[57 F.R. 10979 (April 1, 1992)]
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
12 CFR Part 1102
[Docket No. AS92-2]
APPRAISAL REGULATION; RULES OF PRACTICE FOR TEMPORARY WAIVER PROCEEDINGS
AGENCY: Appraisal Subcommittee, Federal Financial Institutions Examination Council.
ACTION: Final Rule.
SUMMARY: The Appraisal Subcommittee ("ASC") of the Federal Financial Institutions Examination Council ("FFIEC") today announced the adoption of 12 CFR part 1102, subpart A ("Rule 1102"), which sets out the ASC's procedures relating to proceedings granting and terminating temporary waivers under' 1119(b) of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA").
EFFECTIVE DATE: [Insert date 30 days after publication in the FEDERAL REGISTER].
FOR FURTHER INFORMATION CONTACT: Edwin W. Baker, Executive Director, or Marc L. Weinberg, General Counsel, at (202) 634-6520, Appraisal Subcommittee, 2100 Pennsylvania Avenue, N.W., Suite 200, Washington, D.C. 20037.
On August 9, 1989, Congress adopted FIRREA, including' 1102 of Title XI, which established the ASC and placed it within the FFIEC. The ASC consists of representatives appointed by the heads of the federal financial institutions regulatory agencies ("Regulatory Agencies") and the Department of Housing and Urban Development. Congress intended Title XI of FIRREA and the ASC, the Regulatory Agencies and the Resolution Trust Corporation ("RTC") (collectively "Agencies") to protect federal financial and public policy interests in real estate-related financial transactions requiring the services of an appraiser.
The ASC has several statutory duties under Title XI. First, it must monitor the appraisal regulations adopted by the Agencies. Those regulations set out appraisal standards for federally related transactions and define those federally related transactions requiring the services of a State certified or State licensed appraiser. Second, the ASC must monitor and review the practices, procedures, activities, and organizational structure of the Appraisal Foundation. Third, the ASC must monitor the certification and licensing programs for real estate appraisers in each State, territory, commonwealth, and the District of Columbia ("States") and must review the State's compliance with the requirements of Title XI. It also is authorized by Title XI to take action against non-complying States.
II. Statutory Authority
Section 1119(b) of Title XI provides the ASC and the States with a degree of flexibility in dealing with extraordinary circumstances. This section enables the ASC to waive, on a temporary basis and with the FFIEC's approval, any State certification or licensing requirement on a written finding that: (1) "[t]here is a scarcity of certified or licensed appraisers to perform appraisals in connection with federally related transactions"; and (2) that the scarcity is "leading to significant delays in the performance of such appraisals." Either a State in compliance with Title XI or the ASC can make a written "scarcity/delay" finding. A State, however, cannot grant or deny a waiver under' 1119(b); that authority belongs only to the ASC. Even though Congress intended that the ASC exercise its waiver authority "cautiously," the recent amendments to ' 1119(b) of Title XI, which are discussed in the next paragraph, signal that the ASC should be receptive to temporary waiver requests.
On November 27, 1991, Congress approved amendments to Title XI. The amendments were included in' 701 of the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991 and ' 472 of the Federal Deposit Insurance Corporation Improvement Act of 1991. The amendments, among other things: (a) extended the deadline for States to comply with the mandatory use requirements of Title XI from July 31, 1991, to December 31, 1992; (b) modified ' 1119(b) of Title XI by substituting "significant" for the word "inordinate" to use as the standard for measuring the extent of the delays to determine whether a waiver should be granted; (c) clarified that the ASC is not authorized to set qualifications and experience requirements for licensed appraisers, and that ASC recommendations respecting licensing criteria were not binding on the States; and (d) further clarified that the scarcity of licensed or certified appraisers could occur within "any geographical political subdivision regions of a State."
