Appraisers provide an estimate of the value of real estate prior to the completion of a sale or refinance of the property. Lenders typically rely on independent real estate appraisers because the property serves as collateral for the loan used to finance the transaction. The lender is in a position to seize and sell the property if the borrower defaults. Borrowers who are purchasing or refinancing the property may also desire an appraisal in order to reassure themselves that the price of the property is in line with an objective evaluation of its value. Either the buyer or the seller may be dissatisfied with the property appraisal if prices rise or fall rapidly after the sale; as a result, reexamination of appraisal regulation is not unusual following a real estate related financial crisis. Current regulation of property appraisals is based on legislation passed following two financial crises linked to real estate bubbles. Legislation governing appraisal regulation includes Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA, P.L. 101-73 ) enacted after the Savings and Loan Crisis, and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act, P.L. 111-203 ) enacted after the Subprime Mortgage Crisis. In addition to the changes included in the Dodd-Frank Act, requirements for appraiser independence were included in the Housing and Economic Recovery Act (HERA) of 2008. FIRREA created a federal framework to oversee the state licensing and certification of real estate appraisers. It did so by establishing the Appraisal Subcommittee (ASC) within the Federal Financial Institutions Examinations Council (FFIEC), but the licensing and certifying of appraisers was left to the states. FIRREA required the states to establish licensing and certification requirements and to coordinate through the ASC and a nongovernmental organization, the Appraisal Foundation, which establishes the Uniform Standards of Professional Appraisal Practice (USPAP). Federal banking regulators established the threshold for requiring an appraisal for federally related loans, and the states created appraisal boards to license and certify appraisers. The mortgage crisis that began in 2007 has primarily affected residential properties, not commercial properties. The Dodd-Frank Act transferred some of the regulation of residential mortgages to the new Consumer Financial Protection Bureau (CFPB), established more specific criteria for residential property appraisals and the appraiser profession, and also required a property visit for appraisals financed by a high risk residential mortgage. Other changes mandated in the DFA include mandated independence for appraisers, requiring regulators to establish customary and reasonable fees for appraisal activities, requiring that banks separate the loan officers who underwrite loans from the people who pick the appraisers, and establishing standards for the professional education of licensed and certified appraisers. The Housing and Economic Recovery Act (HERA, P.L. 110-289 ) included a provision designed to increase the independence of appraisers. It prohibited mortgage lenders, mortgage brokers, mortgage bankers, real estate brokers, appraisal management companies, employees of appraisal management companies, and any other people with an interest in a real estate transaction from improperly influencing, or attempting to improperly influence, the development, reporting, result, or review of a real estate appraisal in connection with a federally related mortgage. Federal regulation of appraisals is typically linked to federally related transactions. In practice, federal regulation applies to most of the mortgage market because it includes any loans from federally chartered or insured banks, thrifts, and credit unions. It includes any loans that are part of a Federal Housing Administration (FHA) or Department of Housing or Urban Development (HUD) program. It also includes any loans originated with the intent to be eligible for sale to the housing government sponsored enterprises (GSEs). However, not all property sales and transfers require a mortgage; therefore, there are some property transactions for which federal appraisal regulation would have limited applicability. Appraisers are licensed and certified at the state level. More complex real estate transactions require a certified appraiser. Licensed appraisers may conduct less-complex appraisals. In general, residential appraisals are considered less complex than commercial real estate transactions. Although state boards license and certify appraisers, the boards themselves are subject to oversight by federal authorities in the Appraisal Subcommittee. The ASC is a federal agency that oversees state licensing and certification of appraisers and appraisal management companies. The ASC is part of the Federal Financial Institutions Examinations Council (FFIEC), which coordinates federal banking regulators. The ASC's board is appointed by the heads of related agencies. Each member agency of the FFIEC (banking regulators) appoints one ASC board member. The head of the Federal Housing Finance Agency (FHFA) and the head of the CFPB each appoint one board member. At least one member of the board must have demonstrated knowledge