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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

January 2012: 

Real Estate Appraisals: 

Appraisal Subcommittee Needs to Improve Monitoring Procedures: 

GAO-12-147: 

GAO Highlights: 

Highlights of GAO-12-147, a report to congressional committees. 

Why GAO Did This Study: 

Real estate appraisals have come under increased scrutiny in the wake 
of the recent mortgage crisis. Title XI of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 created an oversight 
structure for appraisals and appraisers that involves state, federal, 
and private entities. This structure includes ASC, a federal agency 
responsible for monitoring these entities’ Title XI-related 
activities. The Dodd-Frank Wall Street Reform and Consumer Protection 
Act (Dodd-Frank Act) expanded ASC’s Title XI role and required GAO to 
examine ASC’s activities and exemptions to federal appraisal 
requirements. This report discusses (1) how ASC is carrying out its 
original Title XI responsibilities, (2) ASC’s actions and plans to 
implement Dodd-Frank Act provisions, and (3) regulatory dollar 
thresholds for determining when an appraisal is required. To do this 
work, GAO reviewed ASC records and reports, surveyed state appraiser 
regulatory agencies, analyzed government mortgage data, and 
interviewed industry stakeholders. 

What GAO Found: 

The Appraisal Subcommittee (ASC) has been performing its monitoring 
role under Title XI, but several weaknesses have potentially limited 
its effectiveness. For example, Title XI did not originally provide 
ASC rulemaking and enforcement tools that could be useful in promoting 
state compliance. In addition, ASC has not reported or clearly defined 
the criteria it uses to assess states’ overall compliance levels. 
Title XI charges ASC with monitoring the appraisal requirements of the 
federal financial institutions regulators, but ASC has not defined the 
scope of this function—for example, by developing policies and 
procedures—and its monitoring activities have been limited. ASC also 
lacks specific policies for determining whether activities of the 
Appraisal Foundation (a private nonprofit organization that sets 
criteria for appraisals and appraisers) that are funded by ASC grants 
are Title XI-related. Not having appropriate policies and procedures 
is inconsistent with federal internal control standards designed to 
promote effectiveness and efficiency and limits the accountability and 
transparency of ASC’s activities. 

ASC faces potential resource and planning challenges in implementing 
some Dodd-Frank Act provisions. ASC has only 10 staff and is funded by 
appraiser registration fees that totaled $2.8 million in fiscal year 
2010. The Dodd-Frank Act expands ASC’s responsibilities and 
authorities. For example, the act requires ASC to establish a national 
appraiser complaint hotline and provide grants to state appraiser 
regulatory agencies, and it gives ASC limited rulemaking and enhanced 
enforcement authorities to help address prior weaknesses. As of 
October 2011, ASC had completed several implementation tasks that 
required no rulemaking or creation of new programs and was in various 
stages of progress on the others. The potentially resource-intensive 
nature of some remaining tasks will require careful planning. For 
example, operating a complaint hotline may require investments in 
information technology and the creation of screening and follow-up 
procedures. Also, implementing a grant program will require ASC to set 
aside funds, develop funding criteria, and oversee grantees. ASC is in 
the process of developing a strategic plan to help carry out these 
efforts with available resources. 

GAO found that more than 70 percent of residential mortgages made from 
2006 through 2009 were $250,000 or less—-the regulatory threshold at 
or below which appraisals are not required for transactions involving 
federally regulated lenders. In recent years, however, the threshold 
has had a limited impact on the proportion of mortgages with 
appraisals because mortgage investors and insurers such as Fannie Mae, 
Freddie Mac, and the Federal Housing Administration have generally 
required appraisals for mortgages both above and below the threshold. 
While these entities currently dominate the mortgage market, federal 
plans to scale them back could lead to a more privatized market, and 
whether this market would impose similar requirements is not known. 
None of the appraisal industry stakeholders GAO spoke with argued for 
increasing the threshold. Some stakeholders said the threshold should 
be lowered or eliminated, citing potential benefits to risk management 
and consumer protection. Others noted potential downsides to lowering 
the threshold, such as requiring more borrowers to pay appraisal fees 
and requiring appraisals on more transactions for which cheaper and 
quicker valuation methods may be sufficient. 

What GAO Recommends: 

To help ensure effective implementation of ASC’s original Title XI and 
additional Dodd-Frank Act responsibilities, ASC should clarify and 
report the criteria it uses to assess states’ overall compliance with 
Title XI and develop specific policies and procedures for its other 
monitoring functions. GAO provided a draft of this report to ASC and 
seven other agencies. ASC and two other agencies agreed with the 
report’s recommendations. One agency did not comment on the 
recommendations, and the others did not provide written comments. 

View [hyperlink, http://www.gao.gov/products/GAO-12-147]. To view the 
e-supplement, click GAO-12-198SP. For more information, contact 
William B. Shear at (202) 512-8678 or shearw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Several Weaknesses Have Potentially Limited ASC's Effectiveness in 
Performing Its Title XI Functions: 

Dodd-Frank Act Provides ASC New Authorities and Presents 
Implementation Challenges: 

Most Recent Mortgages Were Below the Threshold for Appraisal 
Exemption, and Stakeholder Views on the Threshold Vary: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Data on the Number of Appraiser Credentials and State 
Enforcement Actions Against Appraisers: 

Appendix III: Potential Benefits and Challenges of a National 
Appraisal Repository for ASC: 

Appendix IV: Status of ASC Tasks Stemming from the Dodd-Frank Act: 

Appendix V: Comments from the Appraisal Subcommittee: 

Appendix VI: Comments from the Consumer Financial Protection Bureau: 

Appendix VII: Comments from the National Credit Union Administration: 

Appendix VIII: Comments from the Office of the Comptroller of the 
Currency: 

Appendix IX: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: ASC's Tools for Monitoring State Compliance with Title XI 
Requirements: 

Table 2: Number and Type of Noncompliance Findings Identified in ASC's 
State Compliance Reviews, 2007-2010: 

Table 3: Active Appraiser Credentials, by State and Type, as of 
December 31, 2010: 

Table 4: Number and Types of Appraiser Disciplinary Actions Reported 
by States, 2001-2010: 

Table 5: Summary Description and Status of ASC Tasks Stemming from the 
Dodd-Frank Act, as of October 2011: 

Figures: 

Figure 1: ASC's Annual Grant Reimbursements to the Appraisal 
Foundation, Fiscal Years 2000-2010: 

Figure 2: State Disciplinary Actions Against Appraisers, Calendar 
Years 2001-2010: 

Figure 3: ASC Revenues and Expenses, Fiscal Years 2000-2010: 

Figure 4: Percentage of First-Lien Mortgages for Single-Family Homes 
Above and Below $250,000, 2006-2009 Originations: 

Figure 5: Percentage of First-Lien Mortgages for Single-Family Homes 
at or Below $250,000 by State, 2006-2009 Originations Combined: 

Abbreviations: 

AMC: appraisal management company: 

Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection 
Act: 

ASC: Appraisal Subcommittee: 

AVM: Automated Valuation Models: 

BPO: Broker Price Opinion: 

CFPB: Bureau of Consumer Finance Protection: 

the enterprises: Fannie Mae and Freddie Mac: 

FBI: Federal Bureau of Investigation: 

FDIC: Federal Deposit Insurance Corporation: 

Federal Reserve: Board of Governors of the Federal Reserve System: 

FFIEC: Federal Financial Institutions Examination Council: 

FHA: Federal Housing Administration: 

FHFA: Federal Housing Finance Agency: 

FIRREA: Title XI of Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989: 

GPRA: Government Performance and Results Act of 1993: 

GPRAMA: GPRA Modernization Act of 2010: 

HMDA: Home Mortgage Disclosure Act: 

HUD: Department of Housing and Urban Development: 

HVCC: Home Valuation Code of Conduct: 

NCUA: National Credit Union Administration: 

OCC: Office of the Comptroller of the Currency: 

OTS: Office of Thrift Supervision: 

UMDP: Uniform Mortgage Data Program: 

USPAP: Uniform Standards of Professional Appraisal Practice: 

View GAO-12-198SP Key Component: 

Real Estate Appraisals: Survey of State Appraiser Regulatory Agencies 
(GAO-12-198SP), an e-supplement to GAO-12-147: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

January 18, 2012: 

The Honorable Tim Johnson: 
Chairman: 
The Honorable Richard C. Shelby: 
Ranking Member: 
Committee on Banking, Housing, and Urban Affairs: 
United States Senate: 

The Honorable Spencer Bachus: 
Chairman: 
The Honorable Barney Frank: 
Ranking Member: 
Committee on Financial Services: 
House of Representatives: 

In recent decades, periods of financial turmoil have focused the 
federal government's attention on oversight of the real estate 
appraisal industry. Appraisals play a critical role in mortgage 
underwriting by providing evidence that the market value of a property 
is sufficient to help mitigate losses if the borrower is unable to 
repay the loan. Concerned that faulty and fraudulent appraisals 
contributed to the federal government's losses during the savings and 
loan crisis of the 1980s, Congress enacted Title XI of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). 
[Footnote 1] Title XI made reforms to address both the quality of 
appraisals and the qualifications of appraisers who perform them in 
order to protect federal deposit insurance funds and promote safe and 
sound lending. Title XI also authorized federal regulators to 
establish dollar thresholds at or below which an appraisal is not 
required for a "federally related transaction."[Footnote 2] 
Additionally, to help ensure that the purpose of the legislation was 
carried out, Title XI created a regulatory structure to monitor and 
oversee the real estate appraisal industry, including a federal entity 
called the Appraisal Subcommittee (ASC) of the Federal Financial 
Institutions Examination Council (FFIEC) to monitor the title's 
implementation.[Footnote 3] As we reported in July 2011, the recent 
mortgage crisis renewed questions about real estate appraisals, 
including conflicts of interest in the appraisal process and 
perceptions that appraisal quality had diminished.[Footnote 4] The 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act), enacted by Congress in July 2010, amended Title XI and contains 
provisions designed to address these issues and gives ASC additional 
responsibilities and authorities.[Footnote 5] 

ASC is a small agency tasked with several key functions. ASC has 7 
board member positions and 10 staff. Five of the board members are 
designated by the federal agencies that are part of FFIEC--the Board 
of Governors of the Federal Reserve System (Federal Reserve), the 
Bureau of Consumer Financial Protection (known as the Consumer 
Financial Protection Bureau or CFPB), the Federal Deposit Insurance 
Corporation (FDIC), the National Credit Union Administration (NCUA), 
and the Office of the Comptroller of the Currency (OCC).[Footnote 6] 
CFPB has yet to designate its board member. The other two members of 
the ASC board are designated by the U.S. Department of Housing and 
Urban Development (HUD) and the Federal Housing Finance Agency (FHFA). 
ASC's staff is headed by an Executive Director hired by the board. 
Among other things, Title XI requires ASC to monitor appraiser 
requirements established by the states, monitor requirements 
established by the federal financial institutions regulators with 
respect to appraisal standards, monitor and review the activities of 
the Appraisal Foundation (a private not-for-profit corporation that 
sets criteria for appraisals and appraisers), and maintain a national 
registry of state-licensed and state-certified appraisers who may 
perform appraisals in connection with federally related transactions. 
ASC is a self-supporting agency that funds its activities and 
operations through a fee assessed against appraisers that states 
collect and forward to ASC[Footnote 7]. 

The Dodd-Frank Act directed us to study ASC's ability to carry out its 
functions and examine regulatory exemptions to appraisal requirements. 
[Footnote 8] Accordingly, this report discusses (1) how ASC is 
performing its Title XI functions that existed prior to the passage of 
the Dodd-Frank Act, (2) ASC's plans and actions to implement Dodd-
Frank Act provisions, and (3) analysis and stakeholder views on 
existing dollar-based exemptions to appraisal requirements for 
federally related transactions. The act also directed us to provide 
data on state enforcement actions against appraisers and examine the 
extent to which a national appraisal repository would benefit ASC. 
Appendix II contains detailed information on state enforcement actions 
against appraisers from 2001 through 2010. Appendix III contains 
discussion of the potential benefits and challenges of a national 
appraisal repository. 

To address these objectives, we reviewed Title XI of FIRREA and 
relevant Dodd-Frank Act provisions. We reviewed ASC policies and 
procedures, including its rules of operation, policy and procedures 
manual, Title XI policy statements, and compliance review manual. We 
also reviewed ASC records such as its annual reports to Congress, 
board meeting minutes, state compliance review reports, and documents 
concerning grants to the Appraisal Foundation. In addition, we 
analyzed data from ASC's national registry of appraisers and FFIEC's 
Home Mortgage Disclosure Act (HMDA) database.[Footnote 9] We tested 
the reliability of the data by conducting reasonableness checks on 
data elements to identify any missing, erroneous, or outlying data. We 
also reviewed documentation on the process that the data providers use 
to collect and ensure the reliability and integrity of the data. We 
concluded that the data we used were sufficiently reliable for our 
purposes. Using a Web-based questionnaire, we surveyed appraiser 
regulatory agencies in the 50 states, the District of Columbia, and 4 
U.S. territories about their experience in implementing Title XI and 
their views on ASC and provisions in the Dodd-Frank Act.[Footnote 10] 
We received completed surveys from 50 of the 55 agencies. A copy of 
the questionnaire, including summary responses to each question, can 
be found in an e-supplement to this report, GAO-12-198SP. Finally, we 
interviewed ASC board members and staff; officials from CFPB, Federal 
Bureau of Investigation (FBI), FDIC, Federal Reserve, FHFA, HUD, NCUA, 
OCC, and Office of Thrift Supervision (OTS);[Footnote 11] 
representatives of the Appraisal Foundation; state appraisal 
regulatory officials; and a range of appraisal industry participants, 
including trade groups that represent appraisers and lenders and 
officials from Fannie Mae and Freddie Mac, two government-sponsored 
enterprises (the enterprises) that establish standards for appraisals 
used in connection with mortgages that they purchase. Appendix I 
contains a more detailed description of our objectives, scope, and 
methodology. 

We conducted this performance audit from November 2010 to January 2012 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

Before originating a residential mortgage loan, a lender assesses the 
risk of making the loan through a process called underwriting, in 
which the lender generally examines the borrower's credit history and 
capacity to pay back the mortgage and obtains a valuation of the 
property to be used as collateral for the loan. Lenders need to know 
the property's market value, which refers to the probable price that a 
property should bring in a competitive and open market, in order to 
provide information for assessing their potential loss exposure if the 
borrower defaults.[Footnote 12] Lenders also need to know the value in 
order to calculate the loan-to-value ratio, which represents the 
proportion of the property's value being financed by the mortgage and 
is an indicator of its risk level. Real estate can be valued using a 
number of methods, including appraisals, broker price opinions (BPO), 
and automated valuation models (AVM). Appraisals--the valuation method 
used in the large majority of mortgage transactions--are opinions of 
value based on market research and analysis as of a specific date. 
Appraisals are performed by state-licensed or -certified appraisers 
who are required to follow the Uniform Standards of Professional 
Appraisal Practice (USPAP).[Footnote 13] A BPO is an estimate of the 
probable selling price of a particular property prepared by a real 
estate broker, agent, or sales person rather than by an appraiser. An 
AVM is a computerized model that estimates property values using 
public record data, such as tax records and information kept by county 
recorders, multiple listing services, and other real estate records. 
[Footnote 14] 

In 1986, the House Committee on Government Operations issued a report 
concluding that problematic appraisals were an important contributor 
to the losses that the federal government suffered during the savings 
and loan crisis.[Footnote 15] The report states that hundreds of 
savings and loans chartered or insured by the federal government were 
severely weakened or declared insolvent because faulty and fraudulent 
real estate appraisals provided documentation for loans larger than 
justified by the collateral's real value. In response, Congress 
incorporated provisions in Title XI of FIRREA that were intended to 
ensure that appraisals performed for federally related transactions 
were done (1) in writing, in accordance with uniform professional 
standards, and (2) by individuals whose competency has been 
demonstrated and whose professional conduct is subject to effective 
supervision.[Footnote 16] 

Various private, state, and federal entities have roles in the Title 
XI regulatory structure: 

* The Appraisal Foundation. The Appraisal Foundation is a private not-
for-profit corporation composed of groups from the real estate 
industry that works to foster professionalism in appraising. The 
foundation sponsors two independent boards with responsibilities under 
Title XI. The first of these, the Appraisal Standards Board, sets 
forth rules for developing an appraisal and reporting its results 
through USPAP. Title XI requires real estate appraisals performed in 
conjunction with federally related transactions to follow USPAP. The 
second board, the Appraiser Qualifications Board, establishes the 
minimum qualification criteria for state certification and licensing 
of real property appraisers.[Footnote 17] Title XI requires all state-
licensed and -certified appraisers to meet the minimum education, 
experience, and examination requirements promulgated by the Appraiser 
Qualifications Board.[Footnote 18] The foundation disseminates 
information regarding USPAP and the appraiser qualification criteria, 
which are periodically revised and updated, to state and federal 
regulators, appraisers, users of appraisal services, and the general 
public. The foundation is funded primarily by sales of publications 
but also receives an annual grant from ASC. 

* State-level regulatory entities. Title XI relies on the states to 
(1) implement the certification and licensing of all real estate 
appraisers and (2) monitor and supervise appraisers' compliance with 
appraisal standards and requirements. To assure the availability of 
certified and licensed appraisers, all 50 states, the District of 
Columbia, and four U.S. territories have adopted structures to 
regulate and supervise the appraisal industry.[Footnote 19] These 
structures typically consist of a state regulatory agency coupled with 
a board or commission to establish education and experience 
requirements (consistent with or in excess of Appraiser Qualifications 
Board criteria), license and certify appraisers, and monitor and 
enforce appraiser compliance. These regulatory agencies generally 
oversee the activities of appraisers for all types of transactions, 
including those that are federally related. 

* Federal financial institutions regulators. Title XI places 
responsibility for regulating appraisals and "evaluations" performed 
in conjunction with federally related transactions with the Federal 
Reserve, FDIC, OCC, and NCUA.[Footnote 20] To meet this 
responsibility, these financial institution regulators have 
established requirements for appraisals and evaluations through 
regulations and have jointly issued Interagency Appraisal and 
Evaluation Guidelines.[Footnote 21] Among other things, appraisals for 
federally related transactions must, at a minimum, provide an estimate 
of market value, conform to USPAP, be in writing, and contain 
sufficient information and analysis to support the institution's 
decision to engage in the transaction. By regulation, loans that 
qualify for sale to a U.S. government agency or U.S. government-
sponsored agency and loans that are wholly or partially insured or 
guaranteed by such agencies are exempt from the appraisal 
requirements.[Footnote 22] In addition, loans that involve residential 
real estate transactions in which the appraisal conforms to Fannie Mae 
or Freddie Mac appraisal standards are exempt from these appraisal 
requirements. Under authority granted by Title XI, the federal 
regulators also have adopted regulations that exempt federally related 
transactions of $250,000 or less from appraisal requirements, meaning 
that the services of a licensed or certified appraiser are not 
required (although an evaluation must be performed).[Footnote 23] The 
regulations provide a similar appraisal exemption for real estate-
secured business loans of $1 million or less that are not dependent on 
the sale of, or rental income derived from, real estate as the primary 
source of repayment.[Footnote 24] The regulations and guidelines also 
specify the types of policies and procedures lenders should have in 
place to help ensure independence and credibility in the valuation 
process. Additionally, the federal regulators have developed 
procedures for examining the real estate lending activities of 
regulated institutions that include steps for assessing the 
completeness, adequacy, and appropriateness of these institutions' 
appraisal and evaluation policies and procedures. 

* Appraisal Subcommittee. ASC has responsibility for monitoring the 
implementation of Title XI by the private, state, and federal entities 
discussed previously. Among other things, ASC is responsible for (1) 
monitoring and reviewing the practices, procedures, activities, and 
organizational structure of the Appraisal Foundation--including making 
grants to the Foundation in amounts that it deems appropriate to help 
defray costs associated with its Title XI activities; (2) monitoring 
the requirements established by the states and their appraiser 
regulatory agencies for the certification and licensing of appraisers; 
(3) monitoring the requirements established by the federal financial 
institutions regulators regarding appraisal standards for federally 
related transactions and determinations of which federally related 
transactions will require the services of state-licensed or -certified 
appraisers; and (4) maintaining a national registry of state-licensed 
and -certified appraisers who may perform appraisals in connection 
with federally related transactions.[Footnote 25] Among other 
responsibilities and authorities, the Dodd-Frank Act requires ASC to 
implement a national appraiser complaint hotline and provides ASC with 
limited rulemaking authority. ASC provides an annual report to 
Congress on its activities and financial status in the preceding year. 
For fiscal year 2010, ASC reported total expenses (including grants to 
the Appraisal Foundation) of approximately $3.6 million. 

Some 20 years after the passage of Title XI, questions remain about 
oversight of the appraisal industry and the quality of appraisals. 
Although the federal financial institutions regulators have had 
guidance since the 1990s to help ensure the independence of 
appraisers, during the mid-2000s, some appraisers reported that loan 
officers and mortgage brokers pressured them to overvalue properties 
to help secure mortgage approvals. An investigation into allegations 
about a major lender's role in pressuring appraisers led to questions 
about what the enterprises, which had purchased many of the lender's 
mortgages, had done to ensure that the appraisals for the mortgages 
met the enterprises' requirements. A key outcome of that investigation 
was the enterprises' adoption of the Home Valuation Code of Conduct 
(HVCC), which set forth appraiser independence requirements for 
mortgages sold to the enterprises. Although the Dodd-Frank Act 
declared HVCC no longer in effect, it codified several of HVCC's 
provisions, and the enterprises have incorporated many of the other 
provisions into their requirements. As we reported in July 2011, 
appraiser independence requirements and other factors have increased 
the use of Appraisal Management Companies (AMC).[Footnote 26] Some 
appraisal industry participants are concerned that some AMCs may 
prioritize low costs and quick completion of assignments over 
appraiser competence, with negative consequences for appraisal 
quality. Moreover, according to the FBI, appraisal fraud--the 
deliberate overstatement or understatement of a home's appraised 
value--is an ongoing concern. Of the 817 mortgage fraud cases the FBI 
closed from the fourth quarter of fiscal year 2010 through the third 
quarter of fiscal year 2011, 92 involved appraisal fraud.[Footnote 27] 

Several Weaknesses Have Potentially Limited ASC's Effectiveness in 
Performing Its Title XI Functions: 

ASC has been performing its monitoring role under Title XI, but 
several weaknesses have potentially limited its effectiveness. In 
particular, ASC has not fully developed appropriate policies and 
procedures for monitoring state appraiser regulatory agencies, the 
federal financial institutions regulators, and the Appraisal 
Foundation. As part of its monitoring role, ASC also maintains a 
national registry of appraisers, which includes data on state 
disciplinary actions. 

ASC Has Improved State Compliance Reviews, but Its Enforcement Tools 
and Reporting Procedures Have Been Limited: 

ASC has improved its reviews of state compliance with Title XI, but 
its enforcement tools and procedures for reporting compliance levels 
have been limited. ASC has detailed policies and procedures for 
monitoring state appraiser regulatory programs and has issued 10 
policy statements covering different aspects of states' implementation 
of Title XI requirements. The policy statements cover topics including 
submission of data to the national registry, license reciprocity 
(enabling an appraiser certified or licensed in one state to perform 
appraisals in other states), and programs for enforcing appraiser 
qualifications and standards. For example, Statement 6 states that 
license reciprocity agreements should contain certain characteristics, 
such as recognizing and accepting successfully completed continuing 
education courses taken in the appraiser's home state. Statement 10 
sets forth guidelines for enforcing Appraiser Qualifications Board 
criteria for appraiser certification and complaint resolution. The 
policy statements are designed to assist states in continuing to 
develop and maintain appropriate organizational and regulatory 
structures for certifying, licensing, and supervising real estate 
appraisers. These statements reflect the general framework that ASC 
uses to review a state's program for compliance with Title XI. ASC 
staff told us that they had initiated actions to update the policy 
statements to reflect Appraisal Standards Board changes to USPAP, 
modifications to Appraiser Qualifications Board criteria, emerging 
issues identified through state compliance reviews, and provisions in 
the Dodd-Frank Act. 

Apart from the policy statements, however, ASC has functioned without 
regulations and enforcement tools that could be useful in promoting 
state compliance with Title XI. Prior to the Dodd-Frank Act, Title XI 
did not give ASC rulemaking authority and provided it with only one 
enforcement option. ASC's policy statements on specific elements of 
Title XI take the form of policies rather than regulations, which may 
limit ASC's leverage over states that are not in compliance. As 
discussed later in this report, the Dodd-Frank Act provides ASC with 
limited rulemaking authority. Prior to the Dodd-Frank Act, the only 
enforcement action ASC could take under Title XI was to "derecognize" 
a state's appraiser regulatory program, which would prohibit all 
licensed or certified appraisers from that state from performing 
appraisals in conjunction with federally related transactions. ASC has 
never derecognized a state, and ASC officials told us that using this 
sanction would have a devastating effect on the real estate markets 
and financial institutions within the state. 

While ASC has until recently had limited enforcement tools, it has had 
a number of tools to encourage state programs to comply with the 
policy statements and therefore Title XI requirements (see table 1). 
ASC's primary tools for monitoring the states are routine and follow-
up compliance reviews, which are performed on site by ASC's four 
Policy Managers. These reviews are designed to encourage adherence to 
Title XI requirements by identifying any instances of noncompliance or 
"areas of concern" and recommending corrective actions.[Footnote 28] 
ASC conveys its findings and recommendations to states through written 
reports. Examples of areas covered by the reviews include timeliness 
in resolving complaints about appraiser misconduct or wrongdoing; 
degree to which education courses are consistent with Appraiser 
Qualifications Board criteria; adequacy of state statutes and 
regulations on certifying and licensing appraisers; timeliness and 
completeness of data submissions to the national registry and 
remittance of national registry fees; and validation of documentation 
supporting appraiser education and experience.[Footnote 29] ASC 
supplements the compliance reviews with "priority contact visits" on 
an as-needed basis and off-site monitoring performed continuously. 

Table 1: ASC's Tools for Monitoring State Compliance with Title XI 
Requirements: 

Monitoring tool: Routine compliance reviews; 
Description: Full on-site reviews of state appraiser regulatory 
programs; 
Frequency: Every 2 years or annually if ASC determines that a state 
needs closer monitoring. 

Monitoring tool: Follow-up compliance reviews; 
Description: On-site reviews focused on areas of noncompliance 
identified during routine compliance reviews; 
Frequency: 6 to12 months after previous compliance review. 

Monitoring tool: Priority contact visits; 
Description: On-site visits, usually to states with large populations 
of appraisers, to discuss potentially problematic emerging issues and 
maintain a close working relationship with the state agency; 
Frequency: As-needed. 

Monitoring tool: Off-site monitoring; 
Description: Telephone or e-mail contacts with state agencies 
regarding emerging compliance issues and progress in addressing 
previously identified issues; 
Frequency: Continuous. 

Source: ASC. 

[End of table] 

ASC has enhanced its compliance review process over the years and uses 
a risk-based monitoring approach. For example, in 2006, ASC increased 
the frequency of its routine compliance reviews from once every 3 
years to once every 2 years. In recent years, this schedule has 
resulted in 26 to 32 reviews annually. According to ASC staff, 
concerns with several states' appraiser regulatory programs prompted 
the change, which has enabled ASC to identify and address compliance 
problems in a more timely way. In January 2009, ASC modified its 
review process by allowing states to respond to preliminary findings 
before a compliance review report is issued to a state and publicly 
released on ASC's website. ASC considers the state's response, which 
can include comments and corrective actions, in finalizing the report. 
That same year, ASC revised the format of the reports to convey 
findings in a more concise and structured way. According to one ASC 
board member, the new format has improved the consistency of ASC's 
reporting. Consistent with ASC's monitoring policies, our review of 
ASC's records from 2007 through 2010 indicated that ASC reviewed 
states it had designated as higher risk more frequently than other 
states. As previously noted, ASC reviews most states on a 2-year 
cycle; however, it may move a state to a 1-year cycle if prior reviews 
or contacts have found serious Title XI noncompliance or raised 
concerns about the risk of future noncompliance.[Footnote 30] During 
the 4-year period we examined, ASC conducted 1-year reviews of 12 
states due to the seriousness of their compliance problems or state 
resource challenges that increased the risk of noncompliance. For 
example, a 2007 review of one state cited four instances of 
noncompliance and emphasized long-standing deficiencies in the state's 
process for investigating and resolving complaints as the primary 
reason for the 1-year review cycle. ASC staff also conducted a 
priority contact visit to this state within 10 months of the 2008 
compliance review. 

As shown in table 2, results of state compliance reviews from calendar 
years 2007 through 2010 identified areas in which noncompliance 
findings were numerous and others in which noncompliance was less 
common. Over that period, ASC reported 69 findings of state 
noncompliance with enforcement requirements such as those related to 
complaint processing; 59 findings of noncompliance with requirements 
for appraiser application processing; and 30 findings of noncompliance 
with requirements for statutes, regulations, policies, and procedures. 
The number of noncompliance findings concerning enforcement was fairly 
consistent during the 4-year period. Most of these findings were due 
to some states' failure to investigate and resolve complaints about 
appraisers in a timely manner, an area of long-standing concern in 
several states. For example, a 2010 compliance review report noted 
that ASC had cited a state for untimely investigation and resolution 
of complaints in every review since 2000. Noncompliance findings in 
the application process category encompassed a range of shortcomings 
in ensuring that approved applicants met Appraiser Qualifications 
Board criteria. For example, in a 2008 report, ASC cited a state for 
issuing certified appraiser credentials to individuals who lacked 
proper experience and noted that three previous reviews had made the 
same finding. State appraiser regulatory agencies--which are funded at 
the state level--have reported resource limitations as a key 
impediment in carrying out their Title XI responsibilities. 
Specifically, 15 of the 47 state agencies that responded to our survey 
indicated that their funding was inadequate to carry out their 
statutory responsibilities.[Footnote 31] From 2007 through 2010, 
noncompliance was less common in the remaining four areas--temporary 
practice, national registry, reciprocity, and education.[Footnote 32] 
For example, over the 4-year period, ASC reported no noncompliance 
findings concerning reciprocity and eight concerning education. 

Table 2: Number and Type of Noncompliance Findings Identified in ASC's 
State Compliance Reviews, 2007-2010: 

Year: 2007; 
Type of noncompliance: 
Statutes, regulations, policies and procedures: 4; 
Temporary practice: 11; 
National registry: 7; 
Application process: 23; 
Reciprocity: 0; 
Education: 8; 
Enforcement: 19; 
Total: 72. 

Year: 2008;
Type of noncompliance: 
Statutes, regulations, policies and procedures: 15; 
Temporary practice: 8; 
National registry: 4; 
Application process: 8; 
Reciprocity: 0; 
Education: 0; 
Enforcement: 16; 
Total: 51. 

Year: 2009; 
Type of noncompliance: 
Statutes, regulations, policies and procedures: 7; 
Temporary practice: 0; 
National registry: 1; 
Application process: 19; 
Reciprocity: 0; 
Education: 0; 
Enforcement: 15; 
Total: 42. 

Year: 2010;
Type of noncompliance: 
Statutes, regulations, policies and procedures: 4; 
Temporary practice: 1; 
National registry: 1; 
Application process: 9; 
Reciprocity: 0; 
Education: 0; 
Enforcement: 19; 
Total: 34. 

Total: 
Type of noncompliance: 
Statutes, regulations, policies and procedures: 30; 
Temporary practice: 20; 
National registry: 13; 
Application process: 59; 
Reciprocity: 0; 
Education: 8; 
Enforcement: 69; 
Total: 199. 

Source: GAO analysis of ASC annual reports. 

Note: Prior to 2008, ASC used a broad "compliance" category to report 
certain types of noncompliance findings. Using the more specific 
reporting categories ASC adopted in 2008, we reclassified 35 findings 
reported in 2007 under the "compliance" category as statutes, 
regulations, policies and procedures noncompliance (4 findings); 
application process noncompliance (23 findings); and education 
noncompliance (8 findings). 

[End of table] 

At the completion of each review, ASC executive staff and board 
members deliberate on the findings and place the state into one of 
three broad compliance categories: "in substantial compliance," "not 
in substantial compliance," and "not in compliance". According to ASC, 
"in substantial compliance" applies when there are "no issues of 
noncompliance or no violations of Title XI"; "not in substantial 
compliance" applies when there are "one or more issues of 
noncompliance or violations of Title XI but the concerns do not rise 
to the level of 'not in compliance'"; and "not in compliance" applies 
when "the number, seriousness, and/or repetitiveness of the Title XI 
violations warrant this finding."[Footnote 33] From 2007 through 2010, 
52 states were reviewed at least twice, so any changes in their 
compliance levels during this period can be observed. Over the 4-year 
period, 28 remained in the same category, 19 states moved to a more 
favorable compliance category, and 5 moved to a less favorable 
category.[Footnote 34] Most of the states that moved to a more 
favorable category (17 of 19) went from "not in substantial 
compliance" to "in substantial compliance."[Footnote 35] Of the states 
remaining in the same category, most (22 of 28) were in the "not in 
substantial compliance" category.[Footnote 36] All of the states that 
moved to a less favorable category went from "in substantial 
compliance" to "not in substantial compliance." 

Although ASC has been using the three compliance categories in its 
reports to states and annual reports to Congress (which provide 
aggregate statistics on the number of states in each category), it has 
not included the definitions of the categories in these reports or in 
its compliance review manual or policy and procedures manual.[Footnote 
37] In addition, ASC's definition for "not in compliance" is not clear 
or specific. As discussed earlier, it states only that the category is 
to be used "when the number, seriousness, and/or repetitiveness of the 
violations warrant this finding" and does not elaborate on how these 
factors are weighed or provide examples of situations that would meet 
this definition. These shortcomings are inconsistent with our internal 
control standards, which state that federal agencies should have 
appropriate policies and procedures for each of their activities. 
[Footnote 38] Without clear, disclosed definitions, ASC limits the 
transparency of the state compliance review process and the usefulness 
of information Congress receives to assess states' implementation of 
Title XI. Further, by not incorporating the definitions into its 
compliance review and policy and procedures manuals, ASC increases the 
risk that board members and staff may not interpret and apply the 
compliance categories in a consistent manner. 

ASC Has Not Developed Policies and Procedures for Monitoring the 
Appraisal Requirements of the Federal Financial Institutions 
Regulators: 

Although Title XI charges ASC with monitoring the appraisal 
requirements of the federal financial institutions regulators, ASC has 
not developed policies and procedures for carrying out this 
responsibility. As previously noted, our internal control standards 
state that federal agencies should have appropriate policies and 
procedures for each of their activities.[Footnote 39] While ASC's 
policy manual provides detailed guidance on monitoring state appraiser 
regulatory programs, it does not mention any activities associated 
with monitoring the appraisal requirements of the federal financial 
institutions regulators. Further, ASC officials acknowledged the 
absence of a formal monitoring process. The absence of policies and 
procedures specifying monitoring tasks and responsibilities limits 
accountability for this function and is inconsistent with federal 
internal control standards designed to help ensure effectiveness and 
efficiency in agency operations. 

According to ASC officials, ASC performs this monitoring function 
through informal means, primarily through its board members who are 
employed by the federal financial institutions regulators. They said 
that several ASC board members represent their agencies on an 
interagency appraisal workgroup (not under the auspices of ASC) and 
provide information on agency appraisal policies to ASC staff and the 
other board members.[Footnote 40] ASC officials also told us that the 
federal regulators sometimes seek technical assistance from ASC staff 
on appraisal practices and standards. Minutes from ASC's monthly board 
meetings and ASC's annual reports to Congress indicate that the 
monitoring activities of ASC as a whole have been limited. For 
example, our review of board meeting minutes from 2003 through 2010 
found no instances of the board discussing the appraisal requirements 
of the federal financial regulators.[Footnote 41] Additionally, 
evidence of this monitoring function in ASC's annual reports is 
limited to a summary of any new appraisal requirements issued by the 
federal financial regulators and HUD during the preceding year. 

Stakeholder views differ as to how to interpret the Title XI 
requirement that ASC monitor the requirements established by the 
federal financial institutions regulators with respect to appraisal 
standards.[Footnote 42] Specifically, some ASC board members told us 
that they understand their monitoring role as maintaining an awareness 
of the federal financial regulators' appraisal requirements. Further, 
one ASC board member told us that ASC's monitoring of the federal 
financial regulators was more limited than its monitoring of states 
because (1) board members from the federal financial regulatory 
agencies are knowledgeable of the appraisal requirements of their 
agencies, (2) the federal regulators' interagency process for 
developing appraisal guidelines (in place since 1994) has reduced the 
need for monitoring the consistency of guidelines across agencies, and 
(3) monitoring the states' appraiser requirements requires in-depth 
review of state processes for licensing, certification, and 
enforcement. 

In contrast, some appraisal industry stakeholders and observers have 
proposed a larger ASC role in monitoring the appraisal requirements of 
the federal financial institutions regulators. An ASC board member who 
conducted a review of ASC's operations in 2007 recommended a more 
structured and active monitoring role for ASC. The board member's 
report--which the board never officially adopted--suggested that ASC 
staff could be assigned to keep abreast of federal financial 
regulators' requirements and guidelines; the staff could then assess 
the impact of the requirements on ASC's operations and policies. Under 
this proposed recommendation, ASC staff would annually report the 
results of this work to the ASC board members. Although ASC acted on 
several of the report's administrative proposals, ASC did not adopt 
the recommendation, and minutes from ASC's monthly board meetings do 
not contain discussion of the issue.[Footnote 43] A former General 
Counsel of ASC told us that ASC's monitoring role should include 
critically assessing the adequacy of the federal financial regulators' 
appraisal requirements and evaluating how well the requirements are 
being implemented. He indicated that such assessment might have helped 
federal financial regulators and policymakers address issues such as 
appraiser independence, establishing dollar-based exemptions from 
appraisal requirements, and referral of Title XI violations to state 
agencies.[Footnote 44] A representative of an appraisal industry group 
expressed a similar view and noted that ASC's annual reports did not 
provide substantive analysis or critique of federal appraisal 
requirements. 

However, appraisal industry stakeholders also noted that implementing 
a more expansive interpretation of ASC's monitoring role would pose 
challenges. For example, existing ASC staff may not have the capacity 
to take on additional monitoring responsibilities. According to ASC 
officials, ASC's Policy Managers already spend the large majority of 
their time working on state compliance reviews and have other duties. 
Therefore, adding to these responsibilities could require the addition 
of more staff or reduce the time existing staff spend on monitoring 
the states. Even if ASC staff were able to independently analyze the 
federal regulators' appraisal requirements, the analysis would be 
subject to review by the ASC board, which, because of its composition, 
is not independent from the agencies that ASC is charged with 
monitoring. Board members stated that they were appointed to ASC 
primarily to represent their home agency's views and could not act 
without their agency's approval. Although not within the scope of our 
review, alternative organizational structures for ASC (for example, an 
independent entity within a nonbanking agency) could potentially 
address this limitation, but any benefits would have to be weighed 
against the implications for ASC's operating costs and performance of 
its other monitoring responsibilities. 

ASC Monitors the Appraisal Foundation but Has No Written Policies for 
Determining Whether the Foundation's Grant Activities Are Title XI-
Related: 

As discussed earlier, the Appraisal Foundation is a private not-for-
profit corporation that sponsors independent boards that set standards 
for appraisals and minimum qualification criteria for appraisers. ASC 
approves an annual grant proposal and provides monthly grant 
reimbursements to the Appraisal Foundation to support the Title XI-
related activities of the foundation and its Appraisal Standards Board 
and Appraiser Qualifications Board. The reimbursements cover the 
foundation's incurred costs for activities under the grant. From 
fiscal years 2000 through 2010, ASC provided the foundation over $11 
million in grant reimbursements, or about 40 percent of ASC's 
expenditures over that period. In nominal dollars, the total amounts 
reimbursed each year ranged from a low of about $614,000 in fiscal 
year 2001 to a high of about $1.4 million in fiscal year 2009 (see 
figure 1). 

Figure 1: ASC's Annual Grant Reimbursements to the Appraisal 
Foundation, Fiscal Years 2000-2010: 

[Refer to PDF for image: line graph] 

Nominal dollars in millions: 

Fiscal year 2000: $0.9 million; 
Fiscal year 2001: $0.6 million; 
Fiscal year 2002: $1.0 million; 
Fiscal year 2003: $0.8 million; 
Fiscal year 2004: $0.8 million; 
Fiscal year 2005: $0.9 million; 
Fiscal year 2006: $1.0 million; 
Fiscal year 2007: $1.2 million; 
Fiscal year 2008: $1.3 million; 
Fiscal year 2009: $1.4 million; 
Fiscal year 2010: $1.3 million. 

Source: GAO analysis of ASC data. 

[End of figure] 

ASC's initial grants to the Appraisal Foundation after the enactment 
of Title XI focused on supporting the development of uniform appraisal 
standards and appraiser qualification criteria.[Footnote 45] For 
example, with the support of ASC grant funds, the Appraisal Standards 
Board issued a revision of USPAP in 1990 and the Appraiser 
Qualifications Board issued its original education, experience, and 
examination criteria in 1991. In more recent years, the Appraisal 
Foundation's grant activities have included developing a program to 
approve appraiser education courses, developing state investigator 
training courses, and updating USPAP. The voluntary course-approval 
program is designed to facilitate state approval of appraiser 
education courses submitted by course providers and acts as a national 
clearinghouse of appraisal courses, thereby streamlining the approval 
process for both course providers and states. The state investigator 
training courses were jointly developed and sponsored by the Appraisal 
Foundation and the Association of Appraiser Regulatory Officials with 
the goal of promoting more effective investigation and resolution of 
complaints against appraisers.[Footnote 46] As previously discussed, 
investigation of complaints has been a long-standing weakness for some 
state appraiser regulatory agencies. The training covers topics such 
as planning investigations, interview and investigative techniques, 
and reporting findings and recommendations. 

ASC monitors and reviews the Appraisal Foundation in the following 
four main ways: 

* Review of annual grant proposal. Each year, ASC's Executive Director 
reviews the foundation's annual grant proposal, which details the 
foundation's activities for the upcoming year. The proposal contains a 
statement of work and supporting cost schedules. The Executive 
Director determines whether the proposed activities are Title XI-
related and reasonable. To assess reasonableness, the Executive 
Director applies ASC or General Services Administration criteria for 
consultant, travel, and indirect costs and may request supplemental 
information from the foundation.[Footnote 47] The Executive Director 
then prepares a memorandum summarizing his analysis and 
recommendations and presents it to the ASC board for approval. The ASC 
board reviews the recommendation and asks for additional information 
from the ASC staff or the foundation, as necessary. Additionally, 
foundation staff attend an ASC board meeting to present and answer 
questions about their grant proposal. 

* Review of grant reimbursement requests. ASC reimburses the Appraisal 
Foundation for costs the foundation has incurred in performing grant 
activities. Each month, the Executive Director reviews the 
foundation's grant reimbursement request for Title XI-related costs 
incurred during the previous month. The review focuses on whether the 
requested reimbursement covers grant-related (and hence Title XI-
related) activities and whether the costs are appropriate under the 
grant. The Executive Director prepares a memorandum summarizing his 
analysis and recommendations regarding payment and presents it to the 
ASC board for approval. 

* Third-party review of grant records. ASC contracts with an 
independent audit firm to annually assess, among other things, whether 
the Appraisal Foundation expended grant funds on and charged costs to 
activities allowed in the grant agreement.[Footnote 48] The reviews 
from 2005 through 2010 identified no questionable grant expenditures 
or allocation of costs but noted some minor internal control 
deficiencies. For example, the 2005 review found that payment requests 
for postage, printing, and telephone costs lacked an authorizing 
signature. 

* Attending foundation meetings. ASC staff, usually the Executive 
Director, attend every meeting of the foundation's Board of Trustees, 
Appraisal Standards Board, and Appraiser Qualifications Board. 
[Footnote 49] ASC staff observe the meetings and provide input, as 
appropriate. 

Although ASC monitors the foundation in several ways, ASC lacks 
specific policies and procedures for determining whether grant 
activities are related to Title XI. ASC's policies and procedures 
manual does not address how ASC monitors the Appraisal Foundation. 
Instead, ASC uses monitoring procedures contained in a memorandum 
prepared by a former Executive Director. The memorandum describes how 
he reviewed the foundation's grant activities but does not provide 
criteria for deciding what is Title XI-related. When we asked current 
ASC officials for the criteria they used, they indicated only that ASC 
staff "review submissions from the Foundation and supporting cost 
spreadsheets to determine that activities proposed in the annual grant 
request or the monthly reimbursement processes meet the requirements 
of Title XI." They said that once staff determine whether or not a 
submission falls within these parameters, they make a recommendation 
to the ASC board. However, determinations about what activities are 
Title XI-related are not always clear-cut. For example, in 2003, the 
Executive Director at the time recommended that the foundation be 
reimbursed for certain legal expenses in connection with a complaint 
filed with the foundation's ethics committee. However, the ASC board 
rejected the reimbursement request because the expenses "were not 
sufficiently Title XI-related." ASC's records do not indicate what 
criteria either the Executive Director or the ASC board used as a 
basis for their decisions or why they disagreed. Similarly, our review 
of ASC documents for more recent grants found no supporting 
explanations for decisions about whether grant activities were Title 
XI-related. One ASC board member said the board had a common 
understanding of what activities were eligible for grants but 
acknowledged that the basis for funding decisions could be better 
documented. As previously noted, our internal control standards state 
that federal agencies should have appropriate policies for each of 
their activities. Without policies that contain specific criteria, ASC 
increases the risk that its grant decisions will be inconsistent, 
limits the transparency of its decisions, and lacks assurance that it 
is complying with federal internal control standards. 

ASC Maintains a National Registry That Includes Data on State 
Disciplinary Actions: 

ASC maintains a national registry database that contains selected 
information about the nation's state-certified and -licensed real 
estate appraisers. Only state-certified or -licensed appraisers listed 
on the registry as having currently valid certifications or licenses 
(appraiser credentials) are authorized to perform appraisals in 
connection with federally related transactions. As of December 31, 
2010, the national registry showed that there were nearly 110,000 
active appraiser credentials.[Footnote 50] In addition to eligibility 
information, the registry contains information about the number of 
active and inactive licenses, the types of licenses, and any 
disciplinary actions taken by states against appraisers. The registry 
contains both public and nonpublic information--for example, some data 
on disciplinary actions are restricted to authorized representatives 
of state regulatory agencies. Users of the registry--which include 
appraisers, federal and state agencies, financial institutions, and 
consumers--can access it via the Internet. ASC provides instructions 
to states for uploading data to the registry. In addition, ASC charges 
each individual who performs or seeks to perform appraisals in 
conjunction with federally related transactions an annual $25 national 
registry fee, which states collect and forward to ASC. 

According to ASC, the registry is designed to allow users to determine 
(1) whether an appraiser is eligible to perform appraisals in 
conjunction with federally related transactions and (2) whether the 
appraiser has been subject to disciplinary actions such as suspension 
or revocation of credentials. The registry also helps facilitate 
"reciprocity"--that is, allowing appraisers to use credentials from 
their home state to obtain credentials in another state without taking 
examinations or meeting additional requirements--by allowing states to 
determine the status of an appraiser's credentials. Forty-nine of the 
50 state appraiser regulatory agencies that responded to our survey 
said they used the registry to verify that applicants from other 
states are licensed or certified in those states, and 47 of the 50 
said they used the registry to find out if disciplinary actions were 
taken against an appraiser in other states. In addition, financial 
institutions can receive updates via the Internet on revocations, 
suspensions, surrenders, and expirations of appraiser credentials. 

Information contained in the registry comes from the states, which 
must submit appraiser data to ASC at least monthly. In 2010, ASC 
redesigned the registry to, among other things, allow states to report 
data directly into the system rather than forwarding electronic files. 
Thirty-one of our state survey respondents indicated that they 
submitted data more than once per month. The registry has built-in 
edit checks to help ensure the reliability of the data entered into 
the system. Prior to officially updating the registry each day, ASC 
runs validation checks on the states' data. If the validation fails, 
the failure is identified on an exception report reviewed by ASC's 
Information Specialist, who contacts the state for corrected data, as 
necessary.[Footnote 51] Based on data submitted by the states, the 
registry also generates invoices for appraiser registration fees on a 
monthly basis. ASC then forwards the invoices to the states for 
payment. 

From calendar years 2001 through 2010, states reported 15,938 
disciplinary actions to the registry. Over that 10-year period, the 
number of actions reported annually ranged from a low of 830 in 2003 
to a high of 2,471 in 2007 (see figure 2). For the 10 years combined, 
Florida reported the most disciplinary actions (1,480), while three 
states reported none. The types of actions reported by states included 
probation, suspension, and revocation of appraiser credentials, as 
well as fines and additional education. The most common action was a 
fine, and the least common was a downgrade in the appraiser's 
credentials (for example, from certified to licensed). 

Figure 2: State Disciplinary Actions Against Appraisers, Calendar 
Years 2001-2010: 

[Refer to PDF for image: vertical bar graph] 

Number of disciplinary actions: 

Year: 2001: 1,057; 
Year: 2002: 1,024; 
Year: 2003: 830; 
Year: 2004: 1,164; 
Year: 2005: 1,533; 
Year: 2006: 1,758; 
Year: 2007: 2,471; 
Year: 2008: 2,039; 
Year: 2009: 2,256; 
Year: 2010: 1,806. 

Source: GAO analysis of ASC national registry data. 

[End of figure] 

Appendix II contains additional information, including statistics on 
the number of active appraisers by type of credential as of December 
31, 2010, and disciplinary actions reported by each state over the 10-
year period. 

Dodd-Frank Act Provides ASC New Authorities and Presents 
Implementation Challenges: 

The Dodd-Frank Act Expands ASC's Role and Provides New Tools to 
Oversee State Appraiser Regulatory Agencies: 

The Dodd-Frank Act contains 14 provisions that give ASC a number of 
new responsibilities and authorities. We identified 27 tasks 
associated with these provisions, ranging from complex undertakings to 
more straightforward administrative actions. Some of the more complex 
tasks include establishing and maintaining a national appraisal 
complaint hotline, making grants to state appraiser regulatory 
agencies, and implementing new rulemaking authority and enforcement 
tools. The act includes several other tasks such as encouraging states 
to accept appraisal courses approved by the Appraiser Qualifications 
Board and to establish policies for issuing reciprocal licenses or 
certifications to qualified appraisers from other states. As of 
October 2011, ASC had completed several tasks that required no 
rulemaking or creation of new programs and was in various stages of 
progress on the others. Appendix IV provides a summary of all 27 tasks 
and their status as of October 2011. 

National Hotline: 

The Dodd-Frank Act requires ASC to determine whether a national 
hotline exists that receives complaints of noncompliance with 
appraisal independence standards and USPAP, including complaints from 
appraisers, individuals, or other entities concerning the improper 
influencing or attempted improper influencing of appraisers or the 
appraisal process. ASC completed this task in January 2011, within the 
statutory deadline, and reported that no such hotline currently 
existed. 

The Dodd-Frank Act also requires ASC to establish and operate such a 
national hotline, including a toll-free telephone number and an e-mail 
address, if it determined that one did not already exist. 
Additionally, the act requires ASC to refer hotline complaints to 
appropriate governmental bodies for further action. ASC has not fully 
addressed this requirement but has researched how other agencies 
operate hotlines and make complaint referrals. ASC officials told us 
that the hotline would require significant staff and funds and that 
they were exploring options for implementing it, including hiring a 
contractor. 

Appraisal industry stakeholders we spoke with identified a number of 
potential challenges in establishing and operating a hotline. They 
noted that creating and maintaining a hotline could be costly because 
it will likely require investments in staff and information technology 
to fully ensure that calls are properly received, screened, tracked, 
and referred to appropriate regulatory agencies. Stakeholders 
indicated that screening calls would be a critical and challenging 
task because frivolous complaints could overwhelm the system and 
identifying valid complaints would require knowledge of USPAP. Some 
stakeholders we spoke with expressed concern about consumers using the 
hotline simply to report disagreement with an appraiser's valuation 
instead of to report USPAP violations, concerns about appraiser 
independence, or potential fraud. Some appraisers said that frivolous 
consumer complaints could hurt an appraiser's ability to get future 
appraisal assignments, while federal financial regulatory officials 
said that frivolous complaints from appraisers against lenders could 
lead to costly and time-consuming investigations. Additionally, 
industry stakeholders noted that the hotline would only have value if 
valid complaints were followed up and resolved but pointed out that 
some states lack the resources to handle their existing volume of 
complaints. Further, stakeholders said that deciding which regulatory 
entities should receive complaint referrals could be difficult in some 
cases and that differing state requirements for complaints (such as 
forms, procedures, and standards) could complicate the referral 
process. [Footnote 52] 

Nonetheless, appraisal industry stakeholders told us they believed 
that the hotline would offer several benefits. These included giving 
appraisers a central place to report when they feel they are being 
pressured, providing a conduit to forward complaints to appropriate 
entities, promoting the development of more uniform complaint and 
complaint follow-up procedures, and providing ASC with information 
that could be useful for its state and appraiser enforcement efforts. 
Among the state appraiser regulatory agencies we surveyed, views on 
establishing a hotline varied. For example, 13 of the 50 states 
responded that the hotline would improve their ability to regulate the 
appraisal industry in their state, while 9 viewed it as a hindrance. 
Of the remaining 28 respondents, 13 thought it would neither help nor 
hinder, 12 did not know, 2 commented on the potential for frivolous 
complaints, and 1 did not respond. Additionally, 25 of the 50 states 
responded that the establishment of a hotline would increase the 
number of complaints they received. 

Grants to State Regulatory Agencies: 

The Dodd-Frank Act requires ASC to make grants to state appraiser 
regulatory agencies to support these agencies' compliance with Title 
XI, including processing and investigating complaints, enforcement 
activities, and submission of data to the national registry.[Footnote 
53] As previously noted, timely investigation and resolution of 
complaints has been a persistent problem for a number of states. Most 
of the state appraiser regulatory agencies we surveyed expressed 
interest in applying for ASC grants once the program is implemented. 
Specifically, 34 of the 50 states responding to our survey indicated 
they would likely apply for a grant, while 8 said they were unlikely 
to do so, and 3 said they were neither likely nor unlikely to do so. 
[Footnote 54] States cited activities related to enforcement and 
complaints--such as training for prosecutors and investigation of 
complaints--as the most likely potential uses of grant funds. Other 
potential uses cited by states included technological improvements for 
submitting data to the national registry and hiring appraiser 
licensing staff. 

While generally supportive of the grant program, appraisal industry 
stakeholders and ASC officials we spoke with noted several potential 
hurdles. Several stakeholders raised concerns about whether ASC had 
adequate resources to fund grants or sufficient expertise in grant 
administration and oversight. For example, officials from one 
appraisal industry group noted that ASC's grant resources could be 
spread thin if numerous states apply and that states may not find 
small grants to be worthwhile. ASC officials said they were unsure 
whether a planned increase in the national registry fee--from $25 to 
$40 per appraiser credential, effective January 2012--would be 
adequate to fund the grants and oversee them, especially in light of 
recent declines in the number of appraisers.[Footnote 55] They also 
indicated that they would likely need to hire a grants specialist and 
an accountant to properly administer the grant program. 

Additionally, appraisal industry stakeholders cited challenges that 
ASC could face in designing the grant program and the decisions it 
will need to make. Some noted the challenge of designing grant 
eligibility and award criteria that (1) do not reward states that have 
weak appraiser regulatory programs because they use appraisal-related 
fee revenues (from state appraiser licensing and exam fees, for 
example) for purposes other than appraiser oversight and (2) will not 
create incentives for states to use less of their own resources for 
regulation of appraisers.[Footnote 56] They noted that some states 
direct (or "sweep") appraisal-related revenues into the state's 
general fund, which, in some cases may contribute to underfunding of 
the state's appraiser regulatory agency. Twenty-six of the 50 state 
agencies that responded to our survey reported that their state 
government had the authority to sweep revenues collected by the agency 
into the state's general fund, and 19 of these 26 indicated that their 
state had exercised this authority.[Footnote 57] In addition, 
stakeholders had a range of views on what the grant award criteria 
should include. For example, some suggested flexible grants based on 
the number of complaints or the number of appraisers in a state. 
However, others, including an ASC board member, said that the grants 
should target specific, well-defined initiatives to help ensure that 
funds are used appropriately. The board member pointed to state 
investigator training funded through ASC grants to the Appraisal 
Foundation as an example of such an initiative. States responding to 
our survey identified other possible funding criteria, including the 
extent to which a state had established appropriate performance 
benchmarks and the state's past efforts to address compliance 
deficiencies. 

Rulemaking Authority and Enforcement Tools: 

The Dodd-Frank Act also gives ASC the authority to prescribe 
regulations in four areas: temporary practice, the national registry, 
information sharing, and enforcement.[Footnote 58] For purposes of 
prescribing regulations, the act requires ASC to establish an advisory 
committee of industry participants, including appraisers, lenders, 
consumer advocates, real estate agents, and government agencies, and 
hold meetings as necessary to support the development of regulations. 
Although ASC already has policy statements covering the four areas, 
appraisal industry stakeholders and ASC officials indicated that 
regulations could be expected to strengthen ASC's leverage over states 
to comply with Title XI. In addition, ASC officials noted that 
rulemaking authority would allow them to establish mandatory state 
reporting requirements and provide them additional administrative 
options to address state noncompliance. However, as of October 2011, 
ASC had not established an advisory committee or drafted any 
regulations. ASC officials told us that these tasks were still in the 
early planning stage. 

In addition to the rulemaking authority, the Dodd-Frank Act expands 
ASC's enforcement tools. As previously discussed, ASC's only 
enforcement option prior to the act was derecognition of a state's 
appraiser regulatory program. The act gives ASC the authority to 
remove a state-licensed or -certified appraiser or a registered AMC 
from the national registry on an interim basis, not to exceed 90 days, 
pending state agency action on licensing, certification, registration, 
and disciplinary proceedings. It also authorizes ASC to impose 
(unspecified) interim actions and suspensions against a state agency 
as an alternative to, or in advance of, the derecognition of the 
agency.[Footnote 59] Many appraisal industry stakeholders we spoke 
with supported ASC's new authorities because they will allow ASC to 
take a more flexible, targeted approach to enforcement. 

ASC has yet to implement these authorities and will face a number of 
decisions and challenges in doing so. ASC officials told us they would 
use their new rulemaking authority to promulgate regulations for 
removing an appraiser from the national registry. As part of the 
rulemaking, ASC officials said they plan to develop criteria for 
circumstances that warrant removal as well as due process procedures. 
Several appraisers we spoke with stressed the importance of having a 
process that will allow them to defend themselves prior to a removal 
action.[Footnote 60] Officials from state bank regulatory agencies 
told us that ASC may face challenges in collecting sufficient 
documentary evidence to justify removing an appraiser from the 
national registry because evidence collection is resource intensive. 
ASC officials said that determining the interim actions and 
suspensions they would take against state agencies also would be done 
through rulemaking, which can be a time-consuming process. Officials 
from several state appraiser regulatory agencies said that for such 
actions to be effective, they should be directed to higher levels of 
state government because the agencies have limited authority to make 
resource decisions or implement major changes. For example, some state 
appraiser regulatory agencies report to other agencies that control 
budget and policy decisions. 

ASC Faces Resource Challenges and Is Developing a Strategic Plan: 

ASC confronts the challenge of implementing the tasks associated with 
the Dodd-Frank Act with limited resources. As previously noted, ASC 
has a small staff and, in recent years, its revenues have declined 
while its expenses have grown. ASC has 10 staff members, including an 
Executive Director, a Deputy Executive Director, a General Counsel, 4 
Policy Managers, an Information Management Specialist, and 2 
Administrative Officers. 

ASC's revenues--which come exclusively from national registry fees--
rose (in nominal dollars) from $2.2 million in fiscal year 2000 to a 
peak of $3.2 million in fiscal year 2007 but declined to $2.8 million 
in fiscal year 2010 (see figure 3). According to ASC officials, 
revenue from registry fees allowed ASC to carry out its Title XI 
responsibilities and accumulate approximately $6 million in reserves 
by fiscal year 2008. However, since 2007, the number of appraiser 
credentials in the registry has declined each year, causing ASC's 
revenues to shrink. Pursuant to a Dodd-Frank Act provision, ASC 
increased its registry fee from $25 to $40 (a 60 percent increase) 
effective January 2012, which will likely increase ASC's revenues. 
[Footnote 61] However, because the number of appraisers has been 
declining--by about 9.4 percent from 2007 through 2010--the fee 
increase may not result in a proportional rise in revenue.[Footnote 
62] To illustrate, ASC's revenue in 2014 would be about $4.4 million 
if the number of appraiser credentials stayed at 2010 levels but would 
be about $4.0 million if the number of appraiser credentials fell by 
another 9.4 percent from 2011 through 2014.[Footnote 63] Although the 
Dodd-Frank Act also authorized ASC to collect registry fees from AMCs, 
revenues from this source may not be available for several years 
because regulations for AMC registration must be developed and 
implemented first.[Footnote 64] 

Figure 3: ASC Revenues and Expenses, Fiscal Years 2000-2010: 

[Refer to PDF for image: multiple line graph] 

Nominal dollars in millions: 

Fiscal year: 2000; 
Revenue: $2.2 million; 
Total expenses: $2.2 million; 
Reserve: $3.3 million. 

Fiscal year: 2001; 
Revenue: $2.2 million; 
Total expenses: $1.8 million; 
Reserve: $3.7 million. 

Fiscal year: 2002; 
Revenue: $2.3 million; 
Total expenses: $2.3 million; 
Reserve: $3.7 million. 

Fiscal year: 2003; 
Revenue: $2.3 million; 
Total expenses: $2.0 million; 
Reserve: $3.9 million. 

Fiscal year: 2004; 
Revenue: $2.5 million; 
Total expenses: $2.1 million; 
Reserve: $4.3 million. 

Fiscal year: 2005; 
Revenue: $2.8 million; 
Total expenses: $2.2 million; 
Reserve: $4.9 million. 

Fiscal year: 2006; 
Revenue: $2.8 million; 
Total expenses: $2.4 million; 
Reserve: $5.3 million. 

Fiscal year: 2007; 
Revenue: $3.2 million; 
Total expenses: $2.7 million; 
Reserve: $5.8 million. 

Fiscal year: 2008; 
Revenue: $3.2 million; 
Total expenses: $3.0 million; 
Reserve: $6.0 million. 

Fiscal year: 2009; 
Revenue: $3.1 million; 
Total expenses: $3.5 million; 
Reserve: $5.6 million. 

Fiscal year: 2010; 
Revenue: $2.8 million; 
Total expenses: $3.6 million; 
Reserve: $4.8 million. 

Source: GAO analysis of ASC data. 

[End of figure] 

As shown in figure 3, ASC's total expenses in nominal dollars 
increased from $2.2 million in fiscal year 2000 to $3.6 million in 
fiscal year 2010. ASC's total expenses include operating expenses and 
grants to the Appraisal Foundation, both of which rose over that 
period. Operating expenses grew from $1.3 million in fiscal year 2000 
to $2.3 million in fiscal year 2010, primarily due to an increase in 
personnel and administrative costs for conducting more frequent state 
compliance reviews. Grants to the Appraisal Foundation grew from 
$916,000 in fiscal year 2000 to $1.3 million in fiscal year 2010, 
partly to fund state investigator training courses. In fiscal years 
2009 and 2010, ASC's expenses exceeded its revenues by $380,581 and 
$782,046, respectively. ASC used reserve funds to cover these amounts, 
reducing the reserve to $4.8 million by the end of fiscal year 2010. 

In light of these resource and implementation challenges, ASC 
officials began developing a strategic plan in May 2011 that 
encompasses both its existing activities and its new responsibilities 
and authorities under the Dodd-Frank Act. ASC also developed a more 
limited project plan that focuses specifically on tasks and milestones 
stemming from the act. According to an ASC board member, ASC did not 
previously have a strategic plan, due partly to stability in its 
functions over the years. The board member said that the new 
responsibilities contained in the Dodd-Frank Act prompted them to 
undertake a full strategic planning effort. ASC officials told us that 
they hoped to complete the plan by the end of 2011. 

ASC officials told us that their strategic plan would include a 
mission statement and goals but did not provide specific information 
about the expected contents of their plan. Although ASC is not subject 
to the GPRA Modernization Act of 2010 (GPRAMA)--which amends the 
Government Performance and Results Act of 1993 (GPRA)--ASC officials 
told us that their plan would include GPRAMA's general components. 
[Footnote 65] GPRAMA provides federal agencies with an approach to 
focusing on results and improving government performance by, among 
other things, developing strategic plans. Examples of GPRAMA plan 
components include a comprehensive agency mission statement; general 
goals and objectives, including outcome-oriented goals; and a 
description of how the goals and objectives are to be achieved, 
including the processes and resources required. 

Most Recent Mortgages Were Below the Threshold for Appraisal 
Exemption, and Stakeholder Views on the Threshold Vary: 

Our analysis of HMDA data found that approximately 71 percent of first-
lien mortgages for single-family (one-to four-unit) homes originated 
from calendar years 2006 through 2009 were less than or equal to 
$250,000--the regulatory threshold at or below which appraisals are 
not required for federally related transactions[Footnote 66]. As shown 
in figure 4, the percentage varied little by origination year, ranging 
from a low of 69 percent in 2006 to a high of 73 percent in 200 
[Footnote 67]8. For all four years combined, 41 percent of the 
mortgages were $150,000 or less, and 30 percent were from $150,001 to 
$250,000. For the same 4-year period, we found that about 22 percent 
of mortgages for residential multifamily structures were at or below 
the $250,000 threshold, as were about 98 percent of mortgages for 
manufactured housing[Footnote 68]. 

Figure 4: Percentage of First-Lien Mortgages for Single-Family Homes 
Above and Below $250,000, 2006-2009 Originations: 

[Refer to PDF for image: stacked horizontal bar graph] 

Year: 2006; 
Mortgages $150,000 or less: 41%; 
Mortgages $150,0010 to $250,000: 28%; 
Mortgages more than $250,000: 30%. 

Year: 2007; 
Mortgages $150,000 or less: 41%; 
Mortgages $150,0010 to $250,000: 29%; 
Mortgages more than $250,000: 30%. 

Year: 2008; 
Mortgages $150,000 or less: 43%; 
Mortgages $150,0010 to $250,000: 30%; 
Mortgages more than $250,000: 27%. 

Year: 2009; 
Mortgages $150,000 or less: 40%; 
Mortgages $150,0010 to $250,000: 32%; 
Mortgages more than $250,000: 28%. 

Source: GAO analysis of HDMA data. 

Note: Figure excludes mortgages for manufactured homes. 

[End of figure] 

The proportions of mortgages originated from 2006 through 2009 that 
were below the threshold varied considerably by state. The percentage 
of first-lien mortgages for single-family homes that were less than or 
equal to $250,000 ranged from a low of 32 percent in California and 
Hawaii to a high of 95 percent in North Dakota. Two states, New Mexico 
and South Carolina, represented the median percentage of 82 percent 
(see figure 5.) The only places in which more than half of the 
mortgage originations were greater than $250,000 were California, the 
District of Columbia, and Hawaii. In states that experienced some of 
the steepest declines in house prices during the 4 years we examined, 
the proportion of annual mortgage originations that fell below the 
threshold increased substantially over the period. For example, the 
proportion rose 25 percentage points in Nevada, 17 percentage points 
in California, and 8 percentage points in both Arizona and Florida. 
[Footnote 69] 

Figure 5: Percentage of First-Lien Mortgages for Single-Family Homes 
at or Below $250,000 by State, 2006-2009 Originations Combined: 

[Refer to PDF for image: vertical bar graph] 

State: North Dakota: 95%. 

State: Oklahoma: 93%. 

State: Iowa: 92%. 

State: Nebraska: 92%. 

State: Indiana: 92%. 

State: Arkansas: 92%. 

State: Mississippi: 92%. 

State: Kentucky: 91%. 

State: South Dakota: 91%. 

State: Ohio: 90%. 

State: West Virginia: 90%. 

State: Puerto Rico: 90%. 

State: Kansas: 90%. 

State: Louisiana: 89%. 

State: Missouri: 89%. 

State: Michigan: 89%. 

State: Alabama: 88%. 

State: Tennessee: 88%. 

State: Wisconsin: 87%. 

State: Texas: 87%. 

State: Wyoming: 84%. 

State: Maine: 84%. 

State: Idaho: 84%. 

State: Pennsylvania: 84%. 

State: Montana: 82%. 

State: Vermont: 82%. 

State: South Carolina: 82%. 

State: New Mexico: 82%. 

State: Georgia: 82%. 

State: North Carolina: 82%. 

State: Minnesota: 79%. 

State: Utah: 77%. 

State: Florida: 74%. 

State: Arizona: 73%. 

State: Illinois: 72%. 

State: New Hampshire: 72%. 

State: Delaware: 71%. 

State: Alaska: 69%. 

State: Rhode Island: 69%. 

State: Colorado: 69%. 

State: Oregon: 68%. 

State: Connecticut: 63%. 

State: Nevada: 63%. 

State: Virginia: 61%. 

State: Washington: 57%. 

State: New York: 55%. 

State: Maryland: 54%. 

State: Massachusetts: 52%. 

State: New Jersey: 50%. 

State: District of Columbia: 38%. 

State: California: 32%. 

State: Hawaii: 32%. 

Source: GAO analysis of HDMA data. 

Note: Figure excludes mortgages for manufactured homes. 

[End of figure] 

Despite the sizable proportion of residential mortgages at or below 
$250,000, the threshold has had limited impact in recent years on the 
percentage of mortgages with an appraisal because mortgage lenders, 
investors, and insurers generally require them for mortgages, 
regardless of amount. Due to the sharp contraction of the private 
mortgage market that began in 2007, the large majority of mortgage 
originations are currently purchased or insured by the enterprises and 
HUD's Federal Housing Administration (FHA), which require appraisals 
on most mortgages.[Footnote 70] In 2010, enterprise-backed mortgages 
accounted for more than 65 percent of the market and FHA-insured 
mortgages accounted for about 20 percent.[Footnote 71] As we reported 
in July 2011, data for the two enterprises combined showed that they 
required appraisals for 85 percent of the mortgages they bought in 
2010 and 94 percent of the mortgages they bought in 2009 that were 
underwritten using their automated underwriting systems.[Footnote 72] 
FHA requires appraisals for all of the home purchase mortgages and 
most of the refinance mortgages it insures. Furthermore, lender 
valuation policies may exceed investor or insurer requirements in some 
situations. For example, lender risk-management policies may require 
the lender to obtain an appraisal even when the enterprises do not, or 
the lender may obtain an appraisal to better ensure that the mortgage 
complies with requirements for sale to either of the enterprises. 

The $250,000 threshold could become more consequential if the roles of 
the enterprises and FHA are scaled back in the future. The 
administration and Congress are considering options that would 
diminish the federal role in mortgage finance and help transition to a 
more privatized market by winding down the enterprises and reducing 
the size of FHA.[Footnote 73] If this were to occur, the proportion of 
mortgage originations not subject to the appraisal requirements of 
these entities could increase. If private investors and insurers were 
to impose less stringent appraisal requirements than the enterprises 
or FHA, more mortgages of $250,000 or less may not receive an 
appraisal. However, whether the private market will require appraisals 
for mortgages below the threshold is unclear at this time. 

Appraisal Industry Stakeholders Have Differing Views on Revising the 
Exemption Thresholds: 

The perspectives of appraisal industry stakeholders we spoke with--
including appraisers, lenders, and federal and state regulators--did 
not provide a consensus view on whether or how the $250,000 threshold 
or the $1 million threshold that applies to real estate-secured 
business loans should be revised. Although no stakeholders advocated 
higher thresholds, a number recommended lowering or eliminating them, 
while others thought no changes were necessary. In addition, some 
stakeholders suggested alternatives to fixed, national dollar 
thresholds. 

Appraiser industry groups, lending industry representatives, and some 
of the state regulators we contacted said that the appraisal exemption 
thresholds should be lower, in part to help manage the risk assumed by 
lending institutions. For example, 14 of the 50 state appraiser 
regulatory agencies that responded to our survey indicated that the 
$250,000 threshold should be lowered to either $50,000 or $100,000. 
Several of the parties we spoke with pointed out that the median sales 
price of homes in the United States is below $250,000, which exempts 
numerous mortgage transactions from regulatory appraisal requirements. 
An NCUA official noted that in large numbers, smaller home mortgages 
or business loans can pose the same risks to lending institutions as 
larger ones, so smaller loans should not necessarily be exempt from 
appraisal requirements. Additionally, appraisal industry stakeholders 
indicated that "evaluations" that may be performed as an alternative 
to an appraisal may include methods that are less credible and 
reliable, such as AVMs. These stakeholders acknowledged that while 
appraisal requirements are currently driven by the enterprises and 
FHA, the roles of these entities could change. 

Additionally, while appraisals for residential mortgages are not 
intended to validate the purchase price of the property in question, 
some stakeholders believe that they serve a consumer protection 
function by providing objective information about the market value of 
a property that consumers can use in making buying decisions. One 
appraisal industry representative said this information can help 
homebuyers avoid immediately owing more on a property than the 
property is worth, a situation that can make resale or refinancing 
difficult or cost-prohibitive. The Dodd-Frank Act requires that any 
revisions to the $250,000 threshold take into account consumer 
protection considerations through the concurrence of CFPB.[Footnote 74] 

Other appraisal industry stakeholders, including some state appraiser 
and bank regulatory officials, felt that the appraisal thresholds 
should remain where they are. For example, 17 of the 50 state 
appraiser regulatory agencies that responded to our survey indicated 
that the $250,000 threshold should not be changed. A few of these 
stakeholders stated that lowering the threshold would potentially 
require more homebuyers to pay for appraisals, which are generally 
more expensive than other valuation methods. For example, according to 
mortgage industry participants, a typical appraisal can cost a 
consumer $300 to $450 on average, while a property valuation by an AVM 
can cost $5 to $25.[Footnote 75] In addition, one appraisal industry 
participant said that lower thresholds could subject more real estate-
related transactions for which an appraisal is not necessary to 
appraisal requirements. For example, he indicated that when the 
property in question is collateral for a loan that is much less than 
the probable value of the property, a cheaper and faster valuation 
method such as an AVM may be sufficient. An FDIC official said it was 
not clear that the exemption thresholds needed to be revised and noted 
that even for transactions below the thresholds, regulated financial 
institutions are expected to have a risk-based approach that 
determines when they will use an appraisal versus another method. 

Some appraisal industry stakeholders said that changes in real estate 
market conditions and variation in housing markets argued for 
thresholds tied to median property values at the state or regional 
level. For example, some of the respondents to our state survey noted 
that a national $250,000 threshold is largely irrelevant in some areas 
of the country. As previously shown in figure 5, in several states, 
over 90 percent of recent mortgages were $250,000 or less. Some 
stakeholders felt that the thresholds should not be based solely on 
the loan amount and should include other factors that affect credit 
risk, such as the borrower's debt burden. 

Conclusions: 

The critical role of real estate appraisals in mortgage underwriting 
underscores the importance of effective regulation of the appraisal 
industry. Title XI of FIRREA created a complex regulatory structure 
that relies upon the actions of many state, federal, and private 
entities to help ensure the quality of appraisals and the 
qualifications of appraisers used in federally related transactions. 
ASC performs an important function within that structure by, among 
other things, monitoring the requirements and activities of some of 
the key entities--state appraiser regulatory agencies, the federal 
financial institutions regulators, and the Appraisal Foundation. 
Although ASC is carrying out its monitoring function, it has not 
developed appropriate policies and procedures for some of its 
activities, potentially limiting its effectiveness. First, ASC could 
improve how it assesses and reports on states' overall compliance with 
Title XI. Specifically, developing and disclosing clear definitions of 
the compliance categories could help ensure consistent and transparent 
application of the categories and provide more useful information to 
Congress about states' implementation of Title XI. Second, ASC could 
better delineate its role in monitoring the appraisal requirements of 
the federal financial institutions regulators and thereby strengthen 
accountability for this function. Third, ASC could enhance its 
policies for determining which Appraisal Foundation activities are 
eligible for grants to help ensure consistent funding decisions and 
improve the transparency of the grant process. Addressing these areas 
would also improve ASC's compliance with federal internal control 
standards designed to promote the effectiveness and efficiency of 
agency operations. 

Provisions in the Dodd-Frank Act will help ASC carry out its Title XI 
monitoring functions but will also create challenges that will require 
effective long-term planning. The limited rulemaking and enhanced 
enforcement authorities the act provides to ASC address prior 
weaknesses in its ability to promote states' compliance with Title XI. 
Implementing these authorities will involve significant follow-on 
steps, including drafting regulations and developing criteria and 
processes to remove problem appraisers from the national registry. 
Other tasks stemming from the Dodd-Frank Act, such as establishing an 
appraiser hotline and a state grant program, require resources and 
involve difficult decisions. ASC is facing these tasks at a time when 
its costs have been increasing, and its revenues from national 
registry fees have fallen because of a decline in the number of 
appraisers. To help address these challenges, ASC has for the first 
time undertaken a strategic planning process. Although this process 
was not far enough along for us to examine the details of ASC's plan, 
setting goals and identifying processes and resources necessary to 
achieve them could help ASC align its new responsibilities with its 
mission and aid in resource allocation decisions. 

Recommendations for Executive Action: 

To help ensure effective implementation of ASC's Title XI and Dodd-
Frank Act responsibilities and improve compliance with federal 
internal control standards, we recommend that the Chairman of ASC 
direct the ASC board and staff to take the following three actions: 

* clarify the definitions used to categorize states' overall 
compliance with Title XI and include them in ASC's compliance review 
and policy and procedures manuals, compliance review reports to 
states, and annual reports to Congress; 

* develop specific policies and procedures for monitoring the 
appraisal requirements of the federal financial institutions 
regulators and include them in ASC's policy and procedures manual; and: 

* develop specific criteria for assessing whether the grant activities 
of the Appraisal Foundation are Title XI-related and include these 
criteria in ASC's policy and procedures manual. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to ASC, CFPB, FDIC, the Federal 
Reserve, FHFA, HUD, NCUA, and OCC for their review and comment. We 
received written comments from the Chairman, ASC; the Assistant 
Director for Mortgage Markets, CFPB; the Executive Director, NCUA; and 
the Acting Comptroller of the Currency, which are reprinted in 
appendixes V through VIII. We also received technical comments from 
FDIC, the Federal Reserve, and OCC, which we incorporated where 
appropriate. FHFA and HUD did not provide comments on the draft report. 

In their written comments, ASC, NCUA, and OCC agreed with our 
recommendations. ASC noted that it had already taken preliminary 
actions to address our recommendations and would consider the report's 
findings as it continues to implement its new authority under the Dodd-
Frank Act. OCC also acknowledged the challenges ASC faces in 
implementing its new responsibilities and authority under the act. 

CFPB neither agreed nor disagreed with our recommendations but said 
that the report provided a comprehensive analysis of ASC's role and 
highlighted resource and operating constraints that may challenge 
ASC's ability to implement its new duties under the Dodd-Frank Act. 
CFPB also noted that if federal regulators contemplate revising the 
$250,000 appraisal exemption threshold, CFPB would evaluate whether 
the proposed change would provide reasonable protection for 
homebuyers. Additionally, CFPB indicated that it hoped to designate an 
ASC board member in the near future and that, in the meantime, CFPB 
serves on the ASC board in an advisory capacity. 

We are sending copies of this report to the appropriate congressional 
committees, the Chairman of ASC, the Chairman of FFIEC, the Chairman 
of FDIC, the Chairman of the Federal Reserve, the Acting Director of 
FHFA, the Secretary of Housing and Urban Development, the Chairman of 
NCUA, the Acting Comptroller of the Currency, the Director of the 
Bureau of Consumer Financial Protection, and other interested parties. 
In addition, the report is available at no charge on the GAO Web site 
at [hyperlink, http://www.gao.gov]. 

If you or your staff members have any questions about this report, 
please contact me at (202) 512-8678 or shearw@gao.gov. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. GAO staff who made key 
contributions to this report are listed in appendix IX. 