After December 31, 1992, all appraisals performed in connection with federally related transactions will need to be performed only by individuals certified or licensed in accordance with the requirements of Title XI. As noted in a recent ASC Advisory, however, States have the discretion under Title XI to require the use of State licensed or certified appraisers any time prior to January 1, 1993. Because of this extension of the deadline for mandatory use of State licensed and State certified appraisers in federally related transactions, the ASC believes that the need for many waivers between now and January 1, 1993, have been eliminated. Temporary waiver relief, however, remains statutorily available both to States that choose to require the use of State licensed and State certified appraisers before January 1, 1993, and for all States after that date.
While' 1119(b) of Title XI speaks clearly to the ASC and the States, it does not explicitly limit the universe of persons who may either request that the ASC provide temporary waiver relief or provide information to the ASC that could lead to the ASC granting temporary waiver relief on its own initiative. Agencies, their respective regulated financial institutions, and other persons or institutions are encouraged to submit to the ASC critical information respecting appraiser scarcities and delays occurring in the States.
III. Summary of Comments and Recommendations
On November 26, 1991, the ASC published the Proposing Release in the Federal Register soliciting comments from interested members of the public. Comment letters were received from the: (a) American Bankers Association ("ABA"); (b) Independent Bankers Association of America ("IBAA"); and (c) United States League of Savings Institutions ("USL"). The ASC thanks the commentators for their thoughtful observations and suggestions.
The commentators generally supported the adoption of Rule 1102. In particular, they supported the ASC's approach of gathering relevant information and entertaining temporary waiver requests from as wide a universe of persons as reasonably possible. The commentators' suggestions largely focused on liberalizing the proposed Rule 1102's time frames and technical requirements. In response to those comments, the ASC today is adopting a modified version of Rule 1102.
IV. Discussion of Comments and Responses
The commentators noted that the ASC correctly interpreted Title XI's authorization of the ASC to grant and to terminate temporary waiver relief. They also expressed their views that the Rule 1102 would help avoid confusion relating to the granting and terminating of temporary waivers.
The commentators particularly supported the ASC's decision to give persons other than State agencies important ways to participate in the temporary waiver process, which could have far reaching consequences. For example, the ABA commented that the ASC's retention of the "other interested party language" in Rule 1102.3 showed an ASC appreciation for the potentially broad impact that a scarcity of licensed or certified appraisers may have on the public.
The commentators also noted that the ASC would need to change proposed Rule 1102 to conform with the recent statutory amendments to' 1119(c) discussed above. In response to these amendments and the commentators' suggestions, Rule 1102.2(a) has been changed accordingly.
The ABA and the IBAA commented that Rules 1102.2(g) and 1102.3, as proposed, would place unreasonable burdens on requesting persons because they would have been required to submit to the ASC a detailed plan to alleviate the scarcity and service delays. The ASC agrees with the ABA's and IBAA's observation that an interested person, other than a State agency, in all likelihood, would not have adequate information to satisfy this requirement. As a result, Rule 1102.3 has been amended. The Rule now provides that interested parties, i.e., "persons or institutions with a demonstrable interest in appraiser regulation[,] . . . are strongly encouraged to include meaningful suggestions and recommendations for remedying the [scarcity and service delays]." The ASC believes that this provision should facilitate creative problem solving on the local level, especially because Rule 1102.3 now requires an interested party to forward a copy of its informational submission or request directly to the affected State agency.
The IBAA separately expressed concern about the time frames in proposed Rule 1102. Indeed, the IBAA suggested that the proposed waiver procedures might be cumbersome and would not allow the ASC to act quickly to grant waivers in emergency situations. First, the IBAA focused on the 45-day time frame in Rule 1102.5. As proposed, that Rule provided that, within 45 calendar days of the date of the ASC's publication in the Federal Register of the notice regarding the received request or the initiation of a waiver proceeding, the ASC, by order, generally must either grant or deny a temporary waiver relief. The IBAA requested a shortening of this time period in the event of critical shortages of appraiser services. Moreover, the IBAA suggested that the ASC should possibly grant temporary waiver relief on an emergency basis. Last, the IBAA thought that the ASC should extend the public comment period for terminating a temporary waiver in Rule 1102.7 from 30 to 60 days.
