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When the appraisal is to be used in a federally related transaction (FRT), all the requirements shown in Table 1 must be followed.
The issue is explored in Advisory Opinion 25 "Clarification of the Client in a Federally Related Transaction" from the Appraisal Standards Board of The Appraisal Foundation.
The bill, introduced in Congress in March, tackles the issue of client pressure and clarifies that financial institutions may consider an appraiser's professional designations when hiring them for an assignment in a federally related transaction. The bill also takes on the issue of reciprocity among the states (see related story, page 44).
According to Section 1119(a)(1) of Title XI: "All appraisals performed in connection with federally related transactions shall be performed only by individuals certified or licensed in accordance with the requirements of this title." Title XI defines a federally related transaction as "Any real estate-related financial transaction which (a) a federal financial institutions regulatory agency or the Resolution Trust Corporation engages in, contracts for, or regulates; and (b) requires the services of an appraiser."(73) Title XI directs each federal financial institutions regulatory agency and the RTC to prescribe appropriate regulations to implement Title XI.
10 (SMT-10) provides clarification, interpretations, explanation and elaboration on the appraiser's USPAP obligations when performing assignments for use by a federally insured depository institution in a federally related transaction and that SMT-10 also discusses supplemental standards issued by federal financial institution regulatory agencies for appraisers, as well as requirements imposed on the lender that the lender or its agent directly engage the appraiser in such assignments.
For example, if a borrower owes $125,000 on a property and wants to borrow $10,000 on a second mortgage, such a loan is not a federally related transaction because the second
Limited-scope appraisals are not acceptable in support of a federally related transaction.
The draft includes revisions to Advisory Opinion 10, clarification of "client" in a federally related transaction; a new Advisory Opinion on appraising the same property for a new client; and a new Advisory Opinion on "the normal course of business." Other proposed changes include a new statement on draft of reports; the deletion of certain definitions; and edits related to: the definition of bias; the review of restricted use appraisal reports; the records keeping and the management sections of the Ethics Rule; and the preamble.
Thus, for example, a "federally related transaction" is defined as any real estate-related financial transaction that 1) involves a federal financial institutions regulatory agency or the RTC; and 2) requires the services of an appraiser.[4] The term "federal financial institutions regulatory agency" refers to the five primary financial institutions' regulatory agencies, including the FDIC, the Board of Governors of the Federal Reserve System (Feb), the Office of the
The judge looked to federal law in his determination, under which a licensed appraiser in any state has a right to a temporary raciprocal license in another state provided: 1) the appraised property is within a federally related transaction; 2) the appraiser's business in the state is temporary; and 3) the appraiser registers with the state of temporary practice.
Synopsis: Requires a person to possess an appraiser's license in order to appraise a home or advertise or hold one's self out as an appraiser in a federally related transaction. Creates criminal penalties for practicing without a license when it is required in a federally related transaction.
Doug Burgum, North Dakota Department of Financial Institutions Commissioner Lise Kruse and the North Dakota Bankers Association-is intended to help address the ongoing shortage of licensed appraisers, which has led to significant delays in obtaining appraisals in connection with federally related transactions.

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