FRHY5_20160418_omb

Supporting Statement for the
Reporting and Recordkeeping Requirements of Regulation H and Regulation Y
Associated with Minimum Requirements for Appraisal Management Companies
(FR HY-5; OMB No. to be obtained)
Minimum Requirements for Appraisal Management Companies
(Docket No. R-1486) (RIN 7100-AE15)
Summary
The Board of Governors of the Federal Reserve System (Board), under delegated
authority from the Office of Management and Budget (OMB), proposes to implement the
mandatory Reporting and Recordkeeping Requirements of Regulation H and Regulation Y
Associated with Minimum Requirements for Appraisal Management Companies (AMCs)
(FR HY-5; OMB No. to be obtained). The Office of the Comptroller of the Currency (OCC),
Federal Deposit Insurance Corporation (FDIC), and Federal Housing Finance Agency (FHFA)
are separately submitting the requirements to OMB for approval under section 3507(d) of the
Paperwork Reduction Act (PRA) and section 1320.11 of OMB’s implementing regulations
(5 CFR part 1320). The PRA classifies reporting, recordkeeping, or disclosure requirements of a
regulation as an “information collection.”1
On June 9, 2015, the OCC, Board, FDIC, National Credit Union Administration
(NCUA), Bureau of Consumer Financial Protection (Bureau), and FHFA (collectively, the
agencies) published a joint final rule in the Federal Register (80 FR 32658). This final rule
implements the minimum requirements in section 1473 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-Frank Act)2 to be applied by States in the registration and
supervision of AMCs; and for AMCs that are subsidiaries owned and controlled by an insured
depository institution and regulated by a Federal financial institutions regulatory agency
(Federally regulated AMCs). Under the final rule, these Federally regulated AMCs do not need
to register with a State, but are subject to the same minimum requirements as State-regulated
AMCs. The final rule also implements the requirements for States to report to the Appraisal
Subcommittee (ASC) of the Federal Financial Institutions Examination Council (FFIEC) the
information required by the ASC to administer the new national registry of AMCs (AMC
National Registry). In conjunction with this implementation, the FDIC is integrating its
appraisal regulations for State nonmember banks and State savings associations. The final rule is
effective on August 10, 2015.
The Board’s reporting and recordkeeping requirements of Regulation H and
Regulation Y associated with minimum requirements for AMCs are found in sections 225.192
through 225.196. The Board estimates the total annual burden for the information collection to
be 1,545 hours. There are no required reporting forms associated with this information
collection.

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2

See 44 U.S.C. § 3501 et seq.
Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010).

Background and Justification
Section 1473 of the Dodd-Frank Act added a new section 1124 to Title XI of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) that
established minimum requirements to be applied by States in the registration and supervision of
AMCs. An AMC is an entity that serves as an intermediary for, and provides certain services to
creditors. These minimum requirements apply to States that have elected to establish, pursuant
to section 1117 of FIRREA, an appraiser certifying and licensing agency with authority to
register and supervise AMCs (participating States). Section 1473 of the Dodd-Frank Act also
requires the ASC to maintain an AMC National Registry, which will include AMCs that are
either registered with, and subject to supervision by, a State appraiser certifying and licensing
agency or are subsidiaries owned and controlled by Federally regulated insured depository
institution and regulated by a Federal financial institution regulatory agency. Section 1124(e)
further requires the agencies to promulgate regulations for the reporting of the activities of
AMCs to the ASC in determining the payment of the annual fee for the AMC National Registry.
Pursuant to FIRREA section 1124, the agencies must establish, by rule, minimum
requirements to be imposed by a participating State appraiser certifying and licensing agency on
AMCs doing business in the State. Specifically, pursuant to section 1124(a), participating States
must require that AMCs (1) register with, and be subject to supervision by, the State appraiser
certifying and licensing agency in the State or States in which the company operates; (2) verify
that only State-certified or State-licensed appraisers are used for Federally related transactions;
(3) require that appraisals comply with the Uniform Standards of Professional Appraisal Practice
(USPAP); and (4) require that appraisals are conducted in accordance with the statutory
valuation independence standards pursuant to the Truth in Lending Act (TILA) (15 U.S.C. §
1639e) and its implementing regulations. An AMC that is a subsidiary owned and controlled by
an insured depository institution and regulated by a Federal financial institutions regulatory
agency is subject to all of the minimum requirements, except the requirement to register with a
State.
In participating States, the minimum requirements apply to any AMC that provides
appraisal management services, as defined in the final rule, and meets the statutory panel size
threshold, which is that the AMC oversees an appraiser panel of more than 15 State-certified or
State-licensed appraisers in a State or 25 or more appraisers in two or more States in a calendar
year or 12- month period under State law. States may establish requirements for AMC
registration and supervision that are in addition to these minimum requirements.
Pursuant to section 1124(f), beginning 36 months from the effective date of the final rule,
an AMC that meets the statutory size threshold may not provide services for a Federally related
transaction in a State unless the AMC is registered with the State or is subject to oversight by a
Federal financial institutions regulatory agency. This provision effectively allows each State up
to three years to establish registration and supervision systems that meet the requirements of the
final rule before AMCs in the State will be subject to the aforementioned restriction in the
absence of such a regime. The ASC, with the approval of the FFIEC, may delay the restriction
for an additional year if the ASC makes a written finding that a State has made substantial
progress toward implementation of a system that meets the criteria in Title XI of FIRREA. Even

