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4000 - Advisory Opinions

Interpretation of 12 C.F.R. § 323.5 Where Mortgage Broker Acts as Agent for Institution in Ordering Appraisals


October 17, 1991

Walter P. Doyle, Counsel

This responds to your October 10 letter requesting a legal interpretation of § 323.5 of FDIC's appraisal rule as it relates to mortgage brokers acting as agent for a regulated institution in ordering appraisals.

A mortgage broker that has entered into an agreement to generate loan applications to be approved and funded by a regulated institution may be considered an "agent" of the institution. As the agent for the institution, the mortgage broker would be required to obtain appraisals in accordance with the rule in the same manner that the institution would if it were making the loan directly. The institution remains responsible for complying with the appraisal rule. It is recommended that the agreement with the agent be reduced to writing and set out the agent's responsibilities to ensure compliance with the requirements of the appraisal rule. The institution should establish also compliance procedures to review the performance of its agent.

A mortgage company is not acting as agent for an institution when the mortgage company takes the initial credit risk and offers the funded mortgage for sale to the public. A new appraisal is not required, however, if the real estate supporting the purchased mortgage was appraised in accordance with the regulation at the time the loan was originated.

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