CAR Legal & Liability Considerations Flashcards

Under FIRREA, which federal regulatory body is primarily responsible for establishing minimum standards for state-licensed and state-certified appraisers?

Answer: The Appraisal Subcommittee (ASC) in coordination with The Appraisal Foundation

FIRREA created the ASC to oversee state appraiser programs and authorized The Appraisal Foundation to set minimum qualifications and USPAP through its Boards.

An appraiser reviewer discovers that the appraiser on a federally related transaction is licensed but not certified. Under FIRREA threshold rules, this may be a problem if:

Answer: The transaction value exceeds the applicable de minimis threshold requiring a certified appraiser

FIRREA and interagency guidance establish de minimis thresholds above which a certified appraiser (not merely licensed) is required for federally related transactions.

What is the primary liability concern for a reviewer who issues a positive review of an appraisal that was later found to be fraudulent?

Answer: The reviewer may share liability if they failed to exercise the level of competency expected of a reasonable reviewer

Reviewers owe a duty of care; failing to identify red flags that a competent reviewer should have caught can expose the reviewer to professional and legal liability.

Under USPAP Standard 3, what is a reviewer's obligation when they form their own opinion of value that differs from the appraiser's conclusion?

Answer: The reviewer must comply with Standard 1 and Standard 2 requirements when developing and reporting their own value opinion

USPAP Standard 3 explicitly states that when a reviewer develops their own value opinion, they must comply with Standards 1 and 2, making the review also an appraisal.

What does the term 'scope creep' mean in the context of a review assignment?

Answer: Performing work beyond the agreed-upon scope without client authorization, which may create uncompensated liability exposure

Scope creep occurs when a reviewer performs tasks outside the defined assignment conditions, potentially creating unauthorized deliverables and associated liability without compensation.

Which federal law prohibits appraisers from being coerced, pressured, or bribed by lenders or mortgage brokers to reach a predetermined value conclusion?

Answer: The Dodd-Frank Wall Street Reform and Consumer Protection Act (including appraiser independence provisions)

Dodd-Frank codified appraiser independence requirements and prohibits any party with an interest in a transaction from influencing the appraiser's value opinion.