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after the three-year implementation period has passed, a State may still elect to establish a
regime, at which point AMCs operating in the State would be able to provide appraisal
management services for Federally related transactions.
Section 1124 does not compel a State to establish an AMC registration and supervision
program, nor is a penalty imposed on a State that does not establish a regulatory structure for
AMCs within 36 months of issuance of the final rule. However, in a State that has not adopted
the AMC minimum requirements established by this rule, AMCs are barred by section 1124
from providing appraisal management services for Federally related transactions, unless they are
owned and controlled by a Federally regulated depository institution. Thus, appraisal
management services may still be provided for Federally related transactions in non-participating
States by individual appraisers, by AMCs that are below the minimum statutory panel size
threshold, and as noted previously, by Federally regulated AMCs.
Description of Information Collection
The Board’s reporting and recordkeeping requirements of Regulation H and
Regulation Y associated with minimum requirements for AMCs are found in sections 225.192
through 225.196. There are no required reporting forms associated with these information
collections. Compliance with the information collections is mandatory and no other federal law
mandates these reporting and recordkeeping requirements.
AMC Reporting Requirements - Section 225.195(b) requires that a Federally regulated
AMC must report to the State or States in which it operates the information required to be
submitted by the State pursuant to the ASC’s policies, including (1) information regarding the
determination of the AMC National Registry fee and (2) the information listed in section
225.194.
Section 225.194 provides that an AMC may not be registered by a State or included on
the AMC National Registry if such company is owned, directly or indirectly, by any person who
has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of
revocation, or revoked in any State. Each person that owns more than 10 percent of an AMC
shall submit to a background investigation carried out by the State appraiser certifying and
licensing agency. While section 225.194 does not authorize States to conduct background
investigations of Federally regulated AMCs, it would allow a State to do so if the Federally
regulated AMC chooses to register voluntarily with the State.
State Reporting Requirements to the ASC - Section 225.196 requires that each State
electing to register AMCs for purposes of permitting AMCs to provide appraisal management
services relating to covered transactions in the State must submit to the ASC the information
required to be submitted under this Subpart and any additional information required by the ASC
concerning AMCs.

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Written Notice of Appraiser Removal from Network or Panel - Section 225.192(b)
provides that an appraiser in an AMC’s network or panel is deemed to remain on the network or
panel until (1) the AMC sends a written notice to the appraiser removing the appraiser with an
explanation or (2) receives a written notice from the appraiser asking to be removed or a notice
of the death or incapacity of the appraiser. The AMC would retain these notices in its files.
Establish and Maintain a Registration and Supervision Program - States seeking to
register AMCs must have an AMC registration and supervision program. Section 225.193(a)
requires each participating State to establish and maintain within its appraiser certifying and
licensing agency a registration and supervision program with the legal authority and mechanisms
to (1) review and approve or deny an application for initial registration; (2) periodically review
and renew, or deny renewal of, an AMC’s registration; (3) examine an AMC’s books and records
and require the submission of reports, information, and documents; (4) verify an AMC’s panel
members’ certifications or licenses; (5) investigate and assess potential law, regulation, or order
violations; (6) discipline, suspend, terminate, or deny registration renewals of, AMCs that violate
laws, regulations, or orders; and (7) report violations of appraisal-related laws, regulations, or
orders, and disciplinary and enforcement actions to the ASC.
Section 225.193(b) requires each participating State to impose requirements on AMCs
not owned and controlled by an insured depository institution and regulated by a Federal
financial institution regulatory agency to (1) register with and be subject to supervision by a
State appraiser certifying and licensing agency in each State in which the AMC operates; (2)
engage only State-certified or State-licensed appraisers for Federally regulated transactions in
conformity with any Federally regulated transaction regulations; (3) establish and comply with
processes and controls reasonably designed to ensure that the AMC, in engaging an appraiser,
selects an appraiser who is independent of the transaction and who has the requisite education,
expertise, and experience necessary to competently complete the appraisal assignment for the
particular market and property type; (4) direct the appraiser to perform the assignment in
accordance with the USPAP; and (5) establish and comply with processes and controls
reasonably designed to ensure that the AMC conducts its appraisal management services in
accordance with section 129E(a)-(i) of TILA.
Time Schedule for Information Collection
The Board’s reporting and recordkeeping requirements of Regulation H and
Regulation Y associated with minimum requirements for AMCs are event-generated. There are
no required reporting forms associated with this information collection. There is no mandatory
retention period for the information collection.
Legal Status
Section 1473 of the Dodd-Frank Act specifically provides that the agencies “shall jointly,
by rule, establish minimum requirements to be applied by a State in the registration of appraisal
management companies” (12 U.S.C. § 3353(a)). The agencies also “shall jointly promulgate
regulations for the reporting of the activities of AMCs to the Appraisal Subcommittee in
determining the payment of the registry fee” (12 U.S.C. § 3353(e)). In addition, each State