The ASC agrees with the IBAA respecting the need to act quickly and decisively in the event of emergency situations and has amended Rule 1102.5 accordingly. The Rule now provides that the ASC can make interim temporary waiver relief available to State agencies when an emergency exists. Note, however, that such interim relief still will require FFIEC approval and will be published in the Federal Register for comment for at least thirty days. The ASC anticipates that it will grant interim temporary waiver relief on a very infrequent basis; State agencies will have to show clearly and convincingly that such relief is warranted. In arriving at these conclusions, the ASC has balanced the need to address scarcity/delay situations promptly with its duty to make temporary waiver determinations in a deliberate and careful way. The ASC believes that it must have sufficient time to collect the necessary information to determine whether temporary waiver relief is appropriate, and if so, to tailor that relief for the specific situation. The 45-day time period in Rule 1102.5 generally should address these needs.
The ASC also wishes to point out that, in the absence of an emergency, Rule 1102.5 provides the ASC with significant flexibility in the time needed to arrive at a determination. The Rule only requires an ASC determination no later than 45 days from the date of the publication of the notice or initiation order in the Federal Register. Therefore, the ASC can make a temporary waiver determination earlier than the 45-day deadline as circumstances warrant. The ASC wishes to assure the IBAA and other members of the public that its temporary waiver determinations will be made as quickly as possible.
The ASC also has amended the 30-day length of the temporary waiver termination comment period in response to the IBAA's suggestion. Rule 1102.7, as adopted, provides that the comment period can be no less than 30 days, thus providing the ASC with flexibility respecting its length. The ASC therefore may determine in particular circumstances that a comment period of, for example, 60 days may be appropriate. The ASC will inform the public of the length of the comment period in the Federal Register notice of its temporary waiver termination finding.
The ABA in addition commented on the proposal's time frames. More specifically, the ABA suggested that proposed Rule 1102.7's ten-day time period after which a waiver termination becomes effective should be made longer. The ABA was concerned that the ten day period might not be sufficient to notify banks and other financial entities of a waiver termination. The ASC agrees and has revised the Rule by increasing this period to 21 days after the close of the comment period.
The ABA further suggested that Rule 1102.6 should be changed to allow "other interested parties," in addition to State agencies, to request an extension of any temporary waiver relief granted by the ASC. This change, the ABA said, would make Rule 1102 internally consistent, because State agencies and "other interested parties" can make requests for temporary waiver relief.
While the ASC appreciates the ABA's concerns, the ASC has decided to adopt Rule 1102.6 as proposed. First, temporary waiver requests from State agencies and requests from other interested persons with a demonstrable interest in appraiser regulation are not treated identically under Rule 1102. A received request from a State agency requires the ASC to initiate a temporary waiver proceeding under the subpart by publishing a notice to that effect in the Federal Register. On the other hand, a request from an interested person does not trigger the requirement that the ASC initiate a proceeding. The ASC, in its discretion and on the basis of such requests and included information, may choose to initiate a temporary waiver proceeding.
Second, the ASC believes that the State agency is in the best position to request an extension. The State agency is the party operating under the constraints and conditions of the ASC order granting it a temporary waiver and, under the terms of that order, should be intimately involved in monitoring its progress toward remedying the scarcities and service delays.
Even though the ASC is not providing interested persons with the ability to formally request temporary waiver extensions, the ASC emphasizes that it welcomes information and views from persons other than a State agency regarding the State agency's progress in satisfying an ASC temporary waiver order. Indeed, such information and views could lead to the ASC initiating an extension of the temporary waiver period under' 1102.6. The ASC also strongly encourages these persons to write or otherwise communicate their concerns to the affected State agency, which then should assiduously pursue those concerns.
The ABA finally suggested that the ASC should consider combining requests from all parties into one notice in the Federal Register to provide consistency. The ASC agrees with this suggestion and will attempt to follow this procedure whenever possible. The ASC, however, may have to deviate from this procedure if circumstances warrant.
