Who Can Review Appraisals? The FDIC Weighs In.

There is a mandate that all appraisals be reviewed prior to the final credit decision. In some cases, in a residential context, with the prior approval of a federal regulator, you may be able to move to a sampling methodology instead of reviewing each appraisal, but the basic mandate is that every appraisal be reviewed for underwriting purposes and compliance prior to the final credit decision.

So, who can do the review? According to the FDIC’s Supervisory Insights (Winter 2011), “Establishing reviewer qualification criteria helps ensure internal and external (if outsources) reviewers have the requisite education, experience, and competence to perform the level of review appropriate for the type, risk, and complexity of the transaction. It also ensures that the appraisal/evaluation contains sufficient information and analysis to support the decision to engage in the transaction.” When dealing with reviewer qualifications, we look at their education, experience, and competence, and not just in a vacuum, but specifically with respect to the property type, the risk profile, and the complexity.

People often ask, “Am I supposed to review the review?” The FDIC Supervisory Insights article clarifies that “In addition, having a qualified reviewer conduct a risk-based, secondary review of a sample of each reviewer’s work products can help achieve consistency in the review process, monitor the effectiveness of the reviewers, and address any weaknesses in a timely manner.”