For LAPP lenders, VA requires the QC audit system to review mortgage loan files to evaluate the adequacy and quality of the lender's staff appraisal reviews. This QC system must be independent of the lender’s loan production operation. The lender must furnish VA with findings and information about the system on request.


Independent QC reviewers. Reviews of the staff appraisal reviewer's work may be performed by an independent party or an independent internal audit division that reports directly to the lender’s chief executive officer.


Training for QC personnel. QC reviewers should possess a basic familiarity with appraisal theory and techniques, and the ability to prescribe appropriate corrective actions when they identify problems in the appraisal review process.


Frequency of reviