Q: A financial institution plans to make a construction loan to a tract developer to build multiple homes.45 Is it permissible for the developer to order appraisals on the properties to support the construction loan request? Could the developer select an appraiser from the lender’s approved appraiser list and in turn submit the appraiser’s name to potential permanent lenders?
A: No, the financial institution may not accept a borrower-ordered appraisal and may not allow the borrower to select an appraiser from its approved appraiser list.46
45 See Frequently Asked Questions on Residential Tract Development and Lending (September 8, 2005); OCC: https://www.occ.gov/news-issuances/bulletins/2005/bulletin-2005-32.html; Board: https://www.federalreserve.gov/boarddocs/srletters/2005/SR0514a1.pdf; and FDIC: https://www.fdic.gov/news/news/financial/2005/fil9005a.html.
46 OCC: 12 CFR 34.45(b); Board: 12 CFR 225.65(b); and FDIC: 12 CFR 323.5(b).