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WASHINGTON (Reuters) - U.S. financial regulators on Monday proposed new requirements for state-registered companies that help lenders work with independent appraisers, a requirement of the 2010 financial regulatory overhaul.
Banks often use outside appraisers to determine the value of homes before they extend loans to borrowers. Those appraisers must be independent from the bank, so lenders sometimes use appraisal management companies as go-betweens.
Appraisal management companies are not allowed to operate in states that do not have a licensing agency to oversee them, regulators said. The 2010 Dodd-Frank law called for minimum requirements for any firms that do register with states.
The Federal Reserve, Office of the Comptroller of the Currency, Federal Housing Finance Agency and other federal regulators said licensed appraisal management companies must only use state-certified, independently chosen appraisers and comply with federal rules.
State licensing agencies need the power to approve or deny applications, examine appraisal management companies and discipline any firms that break the rules, the regulators said.
The public will have 60 days to comment on the proposed rules, after which the regulators will consider finalizing them.
Reporting by Emily Stephenson; Editing by Meredith Mazzilli