Compliance

To What Extent Do You Need to Follow USPAP?

By October 3, 2017 January 21st, 2020 No Comments
uspap

Have you caught yourself scratching your head over regulatory compliance and specifically, USPAP guidelines? If you have, you’re probably not alone. We repeatedly hear our lenders agonizing over the realities of USPAP and whether or not they really need to follow those guidelines. In short, the answer is yes, you do. However, like all tales, there’s always more to the story.

 

What is USPAP and why should you pay attention?

As we’ve stated in the past, the Uniform Standards of Professional Appraisal Practice (USPAP) are drafted and maintained by the Appraisal Standards Board (ASB). While they establish uniform guidelines for the development and reporting of real estate appraisals and appraisal requirements, and the ASB is a board sponsored by the Appraisal Foundation, neither is a governing body. Essentially, you can’t find yourself in the hot seat with either party for not complying with USPAP. However, your regulator is a different story. He or she follows the guidelines set forth by Congress. Our previous post about USPAP’s impact discusses this in depth, and we’d encourage you to take a peek.

 

In what ways are you required to follow USPAP?

Outlined in FIRREA, Congress states three necessary elements for regulatory agencies to seek out:

  1. Easily enough, the first is that the appraisal be written. We’re confident, as obvious as it may seem, that you’ve got that one under control.
  2. The second requirement is that an appraisal “be performed in accordance with generally accepted appraisal standards as evidenced by the appraisal standards promulgated by the Appraisal Standards Board of the Appraisal Foundation (ASB).” Sound familiar? This just means, the USPAP is drafted by the ASB, and Congress states appraisals must meet their standards.
  3. Finally, Dodd-Frank added that in order to comply with USPAP, real estate appraisals are subject to review by regulatory agencies and must meet these minimum standards, too.

 

The bottom line:  appraisals must comply with USPAP standards.

 

What happens if your appraisal doesn’t follow USPAP guidelines?

In a nutshell, appraisals that fail to comply with USPAP don’t meet the basic minimum appraisal requirements set forth in FIRREA, and won’t satisfy your regulator. It’s as simple as that.

 

Need to update your appraisal process? Here’s how:

If you aren’t already complying with the guidelines outlined in FIRREA (and therefore USPAP), now is the time to make some changes. Confirm your engagement letter is not only well-crafted but identifies the basic items needed to satisfy professional standards, particularly as related to USPAP. Then, evaluate other potential problem areas and explore ways to get them up to compliance standards before it’s too late.

Want a thorough evaluation of your appraisal process? Let’s chat. We’re here to work through any appraisal questions you might have.