of the appraisal profession through licensure, certification, or designation. The ASC has a number of regulatory responsibilities and must report annually to Congress. The ASC monitors the requirements established by the state boards for the certification and licensing of appraisers, state registration and supervision of appraisal management companies (AMCs), appraisal standards for federally related transactions, and the level of required appraisal (licensed or the more stringent certified) for federally related transactions. The ASC also maintains national registries of certified and licensed appraisers and of appraisal management companies. The ASC oversees the state codes of professional responsibility for real estate appraisers. The ASC reviews about half of the state appraiser boards every year. Boards are assessed in seven categories of federal regulations, including statutes/policies, temporary practice, national registry, application process, reciprocity, education, and enforcement. The most common areas of noncompliance during 2009-2011 were enforcement and application. Based on these seven categories, the ASC rates each state as being (1) in substantial compliance, (2) not in substantial compliance, or (3) not in compliance. The rating "not in substantial compliance" applies when the ASC has concerns regarding the state board's compliance with ASC Policy Statements or Appraisal Qualifications Board (AQB) Criteria but the concerns do not rise to the level of "not in compliance." Until 2011, "not in substantial compliance" had been the most common rating. In 2007, 26 of the 30 state boards reviewed received not in substantial compliance; that ratio had fallen to 11 of 27 by 2011. Table 1 shows the trend in state board ratings during 2009-2011. The number of states receiving not in substantial compliance fell from 18 in 2009 to 11 in 2011. In the last three years (2009, 2010, and 2011), one state has been found not in compliance, although the rating "not in substantial compliance" is common. The state found not in compliance in 2011 was Illinois, which resulted in a move from the standard two-year review cycle to a one-year review cycle. Florida is also on a one-year review cycle. The ASC maintains a registry of state licensed and certified appraisers. Information that is made public includes whether the appraiser is licensed or certified and whether the appraiser's credentials have been suspended or revoked. The database includes nonpublic information such as disciplinary actions other than suspensions and revocations. Only certain state and federal regulatory officials have access to the nonpublic data. The ASC does not receive an annual appropriation. The ASC was provided $5 million in startup funds in FIRREA. Since that time, the ASC's funding has largely come from registration, certification, and licensing fees of appraisers. According to the 2011 Annual Report, the ASC received $2.6 million in fees in FY2011, down from $2.8 million in FY2010. Other than the grant to the Appraisal Foundation, most of the ASC's operating expenses are allocated to personnel. In FY2011, personnel and expenses made up $1.5 million of the $2.3 million operating expenses (excluding grants). The category of expenses with the largest increase was depreciation, which rose from $49,838 to $76,883 dollars from FY2010 to FY2011. The only other category of expenses with significant increase was contracted expenses, which rose from $210,379 to $227,647 during the same period. The ASC is required by FIRREA to provide grants for appraisal related activities. Grants represented $1.4 million of the ASC's outlays in FY2011, down from $1.3 million in FY2010. Most of the grants go to the Appraisal Foundation in order to help defray the costs of issuing appraisal standards and maintaining appraisal qualifications, as required by FIRREA. The ASC also makes some grants to state certification and licensing boards, which are required to conduct audits and report data on the appraisers and appraisal management companies they oversee. The ASC also funds some professional education programs. The Appraisal Foundation (Foundation) is an independent non-profit organization for appraisal professionals, not a government agency. However, the Foundation was authorized by Congress to establish standards for the appraisal profession, and receives funding from the ASC. The Foundation's core activities include promulgating appraisal standards, appraiser qualifications, and appraisal practices. The Foundation's Appraisal Standards Board (ASB) issues and amends professional appraisal standards, called the Uniform Standards of Professional Appraisal Practice (USPAP). FIRREA requires appraisers to adhere to the USPAP for all federally related transactions. The USPAP are not federal statutes, but they are the standards guiding industry professionals. Some readers may be helped by thinking of the USPAP as similar to accounting standards, which are issued by industry professionals, but are used in many regulatory contexts. The Foundation also hosts the Appraiser Qualification Board (AQB) and the Appraisal Practices Board (APB). The AQB establishes the professional requirements (education, experience, etc.) for certification.