A borrower suggests a particular appraiser to the bank for a hybrid appraisal. What do the Interagency Guidelines say about this?
Correct Answer
B) Independence is compromised when a borrower recommends the appraiser
Independence is compromised when a borrower recommends an appraiser or a person to perform an evaluation. The institution or its agents should directly select and engage them.
Why This Is the Correct Answer
Option B is correct because the Interagency Guidelines state that independence is compromised when a borrower recommends an appraiser or a person to perform an evaluation. The institution or its agents should directly select and engage them, which applies to a hybrid appraisal as well.
Why the Other Options Are Wrong
Option A: It is acceptable if the appraiser holds a state certification
Option A says the recommendation is acceptable if the appraiser holds a state certification. Credentials do not cure the independence problem created by a borrower recommending the appraiser.
Option C: It is acceptable for evaluations, though it is not for appraisals
Option C says borrower recommendations are acceptable for evaluations but not for appraisals. The guidelines apply the same independence concern to a person performing an evaluation.
Option D: It is expected for loans that fall below the appraisal threshold
Option D says a borrower recommendation is expected for loans below the appraisal threshold. Loans below the threshold may use evaluations, and the guidelines treat borrower recommendation of an evaluator as compromising independence too.
Borrower picks, independence slips
If the borrower picks the valuer, independence slips. The bank, or its agent, does the choosing.
How to use: Use this when a question asks who may select the appraiser or evaluator.
Exam Tip
Independence concerns apply to both appraisals and evaluations. Credentials or loan size do not make a borrower-recommended valuer acceptable.
Common Mistakes to Avoid
- -Believing a certified appraiser recommended by the borrower is acceptable
- -Applying independence rules to appraisals but not evaluations
- -Assuming smaller loans relax independence requirements
Concept Deep Dive
Analysis
This question tests the Interagency Guidelines' independence standards for selecting appraisers. A borrower's recommendation compromises independence regardless of the appraiser's credentials or the valuation type. The institution or its agents should directly select and engage the appraiser or evaluator.
Background Knowledge
The Interagency Appraisal and Evaluation Guidelines describe how federally regulated institutions should maintain appraiser and evaluator independence. Independence protects the integrity of collateral valuations from influence by parties with an interest in the transaction. Selection and engagement should come from the institution or its agents.
Real-World Application
A borrower emails a loan officer suggesting a specific appraiser who did a prior job for the family. The bank's appraisal management function declines to use the suggestion and assigns an appraiser from its own panel. This keeps the selection process independent of the borrower.
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