Signed by: 

William B. Shear: 
Director, Financial Markets and Community Investment: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act) requires GAO to examine the Appraisal Subcommittee's (ASC) 
ability to carry out its functions, as well as related issues, 
including regulatory exemptions to appraisal requirements, state 
disciplinary actions against appraisers, and the extent to which a 
national appraisal repository would benefit ASC. Our objectives were 
to examine (1) how ASC is performing its functions under Title XI of 
the Financial Institutions Reform, Recovery, and Enforcement Act of 
1989 (FIRREA) that existed prior to the passage of the Dodd-Frank Act, 
(2) ASC's plans and actions to implement provisions in the Dodd-Frank 
Act, and (3) analysis and stakeholder views on existing dollar-based 
exemptions to appraisal requirements for federally related 
transactions. For the first objective and for information that appears 
in appendix II, we also examined the number of state-licensed and 
-certified appraisers, as of December 31, 2010, and the number of 
disciplinary actions that states took against appraisers from 2001 
through 2010. Finally, for information that appears in appendix III, 
we examined the views of appraisal industry stakeholders on the 
potential benefits and challenges of a national appraisal repository 
for ASC. 

ASC's Title XI Functions Prior to the Dodd-Frank Act: 

To determine how ASC is performing its Title XI functions that existed 
prior to the passage of the Dodd-Frank Act, we reviewed Title XI of 
FIRREA and its legislative history. We reviewed ASC's policies and 
procedures, including its rules of operation, policy and procedures 
manual, policy statements, compliance review manual, bulletins, and 
notices. We consulted GAO's Standards for Internal Control in the 
Federal Government and Internal Control Management and Evaluation Tool 
to assess ASC's policies and procedures.[Footnote 76] 

We reviewed a wide range of ASC reports and records relating to each 
of ASC's functions. With respect to ASC's monitoring of states, we 
reviewed reports on ASC's compliance reviews of states from 2007 
through 2010, state response letters to compliance reviews, and 
summary statistics in ASC's annual reports to Congress on the results 
of compliance reviews. We analyzed this information to determine how 
often ASC reviewed states, the type and frequency of noncompliance 
problems ASC identified, and the number of states in each of three 
overall compliance categories ("in substantial compliance," "not in 
substantial compliance," and "not in compliance"). We identified 
states that ASC reviewed at least twice from 2007 through 2010 to 
determine any changes in these states' overall compliance levels over 
that period. Regarding ASC's monitoring of the federal financial 
institutions regulators, we reviewed ASC board minutes from 2003 
through 2010, ASC's annual reports to Congress for those years, and a 
2007 internal review of ASC's operations, which addressed this 
monitoring responsibility. With respect to ASC's monitoring of the 
Appraisal Foundation, we reviewed foundation grant proposals, 
statements of work, and reimbursement requests from 2003 through 2010; 
ASC decisions on grant proposals and reimbursement requests for that 
period; agreed-upon procedures reviews of the foundation from 2005 
through 2010 by an independent auditing firm; and miscellaneous 
correspondence between ASC and the foundation. We also reviewed ASC's 
annual reports to Congress and board meeting minutes from 2003 through 
2010 to obtain information about the foundation's activities and ASC's 
monitoring process. Regarding the national registry, we analyzed 
selected information from ASC's national registry database, including 
the number of active appraiser credentials by type and state as of 
December 31, 2010, and the number and types of disciplinary actions 
against appraisers that states took and reported from calendar years 
2001 through 2010. To assess the reliability of the registry data, we 
(1) reviewed information related to data elements, system operations, 
and controls; (2) performed electronic testing for obvious errors in 
accuracy and completeness; and (3) interviewed ASC officials 
knowledgeable about the data. We concluded that the data elements we 
used were sufficiently reliable for our purposes. 

In addition to our document review and data analysis, we interviewed 
current ASC staff, including the Executive Director, Deputy Executive 
Director, and General Counsel, as well as a former ASC General 
Counsel. We also interviewed ASC board members, which, at the time of 
our fieldwork, included officials from the Federal Deposit Insurance 
Corporation (FDIC), Board of Governors of the Federal Reserve System 
(Federal Reserve), Federal Housing Finance Agency (FHFA), Department 
of Housing and Urban Development (HUD), National Credit Union 
Administration (NCUA), Office of the Comptroller of the Currency 
(OCC), and Office of Thrift Supervision (OTS).[Footnote 77] We also 
interviewed officials from the Federal Financial Institutions 
Examination Council (FFIEC); representatives of the Appraisal 
Foundation; state appraisal regulatory officials; and a range of other 
appraisal industry participants and stakeholders, including trade 
groups that represent appraisers and lenders, officials from the 
government-sponsored enterprises Fannie Mae and Freddie Mac (the 
enterprises), and officials from the Federal Bureau of Investigation 
(FBI). 

Finally, to support this objective and our other reporting objectives, 
we conducted a Web-based survey of appraiser regulatory agencies from 
the 50 states, the District of Columbia, and the U.S. territories of 
Guam, Northern Mariana Islands, Puerto Rico, and the Virgin Islands. 
[Footnote 78] During May 2011, we conducted four telephone pretests of 
the survey instrument with officials from different state regulatory 
agencies. The pretest results were incorporated into the survey 
questions as warranted. We fielded the survey to officials from the 55 
state and territorial regulatory agencies on June 7, 2011. The survey 
had a closing deadline of July 8, 2011. Fifty of the 55 agencies 
completed the survey; the remaining five either did not start or did 
not finish the survey. Among other things, the survey collected 
information on how the state and territorial agencies carry out their 
Title XI responsibilities (including submitting data to the national 
registry and following up on complaints against appraisers); agency 
funding and staffing issues; and state views on ASC, appraisal-related 
provisions in the Dodd-Frank Act, and the $250,000 appraisal exemption 
threshold. The results are contained in an e-supplement to this report 
that includes the questions asked and a summary of the answers 
provided. View the e-supplement at [hyperlink, 
http://www.gao.gov/products/GAO-12-198SP]. 

Implementation of Dodd-Frank Act Provisions: 

To describe ASC's plans and actions to implement Dodd-Frank Act 
provisions, we reviewed pertinent sections of the act and analyzed ASC 
records and other documents that described specific tasks stemming 
from the act and ASC's progress in addressing them. These records and 
documents included ASC board meeting minutes, ASC Dodd-Frank Act 
summaries and implementation timelines, and Federal Register notices. 
We also interviewed ASC board members and staff about progress and 
challenges in implementing these tasks. To gain perspective on ASC's 
resources for implementing the Dodd-Frank Act provisions, we reviewed 
information from ASC's annual reports and financial statements. More 
specifically, we examined the number and responsibilities of ASC's 
staff positions and ASC's revenues, expenses, and reserves from fiscal 
years 2001 through 2010. In addition, we estimated ASC's fee revenues 
in 2014 under two scenarios. The first assumed no change in the number 
of appraiser credentials after 2010, and the second assumed a 9.4 
percent drop after 2010 (mirroring the decline that occurred from 2007 
through 2010). To examine ASC's strategic planning efforts, we 
interviewed ASC board members and staff about their planning process 
and time frames. We also reviewed the GPRA Modernization Act (GPRAMA), 
which provides a framework for federal agency's strategic plans. 
[Footnote 79] 

Dollar-Based Appraisal Exemption Thresholds: 

To examine existing dollar-based appraisal exemption thresholds, we 
analyzed data from FFIEC's Home Mortgage Disclosure Act (HMDA) 
database and obtained stakeholder opinions about the thresholds. HMDA 
requires lending institutions to collect and publicly disclose 
information about housing loans and applications for such loans, 
including the loan type and amount, property type, and borrower 
characteristics. These data are the most comprehensive source of 
information on mortgage lending and are estimated to capture about 75 
to 85 percent of conventional mortgages (those without government 
insurance or guarantees) and 90 to 95 percent of mortgages insured by 
HUD's Federal Housing Administration.[Footnote 80] Lenders with small 
total assets and lenders that do not have a home or branch office in a 
metropolitan statistical area do not have to report HDMA data. We 
analyzed HMDA data from 2006 through 2009 to determine the proportion 
of mortgages less than or equal to $250,000--the regulatory threshold 
at or below which appraisals are not required for federally related 
transactions.[Footnote 81] We focused primarily on purchase and 
refinance mortgages for single-family (one-to-four unit) site-built 
residences. At the national level and for each state, we calculated 
the proportion of these mortgages that were $250,000 or less by year 
of origination and for all 4 years combined. In addition, for each 
state, we calculated the change in the proportion of mortgages at or 
below the $250,000 threshold from 2006 through 2009. Using FHFA's 
purchase-only house price index, we also examined the extent to which 
states with large increases in the proportion of mortgages at or below 
the threshold also experienced large house price declines over the 4-
year period. We analyzed mortgages for residential multifamily housing 
(five or more units) and manufactured housing separately and at the 
national level only. Specifically, we calculated the proportions of 
these mortgages that were at or below the $250,000 threshold, 
combining data for 2006 through 2009. Due to a lack of readily 
available data, we were not able to perform a similar analysis for 
real estate-secured business loans, which have an appraisal exemption 
threshold of $1 million or less. To assess the data reliability of the 
HMDA data we used, we reviewed documentation on the process used to 
collect and ensure the reliability and integrity of the data; reviewed 
Federal Reserve and HUD analysis of the data's market coverage; 
conducted reasonableness checks on data elements to identify any 
missing, erroneous, or outlying data; and spoke with officials from 
the Federal Reserve and the Bureau of Consumer Financial Protection 
(also known as the Consumer Financial Protection Bureau or CFPB) 
knowledgeable about the data. We concluded that the data we used were 
sufficiently reliable for our purposes. 

To provide perspective on the impact of the $250,000 threshold, we 
relied on information in a report we issued in July 2011, which 
included information on the proportion of residential mortgage 
originations from 2006 through 2010 that had appraisals. In that 
report, we indicated that the enterprises and the Federal Housing 
Administration (FHA) have commanded a large share of the mortgage 
market in recent years and that these entities require appraisals on 
the large majority of the mortgages they back, both above and below 
$250,000.[Footnote 82] 

To obtain stakeholder views on the $250,000 and $1 million thresholds, 
we interviewed ASC board members and staff; officials from the federal 
financial institutions regulators, FHFA, HUD, and CFPB; and 
representatives from the Appraisal Foundation and state appraiser 
regulatory agencies. We also interviewed other appraisal industry 
participants, including trade groups that represent appraisers and 
lenders and officials from the enterprises. Additionally, we drew on 
the results of our state survey, which included questions about the 
$250,000 threshold. 

National Appraisal Repository: 

To obtain stakeholder views about whether new means of data 
collection, such as the establishment of a national appraisal 
repository, might assist ASC in carrying out its responsibilities, we 
interviewed ASC board members and staff; officials from federal 
financial institutions regulators, CFPB, FBI, FHFA, HUD, and the 
enterprises; representatives of the Appraisal Foundation; and state 
appraiser regulatory officials. We also interviewed representatives of 
trade groups that represent appraisers and lenders, as well as 
individual mortgage lenders, appraisers, and appraisal industry 
researchers. 

We conducted this performance audit from November 2010 to January 2012 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Data on the Number of Appraiser Credentials and State 
Enforcement Actions Against Appraisers: 

ASC's national registry of state-licensed and -certified appraisers 
contains information on four classes of appraiser credentials: 
certified general, certified residential, licensed, and transitionally 
licensed.[Footnote 83] As of December 31, 2010, the database reported 
nearly 110,000 active appraiser credentials.[Footnote 84] The number 
of appraiser credentials reported by state appraiser regulatory 
agencies ranged from 8 in the Northern Mariana Islands to 13,050 in 
California (see table 3.) Nationwide, certified general and certified 
residential appraiser credentials accounted for about 84 percent of 
the total appraiser credentials. 

Table 3: Active Appraiser Credentials, by State and Type, as of 
December 31, 2010: 

Issuing state or U.S. territory: Alabama; 
Type of appraiser credential: 
Certified general: 532; 
Certified residential: 696; 
Licensed: 94; 
Transitionally licensed: [A]; 
Total: 1,322. 

Issuing state or U.S. territory: Alaska; 
Type of appraiser credential: 
Certified general: 108; 
Certified residential: 126; 
Licensed: [A]; 
Transitionally licensed: [A]; 
Total: 234. 

Issuing state or U.S. territory: Arizona; 
Type of appraiser credential: 
Certified general: 812; 
Certified residential: 1,185; 
Licensed: 503; 
Transitionally licensed: [A]; 
Total: 2,500. 

Issuing state or U.S. territory: Arkansas; 
Type of appraiser credential: 
Certified general: 370; 
Certified residential: 396; 
Licensed: 67; 
Transitionally licensed: [A]; 
Total: 833. 

Issuing state or U.S. territory: California; 
Type of appraiser credential: 
Certified general: 3,448; 
Certified residential: 6,436; 
Licensed: 3,166; 
Transitionally licensed: [A]; 
Total: 13,050. 

Issuing state or U.S. territory: Colorado; 
Type of appraiser credential: 
Certified general: 1,148; 
Certified residential: 1,461; 
Licensed: 655; 
Transitionally licensed: [A]; 
Total: 3,264. 

Issuing state or U.S. territory: Connecticut; 
Type of appraiser credential: 
Certified general: 552; 
Certified residential: 926; 
Licensed: [A]; 
Transitionally licensed: [A]; 
Total: 1,478. 

Issuing state or U.S. territory: Delaware; 
Type of appraiser credential: 
Certified general: 259; 
Certified residential: 342; 
Licensed: 63; 
Transitionally licensed: [A]; 
Total: 664. 

Issuing state or U.S. territory: District of Columbia; 
Type of appraiser credential: 
Certified general: 262; 
Certified residential: 276; 
Licensed: 200; 
Transitionally licensed: [A]; 
Total: 738. 

Issuing state or U.S. territory: Florida; 
Type of appraiser credential: 
Certified general: 2,124; 
Certified residential: 4,597; 
Licensed: 31; 
Transitionally licensed: [A]; 
Total: 6,752. 

Issuing state or U.S. territory: Georgia; 
Type of appraiser credential: 
Certified general: 1,771; 
Certified residential: 1,668; 
Licensed: 704; 
Transitionally licensed: [A]; 
Total: 4,143. 

Issuing state or U.S. territory: Guam; 
Type of appraiser credential: 
Certified general: 11; 
Certified residential: [A]; 
Licensed: 9; 
Transitionally licensed: [A]; 
Total: 20. 

Issuing state or U.S. territory: Hawaii; 
Type of appraiser credential: 
Certified general: 192; 
Certified residential: 340; 
Licensed: 31; 
Transitionally licensed: [A]; 
Total: 563. 

Issuing state or U.S. territory: Idaho; 
Type of appraiser credential: 
Certified general: 292; 
Certified residential: 339; 
Licensed: 122; 
Transitionally licensed: [A]; 
Total: 753. 

Issuing state or U.S. territory: Illinois; 
Type of appraiser credential: 
Certified general: 1,333; 
Certified residential: 2,983; 
Licensed: [A]; 
Transitionally licensed: [A]; 
Total: 4,316. 

Issuing state or U.S. territory: Indiana; 
Type of appraiser credential: 
Certified general: 727; 
Certified residential: 1,116; 
Licensed: 408; 
Transitionally licensed: [A]; 
Total: 2,251. 

Issuing state or U.S. territory: Iowa; 
Type of appraiser credential: 
Certified general: 567; 
Certified residential: 546; 
Licensed: [A]; 
Transitionally licensed: [A]; 
Total: 1,113. 

Issuing state or U.S. territory: Kansas; 
Type of appraiser credential: 
Certified general: 472; 
Certified residential: 467; 
Licensed: 187; 
Transitionally licensed: [A]; 
Total: 1,126. 

Issuing state or U.S. territory: Kentucky; 
Type of appraiser credential: 
Certified general: 520; 
Certified residential: 818; 
Licensed: 21; 
Transitionally licensed: [A]; 
Total: 1,359. 

Issuing state or U.S. territory: Louisiana; 
Type of appraiser credential: 
Certified general: 450; 
Certified residential: 803; 
Licensed: [A]; 
Transitionally licensed: [A]; 
Total: 1,253. 

Issuing state or U.S. territory: Maine; 
Type of appraiser credential: 
Certified general: 262; 
Certified residential: 203; 
Licensed: 236; 
Transitionally licensed: [A]; 
Total: 701. 

Issuing state or U.S. territory: Northern Mariana Islands; 
Type of appraiser credential: 
Certified general: 6; 
Certified residential: [A]; 
Licensed: 2; 
Transitionally licensed: [A]; 
Total: 8. 

Issuing state or U.S. territory: Maryland; 
Type of appraiser credential: 
Certified general: 731; 
Certified residential: 1,223; 
Licensed: 809; 
Transitionally licensed: [A]; 
Total: 2,763. 

Issuing state or U.S. territory: Massachusetts; 
Type of appraiser credential: 
Certified general: 664; 
Certified residential: 1,240; 
Licensed: 434; 
Transitionally licensed: [A]; 
Total: 2,338. 

Issuing state or U.S. territory: Michigan; 
Type of appraiser credential: 
Certified general: 1,018; 
Certified residential: 1,022; 
Licensed: 1,073; 
Transitionally licensed: [A]; 
Total: 3,113. 

Issuing state or U.S. territory: Minnesota; 
Type of appraiser credential: 
Certified general: 811; 
Certified residential: 1,093; 
Licensed: 231; 
Transitionally licensed: [A]; 
Total: 2,135. 

Issuing state or U.S. territory: Mississippi; 
Type of appraiser credential: 
Certified general: 524; 
Certified residential: 478; 
Licensed: 348; 
Transitionally licensed: [A]; 
Total: 1,350. 

Issuing state or U.S. territory: Missouri; 
Type of appraiser credential: 
Certified general: 783; 
Certified residential: 1,475; 
Licensed: 158; 
Transitionally licensed: [A]; 
Total: 2,416. 

Issuing state or U.S. territory: Montana; 
Type of appraiser credential: 
Certified general: 210; 
Certified residential: 163; 
Licensed: 51; 
Transitionally licensed: [A]; 
Total: 424. 

Issuing state or U.S. territory: Nebraska; 
Type of appraiser credential: 
Certified general: 395; 
Certified residential: 215; 
Licensed: 152; 
Transitionally licensed: [A]; 
Total: 762. 

Issuing state or U.S. territory: Nevada; 
Type of appraiser credential: 
Certified general: 469; 
Certified residential: 595; 
Licensed: 200; 
Transitionally licensed: [A]; 
Total: 1,264. 

Issuing state or U.S. territory: New Hampshire; 
Type of appraiser credential: 
Certified general: 301; 
Certified residential: 465; 
Licensed: 145; 
Transitionally licensed: [A]; 
Total: 911. 

Issuing state or U.S. territory: New Jersey; 
Type of appraiser credential: 
Certified general: 1,146; 
Certified residential: 1,290; 
Licensed: 683; 
Transitionally licensed: [A]; 
Total: 3,119. 

Issuing state or U.S. territory: New Mexico; 
Type of appraiser credential: 
Certified general: 288; 
Certified residential: 383; 
Licensed: 62; 
Transitionally licensed: [A]; 
Total: 733. 

Issuing state or U.S. territory: New York; 
Type of appraiser credential: 
Certified general: 1,653; 
Certified residential: 2,403; 
Licensed: 397; 
Transitionally licensed: [A]; 
Total: 4,453. 

Issuing state or U.S. territory: North Carolina; 
Type of appraiser credential: 
Certified general: 1,085; 
Certified residential: 2,066; 
Licensed: 152; 
Transitionally licensed: [A]; 
Total: 3,303. 

Issuing state or U.S. territory: North Dakota; 
Type of appraiser credential: 
Certified general: 131; 
Certified residential: 39; 
Licensed: 50; 
Transitionally licensed: [A]; 
Total: 220. 

Issuing state or U.S. territory: Ohio; 
Type of appraiser credential: 
Certified general: 939; 
Certified residential: 1,345; 
Licensed: 952; 
Transitionally licensed: [A]; 
Total: 3,236. 

Issuing state or U.S. territory: Oklahoma; 
Type of appraiser credential: 
Certified general: 388; 
Certified residential: 457; 
Licensed: 211; 
Transitionally licensed: [A]; 
Total: 1,056. 

Issuing state or U.S. territory: Oregon; 
Type of appraiser credential: 
Certified general: 578; 
Certified residential: 707; 
Licensed: 452; 
Transitionally licensed: [A]; 
Total: 1,737. 

