the ASC of 
entities that meet the Federal definition of an AMC, as defined in 12 
U.S.C. 3350(11), are either registered by a State or are federally 
regulated AMCs and have paid the annual AMC registry fee.
    AMC Registry Fee Rule means the ASC's regulations on the collection 
and transmission of AMC Registry fees as codified in subpart E of this 
part.
    AMC Rule means regulations established by the Office of the 
Comptroller of the Currency, the Board of Governors of the Federal 
Reserve System, the Federal Deposit Insurance Corporation, and the 
Federal Housing Finance Agency regarding the minimum requirements for 
AMCs under section 1124 of Title XI (12 U.S.C. 3353). (12 CFR 34.210 
through 34.216; 12 CFR 225.190 through 225.196; 12 CFR 323.8 through 
323.14; 12 CFR 1222.20 through 1222.26).
    Appraisal management company (AMC) means:
    (1) A person that:
    (i) Provides appraisal management services to creditors or to 
secondary mortgage market participants, including affiliates as defined 
in 12 U.S.C. 1841;
    (ii) Provides such services in connection with valuing a consumer's 
principal dwelling as security for a consumer credit transaction or 
incorporating such transactions into securitizations; and
    (iii) Within a given 12-month period, oversees an appraiser panel 
of more than 15 State certified or State licensed appraisers in a State 
or 25 or more State certified or State licensed appraisers in two or 
more States.
    (2) An AMC does not include a department or division of an entity 
that provides appraisal management services only to that entity.
    Appraisal management services mean one or more of the following:
    (1) Recruiting, selecting, and retaining appraisers;
    (2) Contracting with State certified or State licensed appraisers 
to perform appraisal assignments;
    (3) Managing the process of having an appraisal performed, 
including providing administrative services such as receiving appraisal 
orders and appraisal reports, submitting completed appraisal reports to 
creditors and secondary market participants, collecting fees from 
creditors and secondary market participants for services provided, and 
paying appraisers for services performed; and
    (4) Reviewing and verifying the work of appraisers.
    Appraiser panel means a network, list or roster of licensed or 
certified appraisers approved by an AMC to perform appraisals as 
independent contractors for the AMC. Appraisers on an AMC's ``appraiser 
panel'' under this subpart include both appraisers accepted by the AMC 
for consideration for future appraisal assignments in covered 
transactions or for secondary mortgage market participants in 
connection with covered transactions and appraisers engaged by the AMC 
to perform one or more appraisals in covered transactions or for 
secondary mortgage market participants in connection with covered 
transactions. An appraiser is an independent contractor for purposes of 
this subpart if the appraiser is treated as an independent contractor 
by the AMC for purposes of Federal income taxation.
    Appraisal Subcommittee (ASC) means the Appraisal Subcommittee of 
the Federal Financial Institutions Examination Council established 
under the Federal Financial Institutions Examination Council Act of 
1978 (12 U.S.C. 3301 et seq.) as amended by section 1102 of Title XI 
(12 U.S.C. 3310).
    Appraiser Registry means the national registry maintained by the 
ASC of State licensed and certified appraisers, as defined in 12 U.S.C. 
3345, who are eligible to perform appraisals in federally related 
transactions and have paid the annual appraiser registry fee.
    AQB Criteria means the minimum requirements for the licensure and 
certification of real estate appraisers and the minimum requirements 
for trainee and supervisory appraisers established by the Appraiser 
Qualifications Board of the Appraisal Foundation as contemplated by 12 
U.S.C. 3345.
    Assignment means, for purposes of this subpart with respect to 
temporary practice, one or more real estate appraisals and written 
appraisal report(s) covered by a single contractual agreement.
    Consumer credit means credit offered or extended to a consumer 
primarily for personal, family, or household purposes.
    Covered transaction means any consumer credit transaction secured 
by the consumer's principal dwelling.
    Days means business days. The date of the act, event, or default 
from which the designated period begins to run is omitted, and the last 
day is included.
    Deficiency means the ASC's determination that a State Appraiser 
Regulatory Agency has not demonstrated to the ASC's reasonable 
satisfaction that its regulatory program is operating consistently with 
the specified requirements of a program function as set forth in Sec.  
1102.603(c).
    Dwelling means:
    (1) A residential structure that contains one to four units, 
whether or not that structure is attached to real property. The term 
includes an individual condominium unit, cooperative unit, mobile home, 
and trailer, if it is used as a residence.
    (2) A consumer can have only one ``principal'' dwelling at a time. 
Thus, a vacation or other second home would not be a principal 
dwelling. However, if a consumer buys or builds a new dwelling that 
will become the consumer's principal dwelling within a year or upon the 
completion of construction, the new dwelling is considered the 
principal dwelling for purposes of this subpart.
    Federally regulated AMC means an AMC that is owned and controlled 
by an insured depository institution, as defined in 12 U.S.C. 1813 and 
regulated by the Office of the Comptroller of the Currency, the Board 
of Governors of the Federal Reserve System, or the Federal Deposit 
Insurance Corporation.
    Federally related transaction means any real estate-related 
financial transaction which:
    (1) A Federal financial institutions regulatory agency engages in, 
contracts for, or regulates; and
    (2) Requires the services of an appraiser under the appraisal rules 
(Title XI, section 1121(4), 12 U.S.C. 3350(4), implemented by the 
Office of the Comptroller of the Currency: 12 CFR part 34; Federal 
Reserve Board: 12 CFR

