In a covered consumer-credit transaction secured by the consumer’s principal dwelling, which action violates valuation independence?
Correct Answer
A) Pressuring the appraiser to select sales solely to reach a predetermined target value
For a covered principal-dwelling consumer-credit transaction, coercing an appraiser to use sales to reach a predetermined value conflicts with valuation independence. A reasonable deadline or format request is not automatically coercion, but cannot demand an inadequate or biased appraisal.
Why This Is the Correct Answer
Option A is correct because pressuring the appraiser to select sales to reach a predetermined target value is an attempt to influence the valuation. The interagency guidelines list communicating a predetermined, expected or qualifying estimate of value to an appraiser as a concern, and federal valuation independence rules prohibit influencing the valuation through coercion. This option describes exactly that pressure.
Why the Other Options Are Wrong
Option B: Requesting a feasible deadline without conditioning value
Option B requests a feasible deadline without conditioning the value. Asking for a reasonable completion date is an ordinary business request and does not try to steer the value.
Option C: Requesting a report format that permits credible reporting
Option C requests a report format that permits credible reporting. Specifying a format that still allows credible results does not pressure the appraiser toward a particular value.
Option D: An independent AMC selecting the appraiser for the loan under compliant panel procedures
Option D has an independent AMC selecting the appraiser under compliant panel procedures. Using an AMC that follows compliant procedures is a common way to support independence, not a violation.
Ask About Process, Not Price
Requests about deadlines, format or corrections can be acceptable; pushing toward a target value is not.
How to use: Use this to sort lender communications into acceptable requests and independence violations.
Exam Tip
Look for the choice where someone tries to steer the value to a predetermined number; deadline and format requests are usually acceptable when they do not affect credibility.
Common Mistakes to Avoid
- -Treating any deadline request as coercion
- -Thinking sharing a target value is acceptable if no threat is made
- -Believing use of an AMC is itself a violation
Concept Deep Dive
Analysis
This question tests what counts as a valuation independence violation in a covered consumer credit transaction secured by the consumer's principal dwelling. Coercing or pressuring an appraiser to reach a predetermined value conflicts with valuation independence. Ordinary business requests, such as a reasonable deadline or a report format that allows credible reporting, are not coercion on their own.
Background Knowledge
Regulation Z's valuation independence rules prohibit coercing, instructing, inducing or bribing a person preparing a valuation to misstate value, and they list related prohibited conduct such as excluding an appraiser for not meeting a value threshold or conditioning payment on loan closing. Some communications are allowed, such as asking the appraiser to consider additional information or correct errors.
Real-World Application
A loan officer emails an appraiser the needed value and suggests which sales to use to get there. The appraiser declines, and the lender's compliance team treats the email as a valuation independence concern.
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