Issuing state or U.S. territory: Pennsylvania; 
Type of appraiser credential: 
Certified general: 1,328; 
Certified residential: 2,084; 
Licensed: [A]; 
Transitionally licensed: [A]; 
Total: 3,412. 

Issuing state or U.S. territory: Puerto Rico; 
Type of appraiser credential: 
Certified general: 216; 
Certified residential: 169; 
Licensed: 8; 
Transitionally licensed: [A]; 
Total: 393. 

Issuing state or U.S. territory: Rhode Island; 
Type of appraiser credential: 
Certified general: 172; 
Certified residential: 279; 
Licensed: 91; 
Transitionally licensed: [A]; 
Total: 542. 

Issuing state or U.S. territory: South Carolina; 
Type of appraiser credential: 
Certified general: 841; 
Certified residential: 1,128; 
Licensed: 314; 
Transitionally licensed: [A]; 
Total: 2,283. 

Issuing state or U.S. territory: South Dakota; 
Type of appraiser credential: 
Certified general: 169; 
Certified residential: 67; 
Licensed: 74; 
Transitionally licensed: [A]; 
Total: 310. 

Issuing state or U.S. territory: Tennessee; 
Type of appraiser credential: 
Certified general: 690; 
Certified residential: 1,005; 
Licensed: 167; 
Transitionally licensed: [A]; 
Total: 1,862. 

Issuing state or U.S. territory: Texas; 
Type of appraiser credential: 
Certified general: 2,382; 
Certified residential: 2,495; 
Licensed: 648; 
Transitionally licensed: 22; 
Total: 5,547. 

Issuing state or U.S. territory: Utah; 
Type of appraiser credential: 
Certified general: 403; 
Certified residential: 738; 
Licensed: 230; 
Transitionally licensed: [A]; 
Total: 1,371. 

Issuing state or U.S. territory: Vermont; 
Type of appraiser credential: 
Certified general: 162; 
Certified residential: 144; 
Licensed: 66; 
Transitionally licensed: [A]; 
Total: 372. 

Issuing state or U.S. territory: Virgin Islands; 
Type of appraiser credential: 
Certified general: 15; 
Certified residential: 9; 
Licensed: 3; 
Transitionally licensed: [A]; 
Total: 27. 

Issuing state or U.S. territory: Virginia; 
Type of appraiser credential: 
Certified general: 1,057; 
Certified residential: 1,756; 
Licensed: 1,025; 
Transitionally licensed: [A]; 
Total: 3,838. 

Issuing state or U.S. territory: Washington; 
Type of appraiser credential: 
Certified general: 1,014; 
Certified residential: 1,828; 
Licensed: 287; 
Transitionally licensed: [A]; 
Total: 3,129. 

Issuing state or U.S. territory: West Virginia; 
Type of appraiser credential: 
Certified general: 192; 
Certified residential: 235; 
Licensed: 173; 
Transitionally licensed: [A]; 
Total: 600. 

Issuing state or U.S. territory: Wisconsin; 
Type of appraiser credential: 
Certified general: 623; 
Certified residential: 1,057; 
Licensed: 451; 
Transitionally licensed: [A]; 
Total: 2,131. 

Issuing state or U.S. territory: Wyoming; 
Type of appraiser credential: 
Certified general: 198; 
Certified residential: 123; 
Licensed: [A]; 
Transitionally licensed: [A]; 
Total: 321. 

Issuing state or U.S. territory: Total; 
Type of appraiser credential: 
Certified general: 37,794; 
Certified residential: 55,500; 
Licensed: 16,596; 
Transitionally licensed: 22; 
Total: 109,912. 

Source: GAO analysis of ASC national registry data. 

[A] Not applicable because the state either does not offer that type 
of credential or had no cases to report. 

[End of table] 

As previously noted, the national registry contains information on 
disciplinary actions taken and reported by state regulators. Table 4 
summarizes this information for calendar years 2001 through 2010. 

Table 4: Number and Types of Appraiser Disciplinary Actions Reported 
by States, 2001-2010: 

State or U.S. territory: Alabama; 
Revocation: 6; 
Suspension: 28; 
Probation: 3; 
Fine: 2; 
Official reprimand: 9; 
Voluntary surrender: 13; 
Down-grade: [A]; 
Additional education: [A]; 
Warning: [A]; 
Other: [A]; 
Total: 61. 

State or U.S. territory: Alaska; 
Revocation: 1; 
Suspension: 1; 
Probation: 5; 
Fine: 6; 
Official reprimand: [A]; 
Voluntary surrender: 3; 
Down-grade: [A]; 
Additional education: 4; 
Warning: 3; 
Other: [A]; 
Total: 23. 

State or U.S. territory: Arizona; 
Revocation: 26; 
Suspension: 21; 
Probation: 45; 
Fine: [A]; 
Official reprimand: 2; 
Voluntary surrender: 30; 
Down-grade: 1; 
Additional education: [A]; 
Warning: [A]; 
Other: 319; 
Total: 444. 

State or U.S. territory: Arkansas; 
Revocation: 2; 
Suspension: 15; 
Probation: 122; 
Fine: 2; 
Official reprimand: [A]; 
Voluntary surrender: 5; 
Down-grade: [A]; 
Additional education: 13; 
Warning: [A]; 
Other: 74; 
Total: 233. 

State or U.S. territory: California; 
Revocation: 55; 
Suspension: 18; 
Probation: 34; 
Fine: 200; 
Official reprimand: 1; 
Voluntary surrender: 70; 
Down-grade: [A]; 
Additional education: 40; 
Warning: 13; 
Other: 22; 
Total: 453. 

State or U.S. territory: Colorado; 
Revocation: 29; 
Suspension: 49; 
Probation: 24; 
Fine: 168; 
Official reprimand: 1; 
Voluntary surrender: 63; 
Down-grade: 2; 
Additional education: 165; 
Warning: 2; 
Other: 11; 
Total: 514. 

State or U.S. territory: Connecticut; 
Revocation: 4; 
Suspension: 5; 
Probation: [A]; 
Fine: 131; 
Official reprimand: 1; 
Voluntary surrender: 6; 
Down-grade: [A]; 
Additional education: 29; 
Warning: [A]; 
Other: 1; 
Total: 177. 

State or U.S. territory: Delaware; 
Revocation: 1; 
Suspension: 12; 
Probation: 4; 
Fine: 3; 
Official reprimand: 10; 
Voluntary surrender: [A]; 
Down-grade: [A]; 
Additional education: 9; 
Warning: [A]; 
Other: [A]; 
Total: 39. 

State or U.S. territory: District of Columbia; 
Revocation: 2; 
Suspension: 4; 
Probation: 8; 
Fine: 17; 
Official reprimand: 2; 
Voluntary surrender: [A]; 
Down-grade: [A]; 
Additional education: 2; 
Warning: [A]; 
Other: [A]; 
Total: 35. 

State or U.S. territory: Florida; 
Revocation: 221; 
Suspension: 168; 
Probation: 530; 
Fine: 447; 
Official reprimand: 1; 
Voluntary surrender: 16; 
Down-grade: [A]; 
Additional education: 96; 
Warning: 1; 
Other: [A]; 
Total: 1,480. 

State or U.S. territory: Georgia; 
Revocation: 230; 
Suspension: 103; 
Probation: [A]; 
Fine: [A]; 
Official reprimand: [A]; 
Voluntary surrender: 31; 
Down-grade: [A]; 
Additional education: [A]; 
Warning: [A]; 
Other: 97; 
Total: 461. 

State or U.S. territory: Hawaii; 
Revocation: [A]; 
Suspension: [A]; 
Probation: [A]; 
Fine: 8; 
Official reprimand: [A]; 
Voluntary surrender: [A]; 
Down-grade: [A]; 
Additional education: 2; 
Warning: [A]; 
Other: [A]; 
Total: 10. 

State or U.S. territory: Idaho; 
Revocation: 4; 
Suspension: 10; 
Probation: 48; 
Fine: 117; 
Official reprimand: 3; 
Voluntary surrender: 4; 
Down-grade: [A]; 
Additional education: 86; 
Warning: [A]; 
Other: [A]; 
Total: 272. 

State or U.S. territory: Illinois; 
Revocation: 77; 
Suspension: 78; 
Probation: 15; 
Fine: 60; 
Official reprimand: 10; 
Voluntary surrender: 1; 
Down-grade: 1; 
Additional education: 12; 
Warning: 309; 
Other: 3; 
Total: 566. 

State or U.S. territory: Indiana; 
Revocation: 139; 
Suspension: 101; 
Probation: 169; 
Fine: 21; 
Official reprimand: 48; 
Voluntary surrender: 14; 
Down-grade: [A]; 
Additional education: 14; 
Warning: 7; 
Other: 862; 
Total: 1,375. 

State or U.S. territory: Iowa; 
Revocation: 10; 
Suspension: 5; 
Probation: 44; 
Fine: 28; 
Official reprimand: 17; 
Voluntary surrender: 28; 
Down-grade: [A]; 
Additional education: 68; 
Warning: 3; 
Other: 1; 
Total: 204. 

State or U.S. territory: Kansas; 
Revocation: 18; 
Suspension: 10; 
Probation: 91; 
Fine: 37; 
Official reprimand: [A]; 
Voluntary surrender: 13; 
Down-grade: [A]; 
Additional education: 111; 
Warning: 8; 
Other: [A]; 
Total: 288. 

State or U.S. territory: Kentucky; 
Revocation: 2; 
Suspension: 33; 
Probation: 1; 
Fine: 129; 
Official reprimand: [A]; 
Voluntary surrender: 17; 
Down-grade: [A]; 
Additional education: 78; 
Warning: 3; 
Other: 3; 
Total: 266. 

State or U.S. territory: Louisiana; 
Revocation: 2; 
Suspension: 10; 
Probation: [A]; 
Fine: 22; 
Official reprimand: [A]; 
Voluntary surrender: [A]; 
Down-grade: [A]; 
Additional education: [A]; 
Warning: 14; 
Other: [A]; 
Total: 48. 

State or U.S. territory: Maine; 
Revocation: 19; 
Suspension: 17; 
Probation: 14; 
Fine: 92; 
Official reprimand: 51; 
Voluntary surrender: 6; 
Down-grade: [A]; 
Additional education: 52; 
Warning: 11; 
Other: 3; 
Total: 265. 

State or U.S. territory: Maryland; 
Revocation: 11; 
Suspension: 33; 
Probation: [A]; 
Fine: 65; 
Official reprimand: 10; 
Voluntary surrender: 2; 
Down-grade: [A]; 
Additional education: 33; 
Warning: 1; 
Other: 1; 
Total: 156. 

State or U.S. territory: Massachusetts; 
Revocation: 12; 
Suspension: 6; 
Probation: 58; 
Fine: 64; 
Official reprimand: 149; 
Voluntary surrender: 26; 
Down-grade: [A]; 
Additional education: 3; 
Warning: 6; 
Other: [A]; 
Total: 324. 

State or U.S. territory: Michigan; 
Revocation: 75; 
Suspension: 19; 
Probation: 22; 
Fine: 313; 
Official reprimand: [A]; 
Voluntary surrender: 3; 
Down-grade: [A]; 
Additional education: 114; 
Warning: [A]; 
Other: [A]; 
Total: 546. 

State or U.S. territory: Minnesota; 
Revocation: 59; 
Suspension: 35; 
Probation: 1; 
Fine: 314; 
Official reprimand: 27; 
Voluntary surrender: [A]; 
Down-grade: [A]; 
Additional education: 35; 
Warning: 21; 
Other: 3; 
Total: 495. 

State or U.S. territory: Mississippi; 
Revocation: 7; 
Suspension: 12; 
Probation: 26; 
Fine: [A]; 
Official reprimand: 2; 
Voluntary surrender: 4; 
Down-grade: [A]; 
Additional education: 38; 
Warning: 1; 
Other: 216; 
Total: 306. 

State or U.S. territory: Missouri; 
Revocation: 69; 
Suspension: 120; 
Probation: 170; 
Fine: [A]; 
Official reprimand: 2; 
Voluntary surrender: 8; 
Down-grade: [A]; 
Additional education: [A]; 
Warning: 1; 
Other: 28; 
Total: 398. 

State or U.S. territory: Montana; 
Revocation: 7; 
Suspension: 8; 
Probation: 17; 
Fine: 31; 
Official reprimand: 1; 
Voluntary surrender: [A]; 
Down-grade: [A]; 
Additional education: 30; 
Warning: [A]; 
Other: 2; 
Total: 96. 

State or U.S. territory: Nebraska; 
Revocation: 1; 
Suspension: 6; 
Probation: 6; 
Fine: 2; 
Official reprimand: [A]; 
Voluntary surrender: 8; 
Down-grade: 2; 
Additional education: 49; 
Warning: [A]; 
Other: 14; 
Total: 88. 

State or U.S. territory: Nevada; 
Revocation: 25; 
Suspension: 19; 
Probation: 9; 
Fine: 70; 
Official reprimand: [A]; 
Voluntary surrender: 32; 
Down-grade: 3; 
Additional education: 124; 
Warning: 3; 
Other: [A]; 
Total: 285. 

State or U.S. territory: New Hampshire; 
Revocation: 2; 
Suspension: 7; 
Probation: [A]; 
Fine: 45; 
Official reprimand: [A]; 
Voluntary surrender: [A]; 
Down-grade: [A]; 
Additional education: 30; 
Warning: [A]; 
Other: [A]; 
Total: 84. 

State or U.S. territory: New Jersey; 
Revocation: 16; 
Suspension: 45; 
Probation: 29; 
Fine: 136; 
Official reprimand: 66; 
Voluntary surrender: 2; 
Down-grade: [A]; 
Additional education: 35; 
Warning: 5; 
Other: [A]; 
Total: 334. 

State or U.S. territory: New Mexico; 
Revocation: 8; 
Suspension: 6; 
Probation: 2; 
Fine: 24; 
Official reprimand: 11; 
Voluntary surrender: 1; 
Down-grade: [A]; 
Additional education: 52; 
Warning: 5; 
Other: [A]; 
Total: 109. 

State or U.S. territory: New York; 
Revocation: 114; 
Suspension: 78; 
Probation: [A]; 
Fine: 98; 
Official reprimand: [A]; 
Voluntary surrender: [A]; 
Down-grade: [A]; 
Additional education: 23; 
Warning: 48; 
Other: 1; 
Total: 362. 

State or U.S. territory: North Carolina; 
Revocation: 13; 
Suspension: 143; 
Probation: [A]; 
Fine: 3; 
Official reprimand: 38; 
Voluntary surrender: 38; 
Down-grade: 1; 
Additional education: 148; 
Warning: 6; 
Other: [A]; 
Total: 390. 

State or U.S. territory: North Dakota; 
Revocation: 1; 
Suspension: 3; 
Probation: 11; 
Fine: [A]; 
Official reprimand: [A]; 
Voluntary surrender: 4; 
Down-grade: [A]; 
Additional education: 8; 
Warning: [A]; 
Other: 1; 
Total: 28. 

State or U.S. territory: Ohio; 
Revocation: 24; 
Suspension: 138; 
Probation: [A]; 
Fine: 158; 
Official reprimand: 5; 
Voluntary surrender: 20; 
Down-grade: [A]; 
Additional education: 237; 
Warning: 72; 
Other: [A]; 
Total: 654. 

State or U.S. territory: Oklahoma; 
Revocation: 166; 
Suspension: 120; 
Probation: 6; 
Fine: 62; 
Official reprimand: 3; 
Voluntary surrender: 15; 
Down-grade: 3; 
Additional education: 30; 
Warning: 2; 
Other: 9; 
Total: 416. 

State or U.S. territory: Oregon; 
Revocation: 9; 
Suspension: 28; 
Probation: [A]; 
Fine: 275; 
Official reprimand: 19; 
Voluntary surrender: 13; 
Down-grade: [A]; 
Additional education: 18; 
Warning: [A]; 
Other: 18; 
Total: 380. 

State or U.S. territory: Pennsylvania; 
Revocation: 5; 
Suspension: 36; 
Probation: 27; 
Fine: 205; 
Official reprimand: 11; 
Voluntary surrender: 16; 
Down-grade: [A]; 
Additional education: 131; 
Warning: [A]; 
Other: [A]; 
Total: 431. 

State or U.S. territory: Puerto Rico; 
Revocation: [A]; 
Suspension: 2; 
Probation: [A]; 
Fine: 8; 
Official reprimand: [A]; 
Voluntary surrender: [A]; 
Down-grade: [A]; 
Additional education: 1; 
Warning: [A]; 
Other: 8; 
Total: 19. 

State or U.S. territory: Rhode Island; 
Revocation: 3; 
Suspension: 3; 
Probation: [A]; 
Fine: 16; 
Official reprimand: [A]; 
Voluntary surrender: 1; 
Down-grade: [A]; 
Additional education: 11; 
Warning: [A]; 
Other: 2; 
Total: 36. 

State or U.S. territory: South Carolina; 
Revocation: 10; 
Suspension: 13; 
Probation: 60; 
Fine: 97; 
Official reprimand: 65; 
Voluntary surrender: 13; 
Down-grade: [A]; 
Additional education: 39; 
Warning: 3; 
Other: [A]; 
Total: 300. 

State or U.S. territory: South Dakota; 
Revocation: 3; 
Suspension: 13; 
Probation: [A]; 
Fine: 38; 
Official reprimand: 29; 
Voluntary surrender: 3; 
Down-grade: [A]; 
Additional education: 35; 
Warning: 2; 
Other: 2; 
Total: 125. 

State or U.S. territory: Tennessee; 
Revocation: 11; 
Suspension: 26; 
Probation: 14; 
Fine: 126; 
Official reprimand: 8; 
Voluntary surrender: 10; 
Down-grade: 4; 
Additional education: 85; 
Warning: 39; 
Other: 26; 
Total: 349. 

State or U.S. territory: Texas; 
Revocation: 70; 
Suspension: 33; 
Probation: 65; 
Fine: 182; 
Official reprimand: 13; 
Voluntary surrender: 28; 
Down-grade: [A]; 
Additional education: 269; 
Warning: 3; 
Other: 5; 
Total: 668. 

State or U.S. territory: Utah; 
Revocation: 13; 
Suspension: 2; 
Probation: 3; 
Fine: 126; 
Official reprimand: [A]; 
Voluntary surrender: 24; 
Down-grade: 5; 
Additional education: 61; 
Warning: [A]; 
Other: 18; 
Total: 252. 

State or U.S. territory: Vermont; 
Revocation: 2; 
Suspension: 4; 
Probation: 1; 
Fine: 4; 
Official reprimand: [A]; 
Voluntary surrender: 2; 
Down-grade: [A]; 
Additional education: 7; 
Warning: 12; 
Other: 3; 
Total: 35. 

State or U.S. territory: Virginia; 
Revocation: 17; 
Suspension: 65; 
Probation: 2; 
Fine: 8; 
Official reprimand: [A]; 
Voluntary surrender: 5; 
Down-grade: [A]; 
Additional education: 4; 
Warning: 106; 
Other: 1; 
Total: 208. 

State or U.S. territory: Washington; 
Revocation: 25; 
Suspension: 31; 
Probation: 51; 
Fine: 40; 
Official reprimand: [A]; 
Voluntary surrender: [A]; 
Down-grade: [A]; 
Additional education: 10; 
Warning: 8; 
Other: [A]; 
Total: 165. 

State or U.S. territory: West Virginia; 
Revocation: 3; 
Suspension: 27; 
Probation: 24; 
Fine: 37; 
Official reprimand: 11; 
Voluntary surrender: [A]; 
Down-grade: [A]; 
Additional education: 29; 
Warning: [A]; 
Other: 2; 
Total: 133. 

State or U.S. territory: Wisconsin; 
Revocation: 14; 
Suspension: 54; 
Probation: 8; 
Fine: 122; 
Official reprimand: 93; 
Voluntary surrender: 39; 
Down-grade: [A]; 
Additional education: 182; 
Warning: 12; 
Other: 8; 
Total: 532. 

State or U.S. territory: Wyoming; 
Revocation: 1; 
Suspension: [A]; 
Probation: 5; 
Fine: 5; 
Official reprimand: [A]; 
Voluntary surrender: 2; 
Down-grade: [A]; 
Additional education: 4; 
Warning: [A]; 
Other: 3; 
Total: 20. 