[[Page 96931]]

part 225; Federal Deposit Insurance Corporation: 12 CFR part 323; and 
National Credit Union Administration: 12 CFR part 722).
    Final order means an order issued by the ASC that includes findings 
of fact, conclusions of law, and, if applicable, the terms of a related 
enforcement action imposed against a State Appraiser Regulatory Agency 
for failing to have an effective regulatory program.
    Final report means a document that records the ASC's final 
monitoring findings and analysis of the regulatory program's 
effectiveness, as required in Sec.  1102.603, identifying any 
deficiencies. The final report also includes the ASC's final assessment 
of the regulatory program's level of effectiveness, adjusted for the 
State Appraiser Regulatory Agency's response to the preliminary report 
and relevant mitigating and aggravating factors in Sec.  1102.604.
    Financial institution means an insured depository institution as 
defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
1813) or an insured credit union as defined in section 101 of the 
Federal Credit Union Act (12 U.S.C. 1752).
    Negotiated agreement means a written agreement signed between the 
ASC and a State Appraiser Regulatory Agency to correct deficiencies 
that negatively impact the regulatory program's effectiveness. The 
agreement may provide that the State Appraiser Regulatory Agency 
commits to taking a certain action or actions or to refraining from a 
certain action or actions by a specified time.
    Non-recognition means the ASC and all agencies, instrumentalities, 
and federally recognized entities under Title XI shall not recognize or 
accept appraiser licenses and certifications issued by a State 
Appraiser Regulatory Agency whose policies, practices, funding, 
staffing, or procedures are found to be inconsistent with Title XI and 
Federal regulations promulgated thereunder. ``Non-recognition'' is 
synonymous with ``derecognition,'' which is referenced in section 1118 
of Title XI (12 U.S.C. 3347).
    Person means a natural person or an organization, including a 
corporation, partnership, proprietorship, association, cooperative, 
estate, trust, or government unit.
    Preliminary report means a document that records the initial 
monitoring findings and analysis of the regulatory program's 
effectiveness, as required in Sec.  1102.603, identifying any 
deficiencies. The preliminary report also includes the ASC's initial 
assessment of the program's level of effectiveness.
    Program functions mean those responsibilities of a State Appraiser 
Regulatory Agency that the ASC will examine and include in its analysis 
of the effectiveness of a State Appraiser Regulatory Agency's 
regulatory program, consistent with section 1118(a) of Title XI (12 
U.S.C. 3347(a)).
    (1) There are five program functions for State appraiser regulatory 
programs:
    (i) Licensing and certification of appraisers;
    (ii) Issuance of temporary licenses and certifications for 
appraisers;
    (iii) Receiving and tracking of submitted complaints against 
appraisers;
    (iv) Investigation of complaints against appraisers; and
    (v) Enforcement actions against appraisers.
    (2) There are four program functions for State AMC regulatory 
programs:
    (i) Registration of AMCs;
    (ii) Receiving and tracking of submitted complaints against AMCs;
    (iii) Investigation of complaints against AMCs; and
    (iv) Enforcement actions against AMCs.
    Secretary means the Secretary of the ASC under its Rules of 
Operation.
    Special documented circumstances mean well-documented and monitored 
extenuating circumstances, evaluated by the ASC, that are beyond the 
control of the State Appraiser Regulatory Agency and result in a 
complaint processing delay.
    State means any State of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the 
Northern Mariana Islands, Guam, the U.S. Virgin Islands, and American 
Samoa.
    State Appraiser Regulatory Agency means a State agency that 
certifies and licenses real estate appraisers and registers and 
supervises AMCs or otherwise regulates real estate appraisers and AMCs 
who operate in that State consistent with section 1121(1) of Title XI 
(12 U.S.C. 3350(1)). ``State Appraiser Regulatory Agency'' is 
synonymous with ``State appraiser certifying and licensing agency'' as 
defined in section 1121(1) of Title XI (12 U.S.C. 3350(1)). To the 
extent that the registration and supervision of AMCs is carried out by 
a separate and distinct agency or agencies within a State, each such 
agency is also a State Appraiser Regulatory Agency.
    State certified appraiser means an individual who has satisfied the 
requirements for certification in a State whose criteria for 
certification as a real estate appraiser meet or exceed the applicable 
minimum AQB Criteria as prescribed in section 1116(a) and (b) of Title 
XI (12 U.S.C. 3345(a) and (b)).
    State licensed appraiser means an individual who has satisfied the 
requirements for licensing in a State whose criteria for the licensing 
of a real estate appraiser meet or exceed the applicable minimum AQB 
Criteria as prescribed in section 1116(c) of Title XI (12 U.S.C. 
3345(c)).
    Supervisory appraiser means an individual who has satisfied the 
requirements in a State whose applicable requirements for supervision 
of a trainee appraiser meet or exceed the applicable minimum AQB 
Criteria as prescribed in section 1116(e) of Title XI (12 U.S.C. 
3345(e)).
    Suspension means the State Appraiser Regulatory Agency is 
prohibited from performing a certain task or certain tasks as part of 
the State Appraiser Regulatory Agency's responsibilities under Title XI 
for a specified period of time as stated in the final order. The 
suspension remains in effect until the suspension is lifted by the ASC. 
The ASC may lift the suspension on the finding that the terms and 
conditions of the final order are satisfied.
    Trainee appraiser means an individual who has satisfied the 
requirements in a State whose applicable requirements meet or exceed 
the applicable minimum AQB Criteria as prescribed in section 1116(e) of 
Title XI (12 U.S.C. 3345(e)).
    Uniform Standards of Professional Appraisal Practice (USPAP) means 
the appraisal standards promulgated by the Appraisal Standards Board of 
the Appraisal Foundation.
    Warning letter means a letter issued by the ASC informing a State 
Appraiser Regulatory Agency of a deficiency or deficiencies relating to 
its regulatory program that, if not addressed, could negatively impact 
the regulatory program's effectiveness.

Sec.  1102.602  Compliance reviews.

    (a) Monitoring of State appraiser and AMC regulatory programs. The 
ASC shall monitor appraiser and AMC regulatory programs administered by 
State Appraiser Regulatory Agencies in accordance with sections 
1103(a)(1) and 1118(a) of Title XI (12 U.S.C. 3332(a)(1) and 3347(a)).
    (b) Frequency of compliance reviews. (1) The ASC will conduct 
compliance reviews on either a two-year cycle or one-year cycle as part 
of its routine monitoring but may use an alternate review schedule at 
its sole discretion.
    (2) The ASC may conduct follow-up reviews and additional monitoring 
on specific areas identified during a compliance review. The ASC may

[[Page 96932]]

schedule a follow-up review within 6 to 12 months after the previous 
compliance review or at a time deemed appropriate by the ASC.
    (3) The ASC may conduct accelerated compliance reviews when there 
are indications that a regulatory program might not be operating 
consistently with Title XI or Federal regulations promulgated 
thereunder.
    (4) When a State Appraiser Regulatory Agency oversees both 
appraiser and AMC regulatory programs, the ASC may assign each 
regulatory program the same or different review cycles.
    (c) Performance of compliance reviews. (1) During compliance 
reviews, the ASC will examine records and may conduct interviews with 
State Appraiser Regulatory Agency representatives.
    (2) After completing the examination of records and interviews, the 
ASC will prepare the preliminary report that includes the ASC's initial 
determination of the level of effectiveness of the regulatory program 
as outlined in Sec.  1102.603(b).
    (3) A State Appraiser Regulatory Agency may respond within 60 days 
from the date of the preliminary report. The response may include 
additional documentation showing the State Appraiser Regulatory 
Agency's efforts to remedy any findings or deficiencies identified in 
the preliminary report. The ASC may, on its own initiative or for good 
cause shown, issue a waiver extending the 60-day time limit in 
connection with a State Appraiser Regulatory Agency's response to the 
preliminary report under this section.
    (4) After receiving the State Appraiser Regulatory Agency's 
response to the preliminary report, the ASC will prepare a final report 
that includes the ASC's final determination of the level of 
effectiveness of the regulatory program as outlined in Sec.  
1102.603(b).
    (d) Responsibilities of State Appraiser Regulatory Agencies. State 
Appraiser Regulatory Agencies must maintain sufficient documentation to 
demonstrate that their appraiser and AMC regulatory programs operate 
consistently with Title XI and Federal regulations promulgated 
thereunder. Documentation must be made available for inspection, as 
requested by the ASC, including access to the information stored in any 
electronic system or providing access to the electronic system itself.

