CAR CAR Legal & Liability Considerations 1 — Questions and Answers
Question 1: Under FIRREA, which federal regulatory body is primarily responsible for establishing minimum standards for state-licensed and state-certified appraisers?
- The Appraisal Subcommittee (ASC) in coordination with The Appraisal Foundation (Correct answer)
- The Federal Deposit Insurance Corporation (FDIC) independently
- The Consumer Financial Protection Bureau (CFPB)
- The Office of the Comptroller of the Currency (OCC) acting alone
Correct answer: The Appraisal Subcommittee (ASC) in coordination with The Appraisal Foundation
FIRREA created the ASC to oversee state appraiser programs and authorized The Appraisal Foundation to set minimum qualifications and USPAP through its Boards.
Question 2: An appraiser reviewer discovers that the appraiser on a federally related transaction is licensed but not certified. Under FIRREA threshold rules, this may be a problem if:
- The transaction value exceeds the applicable de minimis threshold requiring a certified appraiser (Correct answer)
- The property is located in a state that only issues licenses, not certifications
- The lender requested a licensed rather than certified appraiser
- The appraiser is a trainee working under a certified supervisor
Correct answer: The transaction value exceeds the applicable de minimis threshold requiring a certified appraiser
FIRREA and interagency guidance establish de minimis thresholds above which a certified appraiser (not merely licensed) is required for federally related transactions.
Question 3: What is the primary liability concern for a reviewer who issues a positive review of an appraisal that was later found to be fraudulent?
- The reviewer may share liability if they failed to exercise the level of competency expected of a reasonable reviewer (Correct answer)
- The reviewer has no liability because appraisal fraud is solely the appraiser's responsibility
- The reviewer is automatically indemnified by their employer's errors and omissions policy
- The reviewer's liability is capped by USPAP to the appraiser's original fee
Correct answer: The reviewer may share liability if they failed to exercise the level of competency expected of a reasonable reviewer
Reviewers owe a duty of care; failing to identify red flags that a competent reviewer should have caught can expose the reviewer to professional and legal liability.
Question 4: Under USPAP Standard 3, what is a reviewer's obligation when they form their own opinion of value that differs from the appraiser's conclusion?
- The reviewer must comply with Standard 1 and Standard 2 requirements when developing and reporting their own value opinion (Correct answer)
- The reviewer may state their value opinion informally without following USPAP Standards 1 and 2
- The reviewer is prohibited from developing an independent value opinion in a review assignment
- The reviewer must use the same comparable sales as the original appraiser to develop their opinion
Correct answer: The reviewer must comply with Standard 1 and Standard 2 requirements when developing and reporting their own value opinion
USPAP Standard 3 explicitly states that when a reviewer develops their own value opinion, they must comply with Standards 1 and 2, making the review also an appraisal.
Question 5: What does the term 'scope creep' mean in the context of a review assignment?
- Performing work beyond the agreed-upon scope without client authorization, which may create uncompensated liability exposure (Correct answer)
- Expanding a property inspection beyond the exterior to include the interior
- Adding additional comparable sales to the reviewer's report after the initial submission
- Reviewing more appraisals than scheduled in a given billing period
Correct answer: Performing work beyond the agreed-upon scope without client authorization, which may create uncompensated liability exposure
Scope creep occurs when a reviewer performs tasks outside the defined assignment conditions, potentially creating unauthorized deliverables and associated liability without compensation.
Question 6: Which federal law prohibits appraisers from being coerced, pressured, or bribed by lenders or mortgage brokers to reach a predetermined value conclusion?
- The Dodd-Frank Wall Street Reform and Consumer Protection Act (including appraiser independence provisions) (Correct answer)
- The Truth in Lending Act (TILA)
- The Real Estate Settlement Procedures Act (RESPA)
- The Equal Credit Opportunity Act (ECOA)
Correct answer: The Dodd-Frank Wall Street Reform and Consumer Protection Act (including appraiser independence provisions)
Dodd-Frank codified appraiser independence requirements and prohibits any party with an interest in a transaction from influencing the appraiser's value opinion.
CAR CAR Legal & Liability Considerations 1
Under FIRREA, which federal regulatory body is primarily responsible for establishing minimum standards for state-licensed and state-certified appraisers?