In response to the failure of a large number of savings and loan institutions in the 1 980s, Congress conducted several hearings to determine the root cause of the crisis and took steps to ensure that a similar crisis would not occur in the future.

During the course of their investigation, Congress was surprised to learn that appraisers, the individuals determining the value of the underlying collateral of loans, were generally unregulated. While professional licensure issues generally fall into the domain of state governments, Congress was concerned about protecting the future integrity of deposit insurance funds.

Accordingly, when passing legislation in 1989 to address the financial institution crisis (known as the Financial Institutions Reform, Recovery and Enforcement Act or FIRREA), Congress included a provision known as Title Xl mandating the regulation of real estate appraisers by the states. The regulatory program contained three components: (1) each state government is to establish an appraiser regulatory body to issue licenses and certificates and to address enforcement or disciplinary issues; (2) private-sector expertise regarding appraisal standards and appraiser qualifications is provided by The Appraisal Foundation; and, (3) a small federal government agency (the Appraisal Subcommittee) was created to oversee the program to ensure it remained consistent with the original intent of Congress.

State Appraiser Regulatory Agencies

Under Title Xl, each state was required to put in place a regulatory system that typically includes a board of five to nine individuals and support staff. The board members are generally appointed by the governor of the state and often include one or more members of the public who are not appraisers. The regulatory agency issues licenses and certificates to individuals who meet the Rea/ Property Appraiser Qualification Criteria established by the Appraiser Qualifications Board (AQB) of The Appraisal Foundation.

The state appraiser regulatory agencies must also investigate and take appropriate action on complaints they receive regarding the actions of appraisers. Although it can vary from state to state, disciplinary action taken against appraisers, such as fines, suspensions or revocation of licenses, is often made public.

Private Sector Expertise

Congress also mandated that all appraisals connected to federally-related transactions (transactions involving financial institutions that are regulated by the federal government) would have to conform to the Uniform Standards of Professional Appraisal Practice (USPAP), the generally-accepted appraisal performance standards promulgated by the Appraisal Standards Board (ASB) of The Appraisal Foundation. The state appraiser regulators also use USPAP when addressing disciplinary issues.

Congress gave The Appraisal Foundation considerable responsibilities that are traditionally under the purview of government agencies. Congress mandated that the state appraiser regulatory agencies must use the Criteria adopted by the Appraiser Qualifications Board (AQB) of The Appraisal Foundation when issuing certificates to individuals. The Criteria outlines minimum requirements in the areas of education, experience and continuing education. Individuals seeking to become state licensed or certified appraisers must also pass a comprehensive state examination that has been reviewed and approved by the AQB.

In exchange for providing USPAP and the Real Property Appraiser Qualification Criteria, The Appraisal Foundation is eligible to receive federal grants; these grants are made at the discretion of the federal appraisal oversight agency known as the Appraisal Subcommittee to fund the real property work of the AQB and ASS.

Federal Government Oversight

Because the issue of regulating appraisers emanated from concerns about the appraisal of collateral for loans made by financial institutions, Congress entrusted federal oversight to an entity known as the Appraisal Subcommittee of the Federal Financial Institutions Examination Council. The Examination Council is an umbrella organization for all federal financial regulatory agencies, and its primary mission is to ensure that financial institution examiners are trained in a consistent manner. The Appraisal Subcommittee is composed of representatives from six government agencies and meets on a monthly basis.

The responsibilities of the Appraisal Subcommittee include:

1. Oversight of the state appraiser regulatory programs to ensure consistency with the intent of Congress. This oversight includes periodic “site visits” to review the operations of state programs;

2. Monitoring the activities of The Appraisal Foundation and providing grants for projects specifically related to Title XI work;

3. Maintaining a National Registry of Appraisers and collecting Registry fees. The fees collected ($25.00 from each appraiser annually) fund the operations of the Appraisal Subcommittee and provide funds for the above-referenced grants to The Appraisal Foundation; and

4. Reporting on an annual basis to the U.S. Congress.

When the appraiser regulatory system was first implemented in the early 1 990s, there were considerable reservations about the ability of government regulators and the private sector to work together. Today, a productive working relationship has developed between state and federal regulators and The Appraisal Foundation, and the appraiser regulatory system in the United States is generally working as Congress intended.