Sec.  1102.603  Analysis of a regulatory program's effectiveness.

    (a) Analysis of the regulatory program's effectiveness. The ASC 
will assess the effectiveness of a regulatory program, as required by 
section 1118 of Title XI (12 U.S.C. 3347), by conducting an analysis of 
the applicable program functions. The ASC will examine whether the 
State Appraiser Regulatory Agency's regulatory program is operating 
consistently with the specified requirements of each program function 
in paragraph (c) of this section. If any deficiencies are found, the 
ASC will document the deficiencies in both the preliminary and final 
reports consistent with this subpart.
    (b) Assessment of the regulatory program's effectiveness--(1) 
Initial assessment of the regulatory program's effectiveness. The ASC 
will assess the initial effectiveness of a State appraiser or AMC 
regulatory program on the basis of the number of deficiencies per 
program function as identified in the preliminary report as follows:
    (i) Effective regulatory program. (A) A State appraiser regulatory 
program is considered ``effective'' if there is no more than one 
deficiency in each of not more than two separate program functions.
    (B) A State AMC regulatory program is considered ``effective'' if 
there is no more than one deficiency in any single program function.
    (ii) Moderately effective regulatory program. (A) A State appraiser 
regulatory program is considered ``moderately effective'' if there is 
no more than one deficiency in each of not more than three separate 
program functions or no more than two deficiencies in one program 
function.
    (B) A State AMC regulatory program is considered ``moderately 
effective'' if there is no more than one deficiency in each of not more 
than two separate program functions.
    (iii) Slightly effective regulatory program. (A) A State appraiser 
regulatory program is considered ``slightly effective'' if there is no 
more than one deficiency in each of not more than four separate program 
functions, no more than two deficiencies in each of two separate 
program functions, or no more than three deficiencies in one program 
function.
    (B) A State AMC regulatory program is considered ``slightly 
effective'' if there is no more than one deficiency in each of not more 
than three separate program functions or no more than two deficiencies 
in one program function.
    (iv) Ineffective regulatory program. (A) A State appraiser 
regulatory program is considered ``ineffective'' if there are one or 
more deficiencies in each of five separate program functions, two or 
more deficiencies in each of three or more separate program functions, 
or four or more deficiencies in one or more program functions.
    (B) A State AMC regulatory program is considered ``ineffective'' if 
there are one or more deficiencies in each of four separate program 
functions, two or more deficiencies in each of two or more separate 
program functions, or three or more deficiencies in one or more program 
functions.
    (2) Final assessment of the regulatory program's effectiveness. The 
ASC will consider whether the State Appraiser Regulatory Agency's 
response to the preliminary report and any relevant mitigating and 
aggravating factors in Sec.  1102.604 justify an increase or decrease 
in the level of the regulatory program's effectiveness for the final 
report.
    (c) Specified requirements of the applicable program functions for 
State appraiser and AMC regulatory programs--(1) State appraiser 
regulatory program. A State Appraiser Regulatory Agency must 
demonstrate to the ASC's reasonable satisfaction that its appraiser 
regulatory program is operating consistently with the specified 
requirements of each program function:
    (i) Licensing and certification of appraisers. (A) The State 
Appraiser Regulatory Agency's licensing and certification requirements 
must meet the minimum requirements set forth in section 1116 of Title 
XI (12 U.S.C. 3345).
    (B) The State Appraiser Regulatory Agency's trainee and supervisory 
appraiser requirements, if applicable, must meet the minimum 
requirements set forth in section 1116 of Title XI (12 U.S.C. 3345).
    (C) The State Appraiser Regulatory Agency must use the designations 
for trainee appraisers, State licensed appraisers, and State certified 
appraisers in accordance with section 1116 of Title XI (12 U.S.C. 
3345).
    (D) The State Appraiser Regulatory Agency must use permitted scopes 
of practice for State licensed and certified appraisers in accordance 
with sections 1113 and 1114 of Title XI (12 U.S.C. 3342 and 3343).
    (E) The State Appraiser Regulatory Agency must process applications 
in a timely, consistent, equitable, and well-documented manner in 
accordance with Title XI.
    (F) The State Appraiser Regulatory Agency must ensure that 
individuals who process applications are knowledgeable about section 
1116 of Title XI (12 U.S.C. 3345) as evaluated by the ASC.
    (G) The State Appraiser Regulatory Agency must have a reciprocity 
policy for issuing a reciprocal license or certification for an 
individual from

