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January 22, 2004


To: The Chief Executive Officer
All Farm Credit System Institutions

From: Roland E. Smith, Director
Office of Examination

Subject: Federal Banking Regulatory Statement on Appraisal Independence

The Federal banking regulatory agencies, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the National Credit Union Administration, jointly issued the attached statement on appraisal and property evaluation independence on October 28, 2003. This statement addresses concerns identified by their examiners regarding the independence of the collateral evaluation process. We are sharing this information with you because it reinforces sound business practices and is consistent with the Farm Credit Administration’s (FCA’s) collateral evaluation regulations found in 12 CFR Part 614. We encourage you to review this statement and ensure your institution’s appraisal and property evaluation program meets the independence standards required by FCA regulations. This is especially important to ensure effective internal controls over the collateral evaluation and appraisal review processes are maintained and adequately documented.

If you have any questions about this memorandum, please call Thomas J. Holland, Director, Special Examination and Supervision Division, Office of Examination, at (703) 883-4483, or write to him on the Internet at e-mail address hollandt@fca.gov.


Attachment: Independent Appraisal and Evaluation Functions