Page 353
Topic 2. Lender Quality Control System Requirements
June 28, 2010, Change 14
Page 354
This section has been updated to add subsection lettering and to make minor grammatical edits.
a. Introduction
To qualify for LAPP authority, the lender must have an effective quality control (QC) system which ensures the adequacy and quality of its staff appraisal reviews. This QC system must be independent of the lender’s loan production operation.
Upon request, the lender must agree to furnish VA with findings and information about the system. The senior officer must certify on each SAR’s Lender's Staff Appraisal Reviewer Application (SAR) Application, VA Form 26-0785, that the QC system meets the requirements detailed in this section.
b. QC Reviewers
Reviews of the SARs’ work may be performed by an independent party or independent internal audit division which reports directly to the lender’s chief executive officer. QC personnel should possess a basic familiarity with appraisal theory and techniques and the ability to prescribe appropriate corrective actions when problems in the appraisal review process are identified.
c. Frequency and Scope of Reviews
Perform desk reviews of each SAR’s appraisal reviews on a routine basis (monthly or quarterly). The sample size should be no less than 5 percent of the SAR’s LAPP cases processed monthly or a minimum number of cases (for example, five cases).
There must be a procedure for expanding the scope of the reviews if a pattern of deficiencies is identified.
d. QC Review Criteria
QC reviews should consider the:
overall quality of the SAR’s appraisal review,
acceptability of the property in light of VA minimum property requirements, and
appropriateness of the reasonable value determination.
e. Maintenance of VA Publications
The QC system must provide assurance that all current pertinent VA regulations, directives, and other releases are maintained and immediately available to the quality control personnel and SARs.
f. Management Notification and Corrective Action
The QC system must provide for written notification of deficiencies cited as a result of audits or reviews at least quarterly to the lender's senior management or chief executive officer.
The QC system must require senior management to promptly initiate and document actions to correct deficiencies and provide SARs with corrective instructions.
Page 355
g. Review of VA Fee Panel Appraisals
In addition to reviews of the SARs’ work, random field reviews of VA fee panel appraisals should be performed. These reviews can be done by the SAR, or an independent appraiser on a contract basis.
Note: Formally report any substantive negative findings to the VA Regional Loan Center where the appraiser is a member of the fee panel.