[[Page 96933]]

another State in accordance with section 1122(b) of Title XI (12 U.S.C. 
3351(b)).
    (H) The State Appraiser Regulatory Agency must ensure that all 
approved applicants meet the applicable minimum requirements of the AQB 
Criteria.
    (I) The State Appraiser Regulatory Agency must ensure that 
appraiser education courses are consistent with the AQB Criteria.
    (J) The State Appraiser Regulatory Agency must obtain and maintain 
sufficient documentation pertaining to all applications, including 
initial licenses or certifications, upgrades, renewals, reinstatements, 
and supervisory approvals, to create a record of facts and 
determinations and the reasons for those determinations made by the 
State Appraiser Regulatory Agency.
    (K) The State Appraiser Regulatory Agency must report appraiser 
data on the issuance and renewal of licenses and certifications on a 
timely basis to the Appraiser Registry in accordance with section 
1109(a)(2) of Title XI (12 U.S.C. 3338(a)(2)).
    (ii) Issuance of temporary licenses and certifications for 
appraisers. (A) The State Appraiser Regulatory Agency must recognize 
the license or certification of an appraiser issued by another State 
Appraiser Regulatory Agency on a temporary basis in accordance with 
section 1122(a)(1) of Title XI (12 U.S.C. 3351(a)(1)).
    (B) The State Appraiser Regulatory Agency must not impose excessive 
fees for a temporary license or certification in accordance with 
section 1122(a)(2) of Title XI (12 U.S.C. 3351(a)(2)).
    (C) The State Appraiser Regulatory Agency must not impose 
burdensome requirements, as determined by the ASC, for temporary 
practice in accordance with section 1122(a)(2) of Title XI (12 U.S.C. 
3351(a)(2)).
    (D) The State Appraiser Regulatory Agency must issue temporary 
licenses or certifications within five days after receiving a complete 
application for such issuance in accordance with section 1122(a) of 
Title XI (12 U.S.C. 3351(a)).
    (E) The State Appraiser Regulatory Agency must issue temporary 
licenses or certifications on an assignment basis and must allow for at 
least one extension through a streamlined process in accordance with 
section 1122(a) of Title XI (12 U.S.C. 3351(a)).
    (F) The State Appraiser Regulatory Agency must issue temporary 
licenses or certifications designating the effective date in accordance 
with section 1122(a) of Title XI (12 U.S.C. 3351(a)).
    (G) The State Appraiser Regulatory Agency must track all temporary 
licenses or certifications using a permit log or system.
    (H) The State Appraiser Regulatory Agency must supervise all 
individuals to whom the State Appraiser Regulatory Agency issues a 
temporary license or certification while performing assignments in its 
State, must discipline such individuals, when appropriate, for 
misconduct or wrongdoing, and must report each disciplinary action to 
the ASC and other appropriate State Appraiser Regulatory Agencies to 
ensure effective supervision in accordance with sections 1117, 1118, 
and 1122(a) of Title XI (12 U.S.C. 3346, 3347, and 3351(a)).
    (I) The State Appraiser Regulatory Agency must obtain and maintain 
documentation sufficient to create a record of the basis for the 
determinations made by the State Appraiser Regulatory Agency in 
processing and issuing temporary licenses or certifications.
    (iii) Receiving and tracking of submitted complaints against 
appraisers. (A) The State Appraiser Regulatory Agency must have a 
system for processing and investigating complaints and sanctioning 
trainee appraisers, State licensed appraisers, and State certified 
appraisers in a timely, effective, consistent, equitable, and well-
documented manner.
    (B) The State Appraiser Regulatory Agency must track and monitor 
all complaints using a complaint log or system.
    (iv) Investigation of complaints against appraisers. (A) The State 
Appraiser Regulatory Agency must require appraisals to be performed in 
accordance with the latest version of USPAP in accordance with sections 
1101 and 1103(a)(1)(A) of Title XI (12 U.S.C. 3331 and 3332(a)(1)(A)).
    (B) When examining an appraisal report in connection with a 
complaint, including complaints based solely on value, the State 
Appraiser Regulatory Agency must consider whether any potential 
violations of USPAP should be investigated.
    (C) To ensure effective supervision, the State Appraiser Regulatory 
Agency must resolve all complaints filed against trainee appraisers, 
State licensed appraisers, and State certified appraisers within one 
year (12 months) from the date the complaint was received except in 
special documented circumstances.
    (D) The State Appraiser Regulatory Agency must ensure that 
individuals who analyze complaints are knowledgeable about Title XI, 
USPAP, and appraisal practices and must document how such individuals 
are qualified, which will be evaluated by the ASC.
    (E) The State Appraiser Regulatory Agency must obtain and maintain 
documentation sufficient to create a record of the facts and 
determinations made by the State Appraiser Regulatory Agency in 
processing and investigating a complaint and the reasons for its final 
disposition.
    (v) Enforcement actions against appraisers. (A) The State Appraiser 
Regulatory Agency must supervise trainee appraisers, State licensed 
appraisers, and State certified appraisers and must discipline such 
individuals, when appropriate, for misconduct and wrongdoing.
    (B) The State Appraiser Regulatory Agency must report all 
disciplinary actions against State licensed and certified appraisers to 
the ASC within five days after the disciplinary action is final as 
determined by State law.
    (2) State AMC regulatory program. A State Appraiser Regulatory 
Agency must demonstrate to the ASC's reasonable satisfaction that its 
AMC regulatory program is operating consistently with the stated 
requirements of each program function:
    (i) Registration of AMCs. (A) The State Appraiser Regulatory Agency 
must establish and maintain an AMC regulatory program with legal 
authority and mechanisms consistent with Title XI, the AMC Rule, and 
the AMC Registry Fee Rule.
    (B) The State Appraiser Regulatory Agency must impose requirements 
on AMCs that are consistent with Title XI and the AMC Rule.
    (C) The State Appraiser Regulatory Agency must enforce and document 
ownership limitations for AMCs in a manner consistent with Title XI and 
the AMC Rule.
    (D) The State Appraiser Regulatory Agency must process AMC 
applications in a timely, consistent, equitable, and well-documented 
manner in accordance with Title XI, the AMC Rule, and the AMC Registry 
Fee Rule.
    (E) The State Appraiser Regulatory Agency must ensure that 
individuals who process applications are knowledgeable about Title XI 
and the AMC Rule as evaluated by the ASC.
    (F) The State Appraiser Regulatory Agency must obtain and maintain 
documentation sufficient to create a record of the basis for its 
determinations for AMC eligibility for the AMC Registry, including the 
appraiser panel requirements, ownership limitations, and AMC Registry 
fee collection and submission to the ASC.

