Q: Should a financial institution review all appraisals and evaluations?
A: As part of the credit approval process and prior to making a final credit decision, a financial institution should review appraisals and evaluations to confirm that they comply with the agencies’ appraisal regulations and the financial institution’s internal policies.
Reviewers should be independent of the transaction and have no direct or indirect interest in the property or transaction, and be independent of and insulated from any influence by loan production staff. Additionally, as reflected in supervisory guidance, the reviews should confirm that an appraisal or evaluation contains sufficient information and analysis to support the market value conclusion and the decision to engage in the transaction.
The depth of the review should be commensurate with the risk of the transaction. Valuations supporting lower risk transactions may warrant a less robust review, while valuations supporting higher risk transactions with complex or specialized collateral, such as large ADC projects, may warrant a more robust review.22
22 Valuation Guidelines, section XV.