RPA Legal & Regulatory Framework for Appraisals 5 — Questions and Answers
Question 1: Under USPAP Standard 2, an appraiser must include which of the following in a real property appraisal report?
- A minimum of three comparable sales regardless of market conditions
- A signed certification that meets the requirements of Standards Rule 2-3 (Correct answer)
- The appraiser's state license number in the report body
- A geographic competency statement for each assignment
Correct answer: A signed certification that meets the requirements of Standards Rule 2-3
Standards Rule 2-3 mandates that each written real property appraisal report contain a signed certification by the appraiser, including specific required statements about bias, personal interest, and USPAP compliance.
Question 2: An appraiser suspects that a client is using an appraisal to facilitate mortgage fraud. Under USPAP's Ethics Rule, the appraiser should:
- Complete the assignment since fraud is the client's responsibility
- Refuse to perform or continue the assignment (Correct answer)
- Report suspicions to federal authorities before completing the report
- Disclose suspicions in the report's limiting conditions
Correct answer: Refuse to perform or continue the assignment
USPAP's Ethics Rule states that appraisers must not knowingly participate in an assignment that is fraudulent, and upon discovery of potential fraud, the appraiser should refuse to perform or continue the assignment.
Question 3: The Home Valuation Code of Conduct (HVCC), which was a precursor to Dodd-Frank's appraiser independence rules, was applicable to:
- All federally related residential mortgage transactions
- Conventional loans sold to Fannie Mae and Freddie Mac (Correct answer)
- FHA-insured and VA-guaranteed loans exclusively
- Commercial mortgage-backed securities only
Correct answer: Conventional loans sold to Fannie Mae and Freddie Mac
The HVCC applied specifically to conventional one- to four-unit residential mortgage loans sold to Fannie Mae or Freddie Mac, not to all federally related transactions or government-backed loans.
Question 4: Under federal law, a state-licensed residential appraiser (non-certified) is eligible to appraise federally related transactions involving non-complex residential properties valued up to:
- $250,000
- $400,000 (Correct answer)
- $1,000,000
- There is no value limit for state-licensed appraisers on non-complex residential properties
Correct answer: $400,000
State-licensed (non-certified) appraisers may appraise non-complex residential properties in federally related transactions with a transaction value below the $400,000 de minimis threshold.
Question 5: An appraiser receives a subpoena to testify about a confidential appraisal. Under USPAP, the appraiser may disclose confidential information because:
- USPAP has no confidentiality requirements in adversarial legal proceedings
- A subpoena constitutes compulsion by due process of law, which is an exception to confidentiality (Correct answer)
- The client waives confidentiality when legal proceedings involve the property
- USPAP allows disclosure whenever the appraiser deems it appropriate
Correct answer: A subpoena constitutes compulsion by due process of law, which is an exception to confidentiality
USPAP's Ethics Rule permits disclosure of confidential information when required by due process of law, including a valid court subpoena compelling testimony.
Question 6: Which of the following actions constitutes 'appraisal fraud' under federal law?
- Using a sales comparison approach when the income approach would be more appropriate
- Knowingly providing a false or misleading valuation to influence a federally related loan (Correct answer)
- Estimating value at the low end of a supportable range at the client's request
- Declining to inspect the interior of a property due to access restrictions
Correct answer: Knowingly providing a false or misleading valuation to influence a federally related loan
Under 18 U.S.C. § 1014, it is a federal crime to knowingly make false statements in a federally related transaction, including providing fraudulent appraisals designed to influence loan decisions.
Question 7: The Appraisal Foundation's Appraisal Practices Board (APB) has authority to:
- Issue mandatory USPAP standards binding on all appraisers
- Enforce USPAP violations through license revocation proceedings
- Issue voluntary guidance on recognized valuation methods and techniques (Correct answer)
- Set mandatory education requirements for appraiser certification
Correct answer: Issue voluntary guidance on recognized valuation methods and techniques
The Appraisal Practices Board issues voluntary guidance documents on recognized valuation methods and techniques; unlike the ASB, its guidance is not mandatory or part of USPAP.
RPA Legal & Regulatory Framework for Appraisals 5
Under USPAP Standard 2, an appraiser must include which of the following in a real property appraisal report?