[[Page 96934]]

    (G) The State Appraiser Regulatory Agency must report AMCs eligible 
for the AMC Registry on a timely basis to the ASC in accordance with 
section 1109(a)(3) of Title XI (12 U.S.C. 3338(a)(3)) and the AMC 
Registry Fee Rule.
    (ii) Receiving and tracking of submitted complaints against AMCs. 
(A) The State Appraiser Regulatory Agency must have a system for 
processing and investigating complaints and sanctioning AMCs (other 
than federally regulated AMCs) in a timely, effective, consistent, 
equitable, and well-documented manner.
    (B) The State Appraiser Regulatory Agency must track and monitor 
all complaints against AMCs using a complaint log or system.
    (iii) Investigation of complaints against AMCs. (A) To ensure 
effective supervision, the State Appraiser Regulatory Agency must 
resolve all complaints filed against AMCs (other than federally 
regulated AMCs) within one year (12 months) from the date the complaint 
was received except in special documented circumstances.
    (B) The State Appraiser Regulatory Agency must ensure that 
individuals who analyze complaints are knowledgeable about Title XI, 
the AMC Rule, USPAP, and appraisal practices and must document how such 
individuals are qualified, which will be evaluated by the ASC.
    (C) The State Appraiser Regulatory Agency must obtain and maintain 
documentation sufficient to create a record of the facts and 
determinations made by the State Appraiser Regulatory Agency in 
processing and investigating a complaint and the reasons for its final 
disposition.
    (iv) Enforcement actions against AMCs. (A) The State Appraiser 
Regulatory Agency must supervise AMCs (other than federally regulated 
AMCs) and must discipline such entities, when appropriate, for 
misconduct and wrongdoing.
    (B) The State Appraiser Regulatory Agency must report all 
disciplinary actions against AMCs (other than federally regulated AMCs) 
to the ASC within five days after the disciplinary action is final as 
determined by State law.

Sec.  1102.604  Mitigating and aggravating factors.