The USL made one suggestion. The USL requested the ASC to define the exact State requirements that would be waived if a waiver were granted. The ASC is of the view that Rule 1102.5, as proposed, adequately identifies these State requirements. Under Rule 1102.5, the ASC will grant a waiver only if a State agency, among other things, has fulfilled the requirements under Rule 1102.2 and has indicated why the requirements are causing the scarcity of certified or licensed appraisers and significant service delays.
The ASC is adopting Rule 1102 as revised. The ASC has made modifications to account for some of the commentators' suggestions. The interim temporary waiver procedures that were published in the Proposing Release are no longer effective.
Rule 1102 will provide State agencies and other persons with a vehicle to request ASC relief under' 1119(b) of Title XI and will provide the public with sufficient opportunities to participate in the temporary waiver proceeding. Rule 1102 also will ensure uniform treatment of waiver requests and will provide guidance for drawing up requests and the expeditious and efficient handling of requests.
Finally, the ASC believes that the process of notification and publication implemented in Rule 1102 is reasonable and consistent with procedures generally followed under the Administrative Procedure Act.
VI. Regulatory Flexibility Act Statement
Pursuant to section 605(b) of the Regulatory Flexibility Act, the ASC certifies that this notice of adoption of Rule 1102 is not expected to have a significant adverse economic impact on a substantial number of small business entities. Accordingly, a regulatory flexibility analysis is not required.
Rule 1102 sets out the ASC's procedures relating to proceedings granting, extending and terminating temporary waivers under' 1119(b) of Title XI. This section of FIRREA generally requires the ASC to make written findings and to determine that such findings satisfy the stated criteria for granting a waiver.
Temporary waiver proceedings by their very nature provide relief for small and large business entities and individuals.
VII. Paperwork Reduction Act Statement
In accordance with the Paperwork Reduction Act of 1980, forms, reporting, and recordkeeping requirements included in final Rule 1102 were approved by the Office of Management and Budget ("OMB") on December 12, 1991, through December 31, 1994, and were assigned OMB No. 3139-0003. On January 1, 1993, all federally insured financial institutions must use State licensed or certified appraisers in federally related transactions. And, about one-half of the States already have in place mandatory appraiser licensing and certification requirements.
The final Rule will provide States and other persons with a vehicle to request ASC relief under' 1119(b) of Title XI. The estimated number of respondents is 15, each submitting
a maximum of 1 response per year, with an estimated average reporting burden of 3 hours per response. No commentators raised any cost implications. Therefore, this final Rule is considered to be nonmajor under Executive Order 12291.
VIII. Statutory Basis of New Rules
Rule 1102 is being adopted pursuant to' 1119(b) of Title XI of the FIRREA. List of Subjects in 12 CFR part 1102
Administrative practice and procedure, Appraisers, Banks, banking, Mortgages, Privacy, Reporting and recordkeeping requirements.
Text of the Rule
Chapter XI, title 12 of the Code of Federal Regulations, is amended as set forth below:
1. By adding new part 1102, consisting of subpart A ('' 1102.1-1102.7), to read as follows:
PART 1102 -- APPRAISER REGULATION
Subpart A -- TEMPORARY WAIVER REQUESTS
1102.1 Authority, purpose and scope.
1102.2 Requirements for requests.
1102.3 Other requests and information submissions.
1102.4 Notice and comment.
1102.5 Subcommittee determination.
1102.6 Waiver extension.
1102.7 Waiver termination.
Subpart A -- TEMPORARY WAIVER REQUESTS
Authority: 12 U.S.C.' 3348(b).
'1102.1 Authority, purpose and scope.
(a) Authority. This subpart is issued under Section 1119(b) of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") (12 U.S.C.
(b) Purpose and scope. This subpart prescribes rules of practice and procedure governing temporary waiver proceedings under Section 1119(b) of Title XI of FIRREA (12 U.S.C.' 3348(b)). These procedures apply whenever a State appraiser regulatory agency requests the Appraisal Subcommittee of the Federal Financial Institutions Examination Council ("ASC") for a waiver of any requirement relating to certification or licensing of a
person to perform appraisals under Title XI of FIRREA. They also apply whenever the ASC, based on sufficient, credible information or requests received from other persons or entities, initiates a temporary waiver proceeding.