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appraiser certifying and licensing agency must “transmit reports on the issuance and renewal of
licenses and certifications, sanctions, disciplinary actions, license and certification revocations,
and license and certification suspensions on a timely basis to the national registry of the
Appraisal Subcommittee … including investigations initiated and disciplinary actions taken”
(12 U.S.C. § 3338(a)(2) and (a)(3)). Accordingly, these reporting and recordkeeping
requirements are legally authorized and mandatory.
While State appraiser certifying and licensing agencies may conduct background or other
investigations regarding AMCs or their principals, the Board believes that any confidential
information would be retained by the States, and information transmitted to the ASC and the
AMC National Registry would be at such a high level as not to warrant confidential treatment.
The Board further believes there is a possibility that the agencies will come into possession of
confidential information in their oversight of Federally regulated AMCs and their compliance
with the rule. In supervising their compliance with the rule (particularly the ownership
limitations), it is possible that the agencies will investigate Federally regulated AMCs’
ownership chains and any appraiser-related disciplinary actions taken against the owners.
Further, they expect that this information may be collected during examinations and could appear
in examination reports. Should such information be obtained by the Board in the course of an
examination, it would be exempt from disclosure under exemption 8 of the Freedom of
Information Act (FOIA) (5 U.S.C. § 552(b)(8)).
Such information also may be exempt from disclosure under one or more other FOIA
exemptions. The most likely case for confidential treatment will be based on FOIA exemption 4,
which permits an agency to exempt from disclosure “trade secrets and commercial or financial
information obtained from a person and privileged and confidential” (5 U.S.C. § 552(b)(4)). To
the extent the AMC can establish the potential for substantial competitive harm, such
information would be protected from disclosure under the standards set forth in National Parks &
Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974).
Exemption 6 of FOIA might also apply with regard to non-public personal information of
owners, shareholders, directors, officers and employees of the AMCs. Exemption 6 covers
“personnel and medical files and similar files the disclosure of which would constitute a clearly
unwarranted invasion of personal privacy” (5 U.S.C. § 552(b)(6)). All requests for confidential
treatment would need to be reviewed on a case-by-case basis and in response to a specific
request for disclosure.
Consultation Outside the Agency
On April 9, 2014, the agencies published a joint notice of proposed rulemaking in the
Federal Register (79 FR 19521) requesting public comment on the proposed information
collection. The comment period for this notice expired on June 9, 2014. The agencies received
no public comments regarding the information collection. On June 9, 2015, the agencies
published a final rule in the Federal Register (80 FR 32658) and is effective on August 10, 2015.

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Estimate of Respondent Burden
The total annual burden for the Board’s reporting and recordkeeping requirements of
Regulation H and Regulation Y associated with minimum requirements for AMCs is estimated
to be 1,545 hours. These reporting and recordkeeping requirements represent less than 1 percent
of the total Federal Reserve System paperwork burden.
Number of
respondents3

Reg HY-5

Annual
frequency

Estimated
average hours
per response

Estimated
annual burden
hours

AMC reporting requirements
(Sections 225.194 and 225.195)

150

6

1

900

State reporting requirements to
the ASC (Section 225.196)

13

1

1

13

Written notice of appraiser
removal from network or panel
(Section 225.192)

6,150

1

0.08

4

1

Establish and maintain
registration and supervision
program (Section 225.193)

492

35

Total

140
1,545

The total cost to the public for this information collection is estimated to be $82,117.4
Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The annual cost to the Federal Reserve System for collecting this information is
negligible.

The Federal Reserve’s estimated number of respondents is based on a percentage of the total estimated number of
respondents for the agencies.
4
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $17, 45% Financial Managers at
$65, 15% Lawyers at $66, and 10% Chief Executives at $89). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2015, published March 30, 2016 www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/.
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