    The ASC will consider the following factors, which may be 
mitigating or aggravating as appropriate, in adjusting the ASC's 
initial assessment of the level of effectiveness of the regulatory 
program identified in the preliminary report. The mitigating or 
aggravating factors include:
    (a) The nature and extent of the deficiency, which includes:
    (1) The type of deficiency;
    (2) Whether any deficiencies indicate systemic issues in the 
regulatory program; and
    (3) The severity of the deficiency, and the extent to which the 
deficiency can be corrected or, if not corrected in a timely manner, 
whether the deficiency poses a potential risk to the regulatory 
program, appraisers, AMCs, financial institutions, or the public.
    (b) Prior compliance history by the State Appraiser Regulatory 
Agency, which includes:
    (1) Whether the regulatory program has had any prior deficiencies;
    (2) Whether the deficiency is the same as or similar to prior 
deficiencies;
    (3) Whether the State Appraiser Regulatory Agency's practices or 
actions indicate a pattern of similar prior deficiencies or a 
fundamental failure to understand the risks and controls that underlie 
a program function; and
    (4) Whether, and to what extent, the State Appraiser Regulatory 
Agency attempted to correct prior deficiencies.
    (c) The structure, stability, and responsiveness of the State 
Appraiser Regulatory Agency, which include:
    (1) The level of cooperation with the ASC staff during a compliance 
review;
    (2) The extent of understanding and acknowledgment of the 
deficiency;
    (3) The level of responsiveness and willingness to correct the 
deficiency;
    (4) Whether the regulatory program has undergone significant 
staffing or leadership changes;
    (5) Any submission of false statements or documents, or deceptive 
practices by the State Appraiser Regulatory Agency;
    (6) Whether the State Appraiser Regulatory Agency failed to 
exercise reasonable care toward equitable, consistent, and timely 
enforcement; and
    (7) The number of State licensed and certified appraisers or 
registered AMCs under the jurisdiction of the State Appraiser 
Regulatory Agency; and
    (8) The risk of program failure.
    (d) Other situations or circumstances may include natural or human-
made disasters or emergencies or other government-declared orders.

Sec.  1102.605  Enforcement actions.

    (a) Interim enforcement actions. The ASC may undertake an interim 
enforcement action against a State Appraiser Regulatory Agency that 
fails to have an effective regulatory program as determined by the ASC 
as set forth in Sec.  1102.603(b). Interim enforcement actions may 
consist of the following actions:
    (1) Warning letter. The ASC may issue a warning letter to a State 
Appraiser Regulatory Agency when the final report indicates that the 
regulatory program is moderately effective or slightly effective.
    (2) Negotiated agreement. The ASC may enter into a negotiated 
agreement with a State Appraiser Regulatory Agency if the State 
Appraiser Regulatory Agency fails to address the deficiency or 
deficiencies identified in a previously issued warning letter, or the 
final report indicates that the regulatory program is slightly 
effective or ineffective.
    (3) Suspension. The ASC may suspend a State Appraiser Regulatory 
Agency for an interim period, as outlined in the procedures within 
Sec.  1102.606, if the State Appraiser Regulatory Agency refuses to 
enter into a negotiated agreement, the State Appraiser Regulatory 
Agency fails to comply with the terms and conditions of a negotiated 
agreement, or the final report indicates that the regulatory program is 
ineffective. The suspension may involve, but is not limited to, the 
State Appraiser Regulatory Agency's ability to perform one or more of 
the following tasks:
    (i) Addition of State licensed or certified appraisers to the 
Appraiser Registry or AMCs to the AMC Registry;
    (ii) Issuance of upgrades of individuals' level of licensure or 
certification to perform appraisals in connection with federally 
related transactions;
    (iii) Renewal of licenses or certifications of State licensed or 
certified appraisers for the performance of appraisals in connection 
with federally related transactions; or
    (iv) Issuance of temporary licenses or certifications to 
individuals who are licensed or certified in another State to perform 
appraisals in connection with federally related transactions in the 
suspended State Appraiser Regulatory Agency's State, as set forth in 
section 1122(a) of Title XI (12 U.S.C. 3351(a)).
    (b) Non-recognition. The ASC may undertake non-recognition, as 
prescribed in the procedures within subpart B of this part, if the ASC 
issues a written finding pursuant to section 1118(b) of Title XI (12 
U.S.C. 3347(b)) that the State Appraiser Regulatory Agency's policies, 
practices, funding, staffing, or procedures are inconsistent with Title 
XI and Federal regulations promulgated thereunder and:
    (1) a State Appraiser Regulatory Agency fails to comply with a 
final order of suspension; or
    (2) the final report indicates the regulatory program is 
ineffective.

[[Page 96935]]

Sec.  1102.606  Procedures governing suspension proceedings.

