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(6.) The definition of federally related transaction is often misunderstood.

The stated purpose of Title XI, Section 1101 is "to provide that federal and public policy interests in real estate-related transactions be protected by requiring that real estate appraisals utilized in connection with federally related transactions be performed in writing, in accordance with uniform standards, by individuals whose competency has been demonstrated and whose professional conduct will be subject to effective supervision."(63) This comprehensive legislation was the most extensive ever to affect the appraisal profession.

Before an appraiser accepts an assignment knowing the intended use of the appraisal is, or may be, for a federally related transaction by a federally insured depository institution, it is that appraiser's responsibility to disclose to the prospective client that the lender or its agent is required to directly engage the appraiser.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (PL 102-242) amended parts of Title XI of FIRREA.(11) Section 1119 of Title XI was amended by changing the effective date in paragraph (a)(1) to read "Not later than December 31, 1992." Section 1119 refers to the use of licensed or certified appraisers by financial institutions in federally related transactions. The original date was not later than July 1, 1991.(12) A state may implement its licensure/certification statute prior to the amended date (and many states have); however, every state must have had its licensing and certification program in place by December 31, 1992.

These changes in appraisal regulations mandated by Title XI of FIRREA increase the level of standards for appraisals prepared in support of federally related transactions. In addition, the regulations squarely place the responsibility to obtain proper appraisal reports with the management of the institution.

For example, all regulatory agencies must require an appraiser to be state certified if a federally related transaction has a value of $1,000,000 or more.

In response to Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, creates three classes of appraisers for federally related transactions: state licensed, state certified residential and state certified general appraisers.

1 granted one-year extensions to 26 states regarding requirements for having compliant appraisal management company registration programs in place to enable AMCs to continue engaging in federally related transactions.

* Licensed real estate appraiser: May provide appraisal services in federally related transactions with 1) non-complex one-to-four-unit residential properties with a transaction value less than $1 million; 2) complex one-to-four-unit residential properties having a transaction value of less than $250,000; and 3) commercial properties having a transaction value of less than $250,000.

However, in states that have not established a regulatory structure after 36 months from the effective date of this final rule, any non-federally regulated AMC is barred by section 1124 of Tide XI from providing appraisal management services for federally related transactions.

Section VII, "Transactions That Require Appraisals," states that most federally related transactions will require appraisals, but recognizes exemptions in certain circumstances.