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1.3.2.6 Appraiser

Originators, or in some cases mortgages brokers, hire an appraiser or appraisal management company (AMC) to determine the value of the property. AMCs are essentially brokers for appraisal services. They administer networks of independent appraisers to perform appraisals.

Appraisers are subject to state regulation and professional standards, as provided in the Uniform Standards of Professional Appraisal Practice which is promulgated nationally by the Appraisal Standards Board. In addition, various federal regulations and statutes establish standards for solicitation, selection, compensation, conflicts of interest, and appraiser independence for mortgage loans. These standards are discussed in more detail in § 9.2.3, infra.18

Borrowers may pay for the appraisal before the closing, or the broker or lender may pay for the appraisal and require the borrower to reimburse the cost out of the loan proceeds. In either case, the payment for the appraisal should be listed on the HUD-1 settlement statement or “Closing Disclosure.”

Obtaining an inflated appraisal is a key element of many mortgage fraud schemes.19

Footnotes