Industry Insights

How to Achieve AIR Compliance using Reggora

Fannie Mae and Freddie Mac issued a material update to their Appraiser Independence Requirements this past summer (you can see our initial summary of it here). While many mortgage lenders have already adjusted their appraisal workflows to ensure compliance, we continue to receive questions about both the requirements and what should be done from an appraisal process perspective in a variety of scenarios unique to individual lenders. The GSE’s also issued an important clarification to their FAQ’s (here and here) on this topic. So, we’ve put together an update designed to help you understand the requirements and recent clarifications, and how Reggora’s platform makes it simple for you to attain AIR compliance.

If you have any questions, or need guidance on how to adjust your workflows, I’m also available for a complimentary, one-on-one consultation. We’ll discuss the update, its implications for your unique appraisal process, and how other mortgage lenders like you are handling it.

The Appraiser Independence Requirements

AIR, or the Appraiser Independence Requirements, adopted by both Fannie Mae and Freddie Mac, applies to Sellers of mortgage products to each of the entities. Valuation Independence Requirements as cited in Regulation Z applies to creditors and persons that provide settlement services for creditors for Consumer Lending transactions. Additionally, regulated banks often refer to the Interagency Real Estate Appraisal and Evaluation Guidelines when developing programs of appraisal independence. All three sources share common principles, concepts and practice recommendations to ensure the appraisal process is free of undue influence.      

Now, let’s focus on how the Reggora technology solution facilitates a Lender’s need for compliance with Fannie Mae and Freddie Mac’s updated AIR documents.  

The use of systems or web portals such as Reggora are not directly cited in the AIR requirements, guidance is noted in the AIR FAQ’s released in August of 2023 by Fannie Mae and Freddie Mac.    

AIR Identifies two categories of parties involved in the requesting and ordering placement of appraisal products:  Restricted Parties and Independent Parties.  

Restricted Parties & Independent Parties

Restricted parties include: “all members of the Seller’s Mortgage production staff; Any person who is compensated on a commission basis upon the successful closing of a Mortgage, including, but not limited to, Mortgage Brokers, Loan Originators, and real estate agents; and Any person whose immediate supervisor is a member of the Mortgage production staff or otherwise participates in the Seller’s Mortgage Production process.”  

Independent Parties include:  “the appraiser, appraisal company, appraisal management company, any entity or person related to the appraiser, appraisal company, or appraisal management company, or any other party that is part of the appraisal process.”

Restricted Parties may not have any involvement in the selection of Independent Parties or have substantive communication with the Independent Party regarding appraisal assignments (emphasis added).

Appraisal Requests vs Appraisal Ordering

FNMA FAQ 16 and Freddie Mac Restricted Parties Q2 specifically address the difference between requesting an appraisal and ordering an appraisal. Requesting an appraisal is providing the information necessary for the placement of an appraisal order. Ordering an appraisal involves the selection and engagement of the Independent Party that will manage the appraisal process and/or perform the appraisal. The Reggora platform allows a Restricted Party to request appraisal products through the platform and lenders have two options to facilitate a compliant ordering process:  

• Manually ordering the appraisal with the Independent Party
• Automated ordering the appraisal via selection algorithms

Option 1 requires the lender to provide additional controls of the workflow to provide assurances that the appraisal order placement to the Independent Party is compliant. Option 2, by design, requires no additional workflow development on the part of the Lender as it ensures compliance because the order placement and selection of the independent party is a fully automated process and cannot be influenced by any Restricted Party. Most lender’s elect Option 2. Only lenders that have dedicated resources of independent and qualified persons will use Option 1.

A compliant process is cited in FNMA FAQ 17 and Freddie Mac FAQ Restricted Parties Q2, that specifically addresses circumstances where a Restricted Party may request an appraisal order. “A Restricted Party may request an appraisal order using applicable systems as long as the Restricted Party does not have control or input over the selection of the independent party. Providing required information (e.g. property type, address, and contact information for access to the property) to facilitate the placement of an appraisal order is acceptable” Both enterprises refer back to the response that differentiates between requesting and ordering.  

Further clarification is noted by addressing the practice of directing mortgage brokers to web portals. FNMA FAQ 15 and Freddie Mac AMC Q4 addresses mortgage broker involvement with order placement. A broker, who is a Restricted Party as defined in AIR, is directed to use a web portal set up either by the lender, or by the lender’s authorized agent, through which the mortgage broker inputs a request for an appraisal that triggers the lender’s system to order an appraisal.  

The FAQ’s affirm that “a lender may direct a mortgage broker to use a web portal in this manner so long as the web portal does not allow the mortgage broker to have control of picking the AMC”. The two operative words above are system and web portal.

Achieving Compliance

The Reggora Platform, is a web-based technology software system, also commonly referred to as a web portal, that makes available to Lenders the appropriate controls to work flows that allow Restricted Parties to provide the necessary information needed to initiate an appraisal order, without the Restricted Party being involved in the Independent Party Selection.

The team here at Reggora is here to assist with meeting your compliance needs in the complicated arena of appraisal order management. In fact, you can book a one-on-one consultation call with me here — even if you’re not a client of ours. Our team of dedicated and seasoned professionals works constantly with lenders to ensure their workflows are  compliant with both regulatory and policy requirements.

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How to Achieve AIR Compliance using Reggora