State or U.S. territory: Total; 
Revocation: 1,644; 
Suspension: 1,823; 
Probation: 1,774; 
Fine: 4,164; 
Official reprimand: 719; 
Voluntary surrender: 639; 
Down-grade: 22; 
Additional education: 2,656; 
Warning: 730; 
Other: 1,767; 
Total: 15,938. 

Source: GAO analysis of ASC national registry data. 

Note: According to an ASC official, the "other" category includes 
limitations on an appraiser's ability to appraise certain types of 
property or suspension from supervising other appraisers. In general, 
only ASC and state regulatory agencies have access to the details of 
disciplinary actions classified as other. 

[A] Not applicable because the state either does not take that type of 
action or had no cases to report. 

[End of table] 

[End of section] 

Appendix III: Potential Benefits and Challenges of a National 
Appraisal Repository for ASC: 

The Dodd-Frank Act asked us to examine whether new means of data 
collection, such as the establishment of a national repository of 
appraisal information, would benefit ASC's ability to perform its 
functions. We spoke with a range of appraisal industry stakeholders, 
including appraisers, lenders, regulators, and ASC officials about 
what a national repository might contain, its potential benefits and 
challenges, and the extent to which it would help ASC carry out its 
responsibilities. 

The Dodd-Frank Act does not specify the information that a national 
appraisal repository would contain if one were to be created. 
Appraisal industry stakeholders we spoke with identified a number of 
possibilities, ranging from a compilation of scanned appraisal reports 
to a searchable database of appraisal information such as the location 
and characteristics of the subject property, name of the appraiser and 
mortgage lender, appraised value, and properties used as 
"comparables."[Footnote 85] Some stakeholders indicated that a 
repository could potentially be linked to other data such as 
geographic information (e.g., digital maps), mortgage and borrower 
characteristics (e.g., status of mortgage payments), and housing 
market and economic statistics (e.g., local sales activity and rental 
and vacancy rates). Stakeholders said that multiple listing services 
and other proprietary databases contain some of this information. 
[Footnote 86] 

While the potential uses of a repository would depend on who had 
access to it, appraisal industry stakeholders identified a variety of 
benefits that a repository could provide. Some indicated that a 
repository could help regulators detect problematic appraisals and 
appraisers. For example, knowing the entities associated with every 
appraisal (e.g., appraiser, appraisal management company, and lender) 
could help regulators identify patterns of questionable behavior by 
individuals or firms. Additionally, the ability to view appraisals of 
the same property over time and appraisals for nearby properties could 
help regulators identify outliers (i.e., unusually high or low values) 
that may merit further investigation. Appraisers also could benefit 
from a repository by having access to additional data with which to 
perform their valuations. For example, one ASC board member said a 
repository that included the selling price of the comparables used in 
each appraisal would give appraisers access to sales information in 
states where such data are not publicly disclosed. In addition, 
industry stakeholders indicated that an appraisal repository could be 
integrated with mortgage portfolio information to help manage 
financial risk--for example, by assessing relationships between 
appraisal quality and loan performance. The government-sponsored 
enterprises Fannie Mae and Freddie Mac (the enterprises) have 
undertaken a joint effort, under the direction of FHFA that 
illustrates this concept. Known as the Uniform Mortgage Data Program 
(UMDP), this effort will collect consistent appraisal and loan data 
for all mortgages the enterprises purchase from lenders and will 
produce a proprietary dataset for use by the enterprises and FHFA. 
[Footnote 87] According to officials from the enterprises, UMDP will 
allow the enterprises to work with lenders to resolve any concerns 
regarding appraisal quality prior to purchasing mortgages. 

While a repository could provide some benefits, appraisal industry 
stakeholders also identified a number of challenges related to data 
collection and analysis, access rights, and resources. For example, 
they indicated that reporting of appraisal data would need to be more 
standardized for the repository to be useful. They also said questions 
exist about the extent to which appraisal reports are proprietary and 
could be included in a database that would potentially be widely 
accessible. Some stakeholders said analyzing data in a repository 
would not be straightforward because potential differences in the 
scope of work for each appraisal (e.g., an interior and exterior 
inspection versus an exterior inspection only) would complicate 
comparison of appraisal results. Additionally, some stakeholders 
expressed concerns about who would have access to the repository and 
whether broad access would encroach upon the privacy of appraisers. 
Further, a number of stakeholders and ASC officials said that a 
national repository could be very costly to create and maintain. They 
indicated that ASC was not the appropriate agency to develop a 
repository because it lacks the necessary resources. Some stakeholders 
also said that development of a repository would partially duplicate 
the enterprises' efforts under UMDP. 

Appraisal industry stakeholders and ASC officials questioned how much 
a national repository would help ASC carry out its monitoring 
responsibilities. They said that the high-level nature of ASC's 
monitoring responsibilities did not require detailed information on 
individual appraisals. For example, ASC officials said it was unclear 
how a repository would help them monitor states' appraiser regulatory 
programs, a process that involves examining state appraiser licensing 
and certification requirements and assessing their compliance with 
Title XI. Other industry stakeholders said they were not sure how ASC 
could use a repository because ASC is not charged with assessing 
appraisal quality or proactively identifying individual appraisers or 
institutions responsible for problem appraisals.[Footnote 88] 
Additionally, one appraisal industry participant noted that analyzing 
information from a repository could require expertise and resources 
that ASC may not currently have. 

[End of section] 

Appendix IV: Status of ASC Tasks Stemming from the Dodd-Frank Act: 

Subtitle F, Section 1473 of the Dodd-Frank Act, includes amendments to 
Title XI of FIRREA. These amendments expand ASC's responsibilities and 
authorities. We identified 27 tasks for ASC stemming from the Dodd-
Frank Act provisions. A description and the status of each task as of 
October 2011 is presented in the table below. 

Table 5: Summary Description and Status of ASC Tasks Stemming from the 
Dodd-Frank Act, as of October 2011: 

Subsection of Dodd-Frank Act: 1473(b); 

ASC task: 1. Submit an annual report to Congress by June 15 of each 
year describing in detail how it carries out its assigned functions 
and the results of its state compliance reviews; 
Status as of October 2011: Addressed. 

ASC task: 2. In the annual report, include a description of the 
conditions causing any ASC disapprovals of state appraiser regulatory 
agencies (e.g., derecognition) and remedial actions taken by states; 
Status as of October 2011: To be addressed when ASC takes a 
disapproval action. 

Subsection of Dodd-Frank Act: 1473(c); 

ASC task: 3. Hold public sessions but may close certain portions of 
these meetings (e.g., those portions related to personnel or 
preliminary state compliance reports); 
Status as of October 2011: Addressed. 

ASC task: 4. Describe matters discussed in closed sessions in Federal 
Register notices; 
Status as of October 2011: Addressed. 

Subsection of Dodd-Frank Act: 1473(d); 

ASC task: 5. Implement authority to prescribe regulations for four 
areas (temporary practice, national registry, information sharing, and 
enforcement) and establish an industry advisory committee for this 
purpose; 
Status as of October 2011: To be addressed if ASC exercises this 
discretionary authority. 

Subsection of Dodd-Frank Act: 1473(f); 

ASC task: 6. Monitor states' requirements for registration and 
supervision of appraisal management companies (AMC); 
Status as of October 2011: To be addressed when federal regulators 
establish requirements for state AMC registration. 

ASC task: 7. Maintain a national registry of AMCs; 
Status as of October 2011: To be addressed when federal regulators 
establish requirements for state AMC registration. 

Subsection of Dodd-Frank Act: 1473(g); 

ASC task: 8. Require states to report on their supervision of AMCs or 
other third-party appraisal providers; 
Status as of October 2011: To be addressed when federal regulators 
establish requirements for state AMC registration. 

Subsection of Dodd-Frank Act: 1473(h); 

ASC task: 9. Collect increased annual registry fees from appraisers; 
Status as of October 2011: To be addressed when fee increase becomes 
effective in January 2012. 

ASC task: 10. Implement authority to impose a minimum annual registry 
fee for AMCs; 
Status as of October 2011: To be addressed when states register AMCs. 

ASC task: 11. Subject to the approval of FFIEC, adjust the registry 
fees up to a maximum of $80 per annum, as necessary to carry out its 
functions; 
Status as of October 2011: Addressed. 

ASC task: 12. Consider at least once every 5 years whether to adjust 
the dollar amount of the registry fees to account for inflation; 
Status as of October 2011: Addressed. 

ASC task: 13. Provide flexibility, when implementing any registry fee 
change, to the states for multiyear certifications and licenses 
already in place, as well as a transition period to implement the 
changes in registry fees; 
Status as of October 2011: Addressed. 

ASC task: 14. Place incremental revenues collected based on fee 
increases in a separate account at the United States Treasury; 
Status as of October 2011: Subsection of Dodd-Frank Act1473(i): 
Partially addressed. ASC is pursuing the establishment of an account 
for deposit of increased registration fees. 

Subsection of Dodd-Frank Act: 1473(i); 

ASC task: 15. Use amounts appropriated or collected to make grants to 
state appraiser certifying and licensing agencies and to inform states 
of surrendered, revoked, or suspended appraiser credentials; 
Status as of October 2011: To be addressed when new registration fees 
are collected. 

Subsection of Dodd-Frank Act: 1473(j); 

ASC task: 16. Notify states that appraiser licensing procedures and 
any state qualification requirements for trainee and supervisory 
appraisers must meet or exceed applicable Appraisal Qualifications 
Board criteria; 
Status as of October 2011: Addressed. 

ASC task: 17. Implement authority to enforce qualification 
requirements for trainee and supervisory appraisers; 
Status as of October 2011: To be addressed as part of state compliance 
reviews. 

Subsection of Dodd-Frank Act: 1473(k); 

ASC task: 18. Assess sufficiency of state appraiser regulatory agency 
funding and staffing as part of its state monitoring function; 
Status as of October 2011: To be addressed as part of state compliance 
reviews. 

ASC task: 19. Implement authority to remove appraisers or a registered 
AMC from a national registry on an interim basis; 
Status as of October 2011: Not addressed. 

ASC task: 20. Implement authority to impose sanctions against a state 
agency that fails to have an effective appraiser regulatory program; 
Status as of October 2011: To be addressed when ASC is considering a 
disapproval action. 

Subsection of Dodd-Frank Act: 1473(l); 

ASC task: 21. Notify states of requirement to establish a reciprocity 
policy and consequences for failing to do so; 
Status as of October 2011: Addressed. 

Subsection of Dodd-Frank Act: 1473(n); 

ASC task: 22. Monitor state appraiser independence requirements, 
policies, and procedures; 
Status as of October 2011: To be addressed as part of state compliance 
reviews. 

Subsection of Dodd-Frank Act: 1473(o); 

ASC task: 23. Encourage states to accept courses approved by the 
Appraiser Qualifications Board; 
Status as of October 2011: Addressed. 

Subsection of Dodd-Frank Act: 1473(p); 

ASC task: 24. Determine by 6 months after law's enactment whether a 
national hotline exists that meets the requirements of the Dodd-Frank 
Act; 
Status as of October 2011: Addressed. 

ASC task: 25. Establish and operate such a national hotline with a 
toll-free telephone number and an e-mail address if one is determined 
not to exist; 
Status as of October 2011: Partially addressed. ASC has researched how 
other agencies operate hotlines and is exploring potential hotline 
options. 

Subsection of Dodd-Frank Act: 1473(s); 

ASC task: 26. Include Bureau of Consumer Financial Protection and 
Federal Housing Finance Agency as members; 
Status as of October 2011: Addressed. 

ASC task: 27. At all times, have at least one board member who is a 
credentialed appraiser; 
Status as of October 2011: Addressed. 

Sources: GAO analysis of the Dodd-Frank Act and ASC documents. 

[End of table] 

[End of section] 

Appendix V: Comments from the Appraisal Subcommittee: 

Appraisal Subcommittee: 
Federal Financial Institutions Examination Council: 
1401 H Street, NW, Suite 760: 
Washington, DC 20005: 
(202) 289-2735; Fax (202) 289-4101: 

December 14, 2011: 

Via Email: 

Mr. William B. Shear, Director of Financial Markets and Community 
Investment: 
United States Government Accountability Office: 
441 G Street, NW:
Washington, DC 20548: 
shearw@aao.gov: 

Dear Mr. Shear: 

Thank you for the opportunity to review the GAO draft report titled 
"Real Estate Appraisals—-Appraisal Subcommittee Needs to Improve 
Monitoring Procedures" (GAO Report). The GAO Report provides an 
assessment of the Appraisal Subcommittee's (ASC) performance of 
responsibilities under Title XI of the Federal Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (Title XI). As noted in 
the GAO Report, the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act) amended Title XI in ways that expand 
the ASC's mission and authority. 

Title XI created the national appraiser regulatory system to provide 
that the federal financial and public policy interests are protected 
through effective regulation and supervision of credentialed 
appraisers performing real estate appraisals for federally related 
transactions. The ASC recognizes its critical role of oversight, and 
will continue to improve its monitoring procedures. 

The GAO Report recommends the ASC take the following three actions: 

* clarify the definitions used to categorize state's overall 
compliance with Title XI and include them in the ASC's Compliance 
Review and Policy and Procedures Manuals, Compliance Review Reports to 
States, and Annual Reports to Congress; 
* develop specific policies and procedures for monitoring the 
appraisal requirements of the federal financial institution regulators 
and include them in the ASC's Policy and Procedures
Manual; and; 

* develop specific criteria for assessing whether the grant activities 
of the Appraisal Foundation are Title XI-related and include these 
criteria in the ASC's Policies and Procedures Manual. 

The ASC agrees with the above recommendations and has already taken 
preliminary actions to address them. As the ASC continues to implement 
our new authority under the Dodd-Frank Act, we also will consider the 
findings included in the GAO Report. 

Sincerely, 

Signed by: 

Deborah S. Merkle: 
Chairman: 

cc: 
Ms. Alexandra Y. Martin-Arseneau, Senior Analyst: 
Ms. Yola C. Lewis, Senior Analyst: 
Ms. Jocelyn Yin, Analyst: 

[End of section] 

Appendix VI: Comments from the Consumer Financial Protection Bureau: 

CFPB: 
Consumer Financial Protection Bureau:
1500 Pennsylvania Avenue, NW: 
Washington, DC 20220: 

December 15, 2011: 

William B. Shear: 
Director, Financial Markets and Community Investment: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548: 

Dear Mr. Shear: 

Thank you for the opportunity to comment on the GAO's draft report 
titled Real Estate Appraisals: Appraisal Subcommittee Needs to Improve 
Monitoring Procedures. 

The report provides a comprehensive analysis of the role of the 
Appraisal Subcommittee (the ASC) in monitoring compliance with the 
appraisal oversight requirements in Title XI of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989. ASC plays 
a vital role in supervising the integrity of the appraisal process so 
that lenders can reliably ascertain the value of the collateral 
securing residential mortgages. In the Dodd-Frank Wall Street Reform and
Consumer Protection Act, Congress expanded the ASC's Title XI 
responsibilities and instructed GAO to examine ASC's effectiveness. 

GAO's report highlights resource and operating constraints that may 
challenge ASC's ability to implement fully its new duties under the 
Dodd-Frank Act. In addition, the report finds that less than 30 
percent of residential mortgages originated from 2006 through 2009 
were for principal amounts of over $250,000, which triggers
mandatory appraisals for loans by federally regulated lenders. While 
Fannie Mae, Freddie Mac, and the Federal Housing Administration 
currently require appraisals for most residential mortgages in any 
amount, it is uncertain whether a more privatized future housing 
finance market would continue to do so. GAO suggests that this 
uncertainty raises a question whether the threshold should be changed. 

The activities of the Consumer Financial Protection Bureau (CFPB or 
Bureau) relate to the findings of the report in three respects. First, 
Section 1473 of the Dodd-Frank Act provides that any change to the 
$250,000 threshold requires concurrence by the Bureau "that such 
threshold level provides reasonable protection for consumers who 
purchase 1-4 unit single-family residences." If federal regulators 
contemplate revising the $250,000 threshold, the Bureau will evaluate 
whether the proposed change would provide reasonable protection for 
homebuyers. 

Second, GAO's report notes that one of the ASC's board members shall 
be a CFPB representative. The Bureau has not yet designated a board 
member, but hopes to do so in the near future. Meanwhile, the Bureau 
currently serves on the ASC board in an advisory capacity. 

Finally, as the report notes, in Title XIV of the Act, Congress 
strengthened the requirements for appraisals, appraisal management 
companies, and appraisers and authorized the CFPB, together with the 
Board of Governors of the Federal Reserve System, the Office of the 
Comptroller of the Currency, the Federal Deposit Insurance 
Corporation, the National Credit Union Administration Board, and the 
Federal Housing Finance Agency to jointly prescribe regulations to 
implement those requirements. All of these federal entities, including 
the CFPB, are currently participating in an interagency group working 
to develop uniform appraisal standards for adoption by all six. The 
CFPB looks forward to working together with the other agencies to 
strengthen the nation's system of residential real estate appraisals. 

Sincerely, 

Signed by: 

Patricia McCoy: 
Assistant Director for Mortgage Markets: 
Consumer Financial Protection Bureau: 

[End of section] 

Appendix VII: Comments from the National Credit Union Administration: 

National Credit Union Administration: 
Executive Director: 
1775 Duke Street: 
Alexandria, VA 22814-3428: 
703-518-6320: 

December 12, 2011: 

Mr. William B. Shear, Director of Financial Markets and Community 
Investment: 
United States Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 
shearw@gao.gov: 

Dear Mr. Shear: 

Thank you for the opportunity to review and comment on the Government 
Accountability Office's draft report titled, Real Estate Appraisals — 
Appraisal Subcommittee Needs to Improve Monitoring Procedures (GA0-12-
147) (hereinafter, the "Report"). The Report focused on how the 
Appraisal Subcommittee (ASC) is carrying out its original 
responsibilities under Title XI of the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989, ASC's actions and plans to 
implement provisions and new authorities under the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank Act), and 
regulatory thresholds for determining when an appraisal is required. 

The Report appropriately describes the oversight structure of ASC and 
recommends ASC take the following actions: 

* clarify the definitions used to categorize state's overall 
compliance with Title XI and include them in the ASC's Compliance 
Review and Policy and Procedures Manuals, Compliance Review Reports to 
States, and Annual Reports to Congress; 

* develop specific policies and procedures for monitoring the 
appraisal requirements of the federal financial institution regulators 
and include them in the ASC's Policy and Procedures Manual; and 

* develop specific criteria for assessing whether the grant activities 
of the Appraisal Foundation are Title XI-related and include these 
criteria in the ASC's Policies and Procedures Manual. 

NCUA agrees with the GAO's conclusions and recommendations in the 
draft report. We believe the provisions in the Dodd-Frank Act rule 
making and enforcement authority will enhance the Appraisal 
Subcommittee's effectiveness in enforcing compliance with the Title XI 
requirements, as amended. NCUA looks forward to working with the ASC 
and its other Board Members to implement the GAO's recommendation. 
Thank you again for the opportunity to comment on this Report. 

Sincerely, 

Signed by: 

David M. Marquis, Executive Director: 
National Credit Union Administration: 

[End of section] 

Appendix VIII: Comments from the Office of the Comptroller of the 
Currency: 

Comptroller of the Currency: 
Administrator of National Banks: 
Washington, DC 20219: 

December 15, 2011: 

Mr. William B. Shear: 
Director, Financial Markets and Community Investment: 
United States Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Shear: 

The Office of the Comptroller of the Currency (OCC), one of the 
federal regulatory agencies represented on the Appraisal Subcommittee 
(ASC), has reviewed your draft report titled "Real Estate Appraisals:
Appraisal Subcommittee Needs to Improve Monitoring Procedures." Your 
report responds to the mandate in the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (Act) for a study of the ASC's ability to 
carry out its functions and to examine regulatory exemptions to 
appraisal requirements. 

You found that: (1) several weaknesses potentially limited the ASC's 
effectiveness and noted, as an example, that Title XI of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (Title XI) 
did not originally provide the ASC with rulemaking and enforcement 
authority that could be useful in promoting state compliance; (2) the 
ASC faces potential challenges with implementation of its new 
authority under the Act; and (3) the majority of residential mortgages 
made from 2006 to 2009 were exempt from the appraisal requirements for 
federally related transactions. 