    The ASC must adhere to the following procedures to suspend a State 
Appraiser Regulatory Agency.
    (a) Notice. (1) The ASC must provide the State Appraiser Regulatory 
Agency with a written notice of intention to suspend the State 
Appraiser Regulatory Agency from a task or tasks as provided in Sec.  
1102.605(a)(3). The notice must contain the ASC's final report.
    (2) The Secretary must publish the notice in the Federal Register 
and must provide notice to the State Appraiser Regulatory Agency by 
sending a copy to the State Appraiser Regulatory Agency's last known 
email or mailing address. Service is complete upon sending.
    (b) State Appraiser Regulatory Agency's response. (1) Within 20 
days after publication of the notice in the Federal Register, the State 
Appraiser Regulatory Agency may submit a response or a notice not to 
contest to the Secretary.
    (2) If a State Appraiser Regulatory Agency submits a notice not to 
contest, the ASC must issue the final order within 80 days after 
publication of the notice in the Federal Register as set forth in 
paragraph (f) of this section.
    (3) If a State Appraiser Regulatory Agency does not submit a 
response or a notice not to contest within 20 days after publication of 
the notice in the Federal Register, the ASC may consider the facts 
presented in the notice to be true. The ASC must then issue the final 
order within 80 days after publication of the notice in the Federal 
Register as set forth in paragraph (f) of this section.
    (c) Briefs, memoranda, and statements. After (or contemporaneously 
with) the State Appraiser Regulatory Agency's filing of its response, 
but in no event more than 40 days after publication of the notice in 
the Federal Register, the State Appraiser Regulatory Agency may file 
with the Secretary a written brief, memorandum, or other statement 
providing factual data and policy and legal arguments regarding the 
matters set out in the notice.
    (d) Oral presentations to the ASC. After (or contemporaneously 
with) the State Appraiser Regulatory Agency's filing of its response, 
but in no event more than 40 days after publication of the notice in 
the Federal Register, a State Appraiser Regulatory Agency may also 
request to make an oral presentation to the ASC. If a State Appraiser 
Regulatory Agency files a request for an oral presentation, the ASC 
must hear the matter within 20 days after the date the ASC received the 
request for an oral presentation. An oral presentation is an 
opportunity for the State Appraiser Regulatory Agency to offer, 
emphasize, and clarify the facts, policies, and laws concerning the 
matters set forth in the notice. The State Appraiser Regulatory Agency 
will make its oral presentation to the ASC on the date and time 
designated by the ASC. The ASC may ask questions relating to the 
contents of the notice, the response, the oral presentation, or any 
written briefs, memoranda, or statements submitted.
    (e) Conduct of suspension proceedings--(1) Written submissions. All 
aspects of suspension proceedings will be conducted by written 
submissions, except for oral presentations allowed under paragraph (d) 
of this section.
    (2) Rules of evidence. Except as is otherwise set forth in this 
section, relevant material and reliable evidence that is not unduly 
repetitive will be admissible to the fullest extent authorized by the 
Administrative Procedure Act (5 U.S.C. 551 et seq.) and other 
applicable laws.
    (3) Extensions of time. The ASC may, on its own initiative or for 
good cause shown, issue a waiver extending any time limit in connection 
with a suspension proceeding under this section.
    (f) Decision of the ASC. Within 80 days after publication of the 
notice in the Federal Register, or, in the case of the ASC's receipt of 
a timely request for an oral presentation within 100 days after 
publication of the notice in the Federal Register, the ASC must make a 
final decision on the matter by issuing a final order. The final order 
will be final and effective upon signature of the ASC Chairperson or 
their designee. The Secretary must promptly disseminate the final order 
to the State Appraiser Regulatory Agency and publish the final order in 
the Federal Register.
    (g) Documents and exhibits. Unless otherwise provided by law, the 
Secretary must place all documents, papers, and exhibits submitted in 
connection with the suspension proceeding in the proceeding's file and 
make them available for public inspection, except those that may be 
withheld from disclosure under applicable law.
    (h) Opportunity for informal settlement. The State Appraiser 
Regulatory Agency may submit written offers or proposals for settlement 
of the proceeding to the Secretary at any time for consideration by the 
ASC. This paragraph (h) shall not preclude settlement of any suspension 
proceeding by the filing of a notice not to contest as provided in 
paragraph (b)(1) of this section.

Sec.  1102.607  Procedures governing non-recognition proceedings.

    To impose non-recognition against a State Appraiser Regulatory 
Agency, the ASC must adhere to the procedures governing a non-
recognition proceeding, as set forth in subpart B of this part.

    By the Appraisal Subcommittee.

    Dated: November 21, 2024.
Zixta Martinez,
Chairperson.
[FR Doc. 2024-27698 Filed 12-5-24; 8:45 am]
BILLING CODE 6700-01-P
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