'1102.2 Requirements for requests.
A request will not be deemed received by the ASC unless it fully and accurately sets out:
(a) If the requester is a State Appraiser Regulatory Agency, a written, duly authorized determination by the State Appraiser Regulatory Agency that there is a scarcity of State licensed or State certified appraisers leading to significant delays in obtaining appraisals in federally related transactions. The scarcity can relate to the entire State or to particular geographical or political subdivisions. In the absence of such a written determination, a State Appraiser Regulatory Agency must ask the ASC for such a determination;
(b) The requirement or requirements of State law from which relief is being sought;
(c) A description of all significant problems currently being encountered in efforts to comply with Title XI;
(d) The nature of the scarcity of certified or licensed appraisers (including supporting documentation);
(e) The extent of the delays anticipated or experienced in obtaining the services of certified or licensed appraisers (including supporting documentation);
(f) The reasons why the requester believes that the requirement or requirements are
causing the scarcity of certified or licensed appraisers and the service delays; and
(g) A specific plan for expeditiously alleviating the scarcity and the service delays.
'c1102.3 Other requests and information submissions.
The federal financial institutions regulatory agencies and the Resolution Trust Corporation, their respective regulated financial institutions, and other persons or institutions with a demonstrable interest in appraiser regulation, may ask the ASC for a determination under' 1102.2(a) of this subpart, and may ask that the ASC exercise its discretionary authority to initiate a temporary waiver proceeding. Such regulated financial institutions and other persons or institutions do not need to comply with ' 1102.2(g) of this subpart, but are strongly encouraged to include meaningful suggestions and recommendations for remedying the situation. A copy of the request or informational submission shall be forwarded promptly to the State Appraiser Regulatory Agency. The ASC shall consider these submissions and requests in exercising its authority to initiate a temporary waiver procedure. When the ASC initiates a temporary waiver proceeding, these documents shall correspond to a received request under ' 1102.4 of this subpart.
'1102.4 Notice and comment.
The ASC shall publish promptly in the Federal Register a notice respecting:
(a) the received request; or
(b) the ASC order initiating a temporary waiver proceeding. The notice or initiation order shall contain a concise general statement of the nature and basis for the action and shall give interested persons 30 calendar days from its publication in which to submit written data, views and arguments.
'1102.5 Subcommittee determination.
Within 45 calendar days of the date of the publication of the notice or initiation order in the Federal Register, the ASC, by order, shall either grant or deny a waiver in whole, in
part, and upon specified terms and conditions, including provisions for waiver termination. Such order shall respond to comments received from interested members of the public and shall provide the reasons for the ASC's finding. The order shall be published promptly in the Federal Register, which, in the case of an approval order, shall be after Federal Financial Institution Examination Council concurrence. Upon the ASC's determination that an emergency exists, the ASC may issue an interim approval order simultaneously with its action under' 1102.4 of this subpart. Any ASC approval order shall be effective only upon Federal Financial Institution Examination Council concurrence.
'1102.6 Waiver extension.
The ASC may initiate an extension of temporary waiver relief and shall follow'' 1102.4, 1102.5 and 1102.7 of this subpart. A State Appraiser Regulatory Agency also may request an extension of temporary waiver relief by forwarding an additional written request to the ASC. A request for an extension from State Appraiser Regulatory Agency shall be subject to all the requirements of this subpart.
'1102.7 Waiver termination.
The ASC at any time may terminate a waiver order on the finding that:
(a) the significant delays in obtaining the services of certified or licensed appraisers no longer exist; or
(b) the terms and conditions of the waiver order are not being satisfied. The ASC shall publish a finding of waiver termination promptly in the Federal Register, giving interested persons no less than 30 calendar days from publication in which to submit written data, views and arguments. In the absence of further ASC action to the contrary, the finding of waiver termination automatically shall become final 21 calendar days after the close of the
By the Appraisal Subcommittee of the Federal Financial Institutions Examination Council,
Date Fred D. Finke, Chairman