To help ensure effective implementation of the ASC's responsibilities 
under Title XI, you recommend that the ASC clarify and report the 
criteria it uses to assess states' overall compliance with Title XI 
and develop specific procedures for its other monitoring 
responsibilities. 

We agree with your recommendations. Consistent with your second 
finding above, the OCC acknowledges the challenges for the ASC with 
implementing its new responsibilities and authority under the Act. The 
OCC, through representation on the ASC, is committed to ensuring that 
the ASC is positioned to effectively carry out its statutory mandates. 

We appreciate the opportunity to comment on the draft report. 

Sincerely, 

Signed by: 

John Walsh: 
Acting Comptroller of the Currency: 

[End of section] 

Appendix IX: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

William B. Shear (202) 512-8678 or shearw@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Steve Westley, Assistant 
Director; Alexandra Martin-Arseneau; Yola Lewis; John McGrail; Marc 
Molino; Carl Ramirez, Kelly Rubin; Jerome Sandau; Jennifer Schwartz; 
Andrew Stavisky; and Jocelyn Yin made key contributions to this report. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 101-73, 103 Stat. 183 (1989). 

[2] Federally related transactions are real estate transactions that 
require the services of an appraiser and involve financial 
institutions regulated by the federal government. These include banks, 
thrifts, and credit unions. Real estate transactions of mortgage 
bankers, brokers, pension funds, and insurance companies are not 
included. 

[3] FFIEC is a formal interagency body empowered to prescribe uniform 
principles, standards, and report forms for the federal examination of 
financial institutions by the Board of Governors of the Federal 
Reserve System, the Federal Deposit Insurance Corporation, the 
National Credit Union Administration, the Office of the Comptroller of 
the Currency, and the Bureau of Consumer Financial Protection, and to 
make recommendations to promote uniformity in the supervision of 
financial institutions. 

[4] GAO, Residential Appraisals: Opportunities to Enhance Oversight of 
an Evolving Industry, [hyperlink, 
http://www.gao.gov/products/GAO-11-653] (Washington, D.C.: July 13, 
2011). 

[5] Pub. L. No. 111-203, 124 Stat. 1376. 

[6] The remaining member of FFIEC is the State Liaison Committee, 
which includes representatives from the Conference of State Bank 
Supervisors, the American Council of State Savings Supervisors, and 
the National Association of State Credit Union Supervisors. 

[7] ASC does not compensate its board members for their service. 

[8] Dodd-Frank Act § 1476. 

[9] HMDA data are reported to FFIEC by lenders and are estimated to 
capture 75 to 85 percent of conventional mortgages (those without 
government insurance or guarantees) and 90 to 95 percent of mortgages 
insured by HUD’s Federal Housing Administration. 

[10] The territories included in our survey are Guam, Northern Mariana 
Islands, Puerto Rico, and the Virgin Islands. The only other U.S. 
territory—-American Samoa-—does not have a regulatory oversight 
structure for appraisers because real estate there can only be 
inherited. In the body of this report, we use the term “states” to 
refer to the 50 states, the District of Columbia, and the territories 
we surveyed. 

[11] The Dodd-Frank Act abolished OTS in 2011. In July 2011, OCC 
assumed oversight responsibility of federal savings associations from 
OTS, FDIC assumed OTS’s oversight responsibility for state savings 
associations, and the Federal Reserve assumed OTS’s oversight 
responsibility for savings and loan holding companies. 

[12] The enterprises and federal financial institutions regulators 
define market value as the most probable price that a property should 
bring in a competitive and open market under all conditions requisite 
to a fair sale, the buyer and seller each acting prudently and 
knowledgeably, and assuming the price is not affected by undue 
stimulus. 

[13] USPAP covers both the principles appraisers must apply in 
developing appraisals and the information the appraisal report must 
contain. 

[14] A multiple listing service is a database set up by a group of 
real estate brokers to provide information about properties sold and 
for sale. 

[15] House Committee on Government Operations, Impact of Appraisal 
Problems on Real Estate Lending, Mortgage Insurance, and Investment in 
the Secondary Market, 99th Cong., 2nd sess., 1986, H. Rep. 99-891, 4-6. 

[16] 12 U.S.C. §§ 3331, 3339-3345. 

[17] Certified appraisers are one of two broad categories of 
appraisers listed in Title XI, the other being licensed appraisers. 
Certified appraisers are qualified to appraise properties of greater 
complexity and value than licensed appraisers and must meet higher 
education and experience requirements. 

[18] The Appraisal Foundation also sponsors a third independent board, 
the Appraisal Practices Board, which was established in 2010 to 
identify and issue opinions on recognized valuation methods and 
techniques. The Appraisal Practices Board does not have 
responsibilities under Title XI. 

[19] The four territories are Guam, Northern Mariana Islands, Puerto 
Rico, and the Virgin Islands. 

[20] Evaluations are estimates of market value that do not have to be 
performed by a state-licensed or -certified appraiser. The Federal 
Reserve oversees insured state-chartered member banks and nonbank 
subsidiaries of bank holding companies and savings and loan holding 
companies. FDIC oversees insured state-chartered banks that are not 
members of the Federal Reserve System, as well as state savings 
associations. NCUA oversees federal credit unions. OCC oversees 
federally chartered banks and federal savings institutions. Both the 
Federal Reserve and FDIC share oversight with the state regulatory 
authority that chartered the bank. The Federal Reserve also has 
general authority over lenders that may be owned by federally 
regulated holding companies but are not federally insured depository 
institutions. 

[21] The federal financial institutions regulators permit evaluations 
to be performed (consistent with safe and sound lending practices) in 
certain circumstances, such as mortgage transactions of $250,000 or 
less that are conducted by regulated institutions. According to the 
regulators’ guidance, an evaluation should provide an estimate of the 
property’s market value; identify the location of the property and 
provide a description of it and its current and projected use; 
describe the methods used to confirm its physical condition and the 
extent to which an inspection was performed; indicate all sources of 
information used in the analysis; and include information on the 
preparer of the evaluation. 

[22] These loans are subject to the appraisal requirements of the 
enterprises or the federal agency that provides the insurance or 
guarantee. 

[23] OCC: 12 C.F.R. § 34.43(a)(1); Federal Reserve: 12 C.F.R. § 
225.63(a)(1); FDIC: 12 C.F.R. § 323.3(a)(1); NCUA: 12 C.F.R. § 
722.3(a)(1). 

[24] Loans that meet the exemption must have an evaluation. NCUA 
regulations do not contain an exemption from the appraisal 
requirements specific to business loans. 

[25] 12 U.S.C. § 3332. 

[26] [hyperlink, http://www.gao.gov/products/GAO-11-653]. AMCs are 
third parties that, among other things, select appraisers for 
appraisal assignments on behalf of lenders and help ensure separation 
between individuals with an interest in the outcome or dollar amount 
of a mortgage transaction and the appraiser. 

[27] The FBI defines mortgage fraud as a material misstatement, 
misrepresentation, or omission relied upon by an underwriter or lender 
to fund, purchase, or insure a loan. Prior to the fourth quarter of 
fiscal year 2010, the FBI’s information system did not have a specific 
code for appraisal fraud. 

[28] ASC defines an area of concern as one in which the state is in 
compliance but could improve. 

[29] Specific requirements related to some of these areas are that 
states should investigate and resolve complaints within 1 year of the 
complaint filing date, must adopt all relevant Appraiser 
Qualifications Board criteria, and must transmit appraiser data at 
least monthly to the national registry. 

[30] A 1-year review cycle can take a number of forms, including 
annual routine compliance reviews and routine compliance reviews every 
2 years with follow-up reviews in between. 

[31] Three of the respondents to our survey did not provide a response 
to this question. 

[32] Temporary practice refers to a state’s recognition of the 
certification or license of an appraiser from another state provided: 
(1) the property to be appraised is part of a federally related 
transaction, (2) the appraiser’s business is of a temporary nature, 
and (3) the appraiser registers with the state appraiser regulatory 
agency in the state of temporary practice. 

[33] Because a state only has to have one noncompliance finding to be 
“not in substantial compliance,” this category can encompass a fairly 
wide range of performance. For example, in 2009, states in this 
category had from one to seven findings of noncompliance. 

[34] We could not assess changes in compliance categories for three 
states because only one routine compliance review was conducted of 
each state during the period we reviewed. 

[35] The remaining two states moved from “not in compliance” to “not 
in substantial compliance.” 

[36] Of the other six states, five were “in substantial compliance,” 
and one was “not in compliance.” 

[37] Although ASC developed definitions of the categories in 2005, it 
did not explicitly use the categories in its reports to states until 
2009. For example, instead of saying that a state program was not in 
substantial compliance, a report would say that the state needed to 
address particular issues to bring the program into substantial 
compliance. In 2009, in conjunction with other revisions to its state 
compliance reports, ASC began explicitly using the compliance 
categories. That year, ASC also began reporting the number of states 
in each category in its annual reports to Congress. 

[38] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999) and GAO, Internal Control Management 
and Evaluation Tool, [hyperlink, 
http://www.gao.gov/products/GAO-01-1008G] (Washington, D.C.: August 
2001). 

[39] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] and 
[hyperlink, http://www.gao.gov/products/GAO-01-1008G]. 

[40] However, the officials also indicated that the amount of 
information that could be shared was limited when agency policies or 
proposals were under deliberation or in a public comment period. The 
interagency workgroup includes officials from the Federal Reserve, 
FDIC, OCC, NCUA, FHFA, and CFPB. The workgroup develops uniform 
appraisal guidance that is issued by all of these agencies. 

[41] The minutes indicated that on at least two occasions, the HUD 
representative to the ASC board provided updates on appraisal policies 
for mortgages insured by HUD’s Federal Housing Administration. 

[42] 12 U.S.C. § 3332(a)(2). 

[43] ASC adopted some of the report’s recommendations such as creating 
a Deputy Executive Director position and allowing states to respond to 
preliminary compliance review findings prior to the issuance of final 
reports. 

[44] In a 2003 report, we discussed the view of state appraiser 
regulatory agencies that lenders and federal financial institutions 
regulators were not actively reporting Title XI violations to state 
regulators. See GAO, Regulatory Programs: Opportunities to Enhance 
Oversight of the Real Estate Appraisal Industry, [hyperlink, 
http://www.gao.gov/products/GAO-03-404] (Washington, D.C.: May 14, 
2003). The Dodd-Frank Act amended the Truth in Lending Act to require 
lenders (among others) who have a reasonable belief that an appraiser 
has not complied with ethical and professional requirements under 
federal or state law or USPAP to report the failure to the appropriate 
state licensing agency. The Federal Reserve has implemented this 
requirement through its Truth in Lending regulations (known as 
Regulation Z). See 12 C.F.R. § 226.42(g). 

[45] The Appraisal Foundation existed prior to ASC. In 1986, nine 
leading professional appraisal organizations in the United States and 
Canada formed a committee that developed the original version of 
USPAP. The Appraisal Foundation was established in 1987 to implement 
USPAP, which was approved and adopted by the foundation’s Appraisal 
Standards Board in 1989. 

[46] The Association of Appraiser Regulatory Officials is an industry 
group that represents state appraiser regulatory agencies. 

[47] For example, in reviewing the Appraisal Foundation’s 2011 grant 
proposal, the Executive Director asked the Foundation for information 
about reasons for cost increases above the general rate of inflation 
and the rationale for increasing the scope of a project. 

[48] The review is an “agreed-upon procedures review,” meaning that 
ASC determines what facets of the foundation’s activities and records 
should be reviewed. According to the independent audit firm, the 
review is not an audit and does not express an opinion on the 
foundation’s financial statements or any of its components. 

[49] ASC staff also attend meetings of the foundation’s Appraisal 
Practices Board, which does not have responsibilities under Title XI 
and is not funded by ASC. 

[50] Appraisers can hold credentials in more than one state. 
Therefore, at the national level, the total number of appraiser 
credentials is greater than the total number of appraisers. 

[51] An exception report is a listing of abnormal items or items that 
fall outside of a specified range. 

[52] For example, some states require or request complaints to be 
notarized, while others do not. 

[53] Pub. L. No. 111-203, § 1473(i) (codified at 12 U.S.C. § 
3338(b)(5)). The act states that the grants are to be made in 
accordance with policies to be developed by ASC. 

[54] Four responded that they did not know, and one provided no 
response. 

[55] Although the Dodd-Frank Act also authorized ASC to collect 
registry fees from AMCs, revenues from this source may not be 
available for several years because regulations for AMC registration 
must be developed and implemented first. 

[56] Most of the states appraiser regulatory agencies that responded 
to our survey indicated that they relied on fee revenues to fund their 
operations. 

[57] Of the remaining 24 respondents, 10 said their state had no such 
authority, 10 did not know, and 4 did not provide a response. 

[58] Pub. L. No. 111-203, § 1473(d) (codified at 12 U.S.C. § 3335). 
ASC must prescribe regulations in accordance with the Administrative 
Procedures Act after providing notice and opportunity for comment. 

[59] FDIC officials told us that ASC had the authority to remove an 
appraiser from the national registry prior to the Dodd-Frank Act, but 
only after a state had taken a major disciplinary action such as 
suspension or revocation of an appraiser’s license. In addition, ASC’s 
former General Counsel told us that ASC had informally removed 
appraisers when criminal actions were being investigated by state 
officials because of the length of time it took to resolve such cases. 

[60] One of these appraisers noted that temporary removal from the 
registry could result in loss of income and informal blacklisting even 
if the appraiser is ultimately absolved. 

[61] Pub. L. No. 111-203, § 1473(h)(1)(A) (codified at 12 U.S.C. § 
3338(a)(4)(A)). 

[62] In November 2011, ASC’s Executive Director told us that the 
number of credentials in the national registry had fallen to about 
106,000. 

[63] From 2007 to 2010, the number of appraiser credentials dropped 
from 121,407 to 110,026 (-9.37 percent). In 2010, the 110,026 
appraiser credentials generated approximately $2.8 million in revenue 
(based on the $25 fee). If the number of appraiser credentials remains 
constant, the new $40 fee will generate about $4.4 million in 2014, a 
60 percent increase over 2010. However, if the number of appraisal 
credentials drops by another 9.37 percent from 2011 to 2014 (i.e., 
from 110,026 to 99,717), the fee increase would generate about $4.0 
million (based on the $40 fee) in 2014. This would represent a 45 
percent increase in revenues compared with 2010. These calculations 
assume full implementation of the fee increase by 2014. 

[64] Pub. L. No. 111-203, § 1473(h)(1)(A) (codified at 12 U.S.C. § 
3338(a)(4)(B). 

[65] Pub. L. No. 111-352, 124 Stat. 3866. 

[66] This figure excludes mortgages for manufactured homes. We 
examined HMDA data for manufactured and multifamily properties 
separately. Data limitations prevented similar analysis of real estate-
secured business loans, which have an appraisal exemption threshold of 
$1 million. The volume of business loans that are $1 million or less—
commonly referred to as small business loans—is substantial. According 
to an analysis by the Federal Reserve Bank of Richmond, $372 billion 
in small business loans secured by commercial real estate were made in 
2009. However, some portion of those loans may not have met regulatory 
criteria for the appraisal exemption, which requires the primary 
source of repayment to be operating cash flow from the business rather 
than rental income or the sale of real estate. 

[67] The 2009 data were the most recent data for which we could 
complete our data processing and reliability steps within the time 
frame of our review. 

[68] For purposes of HMDA reporting, a multifamily property is a 
residential structure that houses five or more families. Even though 
apartment and condominium buildings can house five or more families, 
they comprise individual ownership-deeded units reported as one-to-
four family dwellings. HMDA reporting uses HUD’s definition of 
manufactured housing, which is housing that is factory-built and 
essentially ready for occupancy upon leaving the factory and being 
transported to a building site. 

[69] The proportion rose from 55.6 percent to 80.2 percent in Nevada, 
25.1 percent to 42.4 percent in California, 72.4 percent to 80.2 
percent in Florida, and 70.2 to 78.6 in Arizona. According to FHFA’s 
purchase-only house price index, these four states had the greatest 
decline in average home prices from the first quarter of 2006 through 
the fourth quarter of 2009. 

[70] Regulations exempt loans that qualify for sale to the enterprises 
or are insured or guaranteed by a federal agency from Title XI 
appraisal requirements. OCC: 12 C.F.R. Part 34, subpart C; Federal 
Reserve: 12 C.F.R. Part 208, subpart E and 12 C.F.R. Part 225, subpart 
G; FDIC: 12 C.F.R. Part 323; NCUA: 12 C.F.R Part 722. 

[71] These market shares are expressed in terms of dollar volume and 
do not include home equity loans. 

[72] [hyperlink, http://www.gao.gov/products/GAO-11-653]. Available 
enterprise data for 2006 through 2008 showed that appraisals were 
required for almost 90 percent of mortgages, although the data covered 
a smaller proportion of the enterprises’ total mortgage purchases than 
the data for 2009 through 2010. Because the enterprises’ requirements 
are minimum requirements, lenders can and sometimes do exceed them. 
The enterprises do not require an appraisal when their underwriting 
analysis indicates that the default risk of a mortgage is sufficiently 
low to instead require validation of the sales price (or loan amount 
in the case of a refinance) by an AVM-generated estimate of value. 

[73] Department of the Treasury and Department of Housing and Urban 
Development, Reforming America’s Housing Finance Market: A Report to 
Congress (February 2011). 

[74] Pub. L. No. 111-203, § 1473(a) (codified at 12 U.S.C. § 3341(b)). 

[75] Appraisal costs can vary considerably depending on the location 
and size of the property, among other factors. See [hyperlink, 
http://www.gao.gov/products/GAO-11-653]. 

[76] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] and 
[hyperlink, http://www.gao.gov/products/GAO-01-1008G]. 

[77] The Dodd-Frank Act abolished the Office of Thrift Supervision in 
2011. 

[78] In this appendix, we use the term “state” to refer to the 50 
states, the District of Columbia, and the territories we surveyed. 

[79] Pub. L. No. 111-352. ASC is not subject to GPRAMA requirements, 
but ASC officials indicated their strategic plan would include 
GPRAMA’s general components. 

[80] According to enterprise and Federal Reserve officials, HMDA data 
do not capture all of the loans the enterprises purchase, including 
(1) many loans initially sold to intermediaries (e.g., bank 
affiliates) and subsequently to the enterprises and (2) loans 
originated and purchased in different years. In addition, the Federal 
Reserve has noted that turmoil in the housing and mortgage markets 
resulted in higher levels of nonreporting by lenders who ceased 
operations in 2007. 

[81] The 2009 data were the most recent data for which we could 
complete our data processing and reliability steps within the time 
frame of our review. 

[82] GAO-11-653. 

[83] A certified general appraiser can perform any real property 
appraisal. A certified residential appraiser can perform appraisals 
for noncomplex, commercial real estate transactions valued at $250,000 
or less and appraisals in connection with residential real estate of 
any value, without regard to complexity. A licensed appraiser can 
perform appraisals when the services of a certified appraiser are not 
required by statute or regulation. In most states, licensed appraisers 
may appraise noncomplex, one-to-four-family residential transactions 
up to $1,000,000, and commercial real estate transactions up to 
$250,000. A transitionally licensed appraiser has passed a test but 
has not met all of the education or experience requirements for a 
state license. The Dodd-Frank Act effectively eliminates transitional 
licenses because it requires all practicing appraisers to meet or 
exceed Appraiser Qualifications Board requirements for a state license. 

[84] Appraisers can hold credentials in more than one state. 
Therefore, at the national level, the total number of appraiser 
credentials is greater than the total number of appraisers. 

[85] The most common appraisal approach is to find recent sales of 
comparable properties and make adjustments to the selling prices of 
those properties based on any differences between them and the subject 
property to estimate market value. 

[86] A multiple listing service is a database set up by a group of 
real estate brokers to provide information about properties sold and 
for sale. 

[87] The enterprises are planning to fully implement UMDP by March 
2012. FHFA officials told us that they had not made any decisions 
about whether to make the dataset available more widely. See GAO-11-
653 for a fuller discussion of UMDP. 

[88] However, as discussed in the body of this report, the Dodd-Frank 
Act authorizes ASC to temporarily remove individual appraisers from 
the national registry, pending disciplinary action by a state. 

[End of section] 

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