Table of Contents. Table of Contents Chapter 1 Introduction Goals & Objectives Required Review Applicability...

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1 [ Client]... 1 Chapter 1 Introduction Goals & Objectives Required Review Applicability... 4 Chapter 2 Accountability and Monitoring Internal Controls... 5 Chapter 3 Staff and Training Ongoing Training New Hire Training... 7 Chapter 4 Federal Regulations and Guidance Summary of Truth in Lending Act Section 1639e Regulation Z Valuation Independence: Definitions Prohibited Acts and Practices Permissible Conduct Conflicts of Interest Prohibitions on Extensions of Credit Customary and Reasonable Compensation Mandatory Reporting Interagency Appraisal and Evaluation Guidelines Selection of Appraisers or Persons Who Perform Evaluations Subsequent Appraisals Provision of Appraisal to Borrower Acceptability of Subsequent Appraisals Borrower Receipt of Appraisal Appraiser Engagement Use of Appraisal Reports by In House or Affiliated Appraisers Transfer of Appraisals Chapter 5 Fannie Mae Requirements

2 [ Client] 5.1 Appraiser Quality Monitoring (AQM) Post Closing Quality Control Review of Appraisers & Appraisals Chapter 6 Freddie Mac Requirements General Requirements for Appraisals and Inspections Market Value Definition Chapter 7 FHA Requirements Responsibility for Appraisals Appraisal Assignment to Ensure Appraiser Competency Preventing Improper Influences on Appraisers Who May Not Order the Appraisal Appraiser Independence Safeguards Appraiser Selection in the FHA Connection DE Underwriter Responsibility for the Appraiser Report

3 Introduction Goals & Objectives [ Client] Chapter 1 Introduction Section 1472, Title XIV Mortgage Reform and Anti Predatory Lending Act of Dodd Frank Act (HR 4173) called for the sunset of The Home Valuation Code of Conduct (HVCC). As required by the Dodd Frank Act, the Federal Reserve issued an interim Final Rule in order to ensure the independence of the appraisers and the requirement that appraisers are to receive customary and reasonable payments for their services. Fannie Mae and Freddie Mac issued notices regarding new Appraiser Independence Requirements and require that seller/services establish internal procedures to comply with the federal rules for Appraiser Independence. Both Fannie Mae and Freddie Mac require that all single family loans they purchase adhere to standards for solicitation, selection, compensation, and practitioner independence when it comes to home appraisals. FHA does not require the use of Appraisal Management Companies (AMC) or other third party organizations for appraisal ordering, but recognizes that some lenders use AMCs and/or other third party organizations to help ensure appraiser independence. HUD has also issued several mortgagee letters concerning appraiser independence. 1.1 Goals & Objectives The standards set out in this policy represent minimum requirements based on applicable legal and regulatory guidance and apply throughout [ Client]. These requirements are intended to prevent [ Client], our employees, third party vendors and clients from violating Federal Regulations related to mortgage lending and consumer compliance. 1.2 Required Review [ Client] requires this policy be reviewed no less than annually. Last Date of Review 01/01/20XX Next Due for Review 01/01/20XX The above required annual review shall include the compliance of this policy with current law, regulation, or directive; the procedural implementation of this policy within the then current scope of [ Client] business lines and operations; internal audit results received during the previous year; and, then, current industry trends or regulatory guidance. 3

4 Federal Regulations and Guidance Summary of Truth in Lending Act Section 1639e [ Client] Chapter 4 Federal Regulations and Guidance 4.1 Summary of Truth in Lending Act Section 1639e [ Client] shall comply with the TILA provisions governing appraisal independence as established by the Dodd Frank Wall Street Reform and Consumer Protection Act. In order to maintain appraisal independence TILA prohibits the following actions in consumer credit transactions secured by a consumer s principal dwelling: 1. Causing or attempting to cause the value assigned to the property to be based on a factor other than the independent judgment of the appraiser, by compensating, coercing, extorting, colluding with, instructing, inducing, bribing, or intimidating a person conducting or involved in an appraisal. 2. Mischaracterizing, or suborning any mischaracterization of, the appraised value of the property securing the extension of credit. 3. Seeking to influence an appraiser or otherwise encourage a targeted value in order to facilitate the making or pricing of the transaction. 4. Withholding or threatening to withhold timely payment for an appraisal report or for appraisal services rendered when the appraisal report or services are provided for in accordance with the contract between the parties. [ Client] may engage in the following permissible conduct: 1. Asking an appraiser to consider additional, appropriate property information, including information regarding additional comparable properties to make or support an appraisal. 2. Asking an appraiser to provide further detail, substantiation, or explanation for the value conclusion. 3. Asking an appraiser to correct errors in the report. [ Client] will comply with the TILA requirements governing appraisal independence as well as the implementing rules set forth in the Federal Reserve Board s Regulation Z. 4.2 Regulation Z Valuation Independence: Definitions Covered Persons 8

5 Fannie Mae Requirements Appraiser Quality Monitoring (AQM) [ Client] Chapter 5 Fannie Mae Requirements [ Client] shall comply with Fannie Mae s Appraiser Independence Requirements which were developed to replace the Home Valuation Code of Conduct (HVCC). These requirements were developed to protect the independence of appraisers and the integrity of their appraisals; extend protections for home buyers, mortgage investors, and the housing market; and reinforce Fannie Mae s commitment to responsible lending and mortgage quality standards. [ Client] s Appraiser Independence Requirements are further amended by the following Fannie Mae specific requirements for all loans sold to, or securitized by, Fannie Mae. Only those Fannie Mae requirements which expand, amend, or revise [ Client] policy are recited below. 5.1 Appraiser Quality Monitoring (AQM) Appraisal data submitted to Fannie Mae through the Uniform Collateral Data Portal (UCDP) by [ Client] and other lenders allows Fannie Mae to monitor and evaluate appraisals for data accuracy and consistency. Effective December 10, 2013, Fannie Mae began issuing messages through UCDP notifying lenders about actions regarding appraisals from specific appraisers. The messages indicate either that 100% of the loans submitted with appraisals from the identified appraiser will be reviewed, or Fannie Mae will not accept appraisals from the identified appraiser. Appraisers receiving either status will be placed on the Fannie Mae Appraiser Quality Monitoring (AQM) list. As an approved Seller or Servicer, this protected list is available to [ Client] through Technology Manager. [ Client] shall ensure the AQM list is monitored such that all appraisals ordered by [ Client] or on our behalf by any third party are ordered from appraisers who do not appear on the AQM list. The following outlines the procedure should an appraiser currently engaged by [ Client] be placed on the AQM list: The change in status should be immediately reported to the [Valuation Manager]. No new assignments should be issue to the appraiser. Any pending assignments not completed should be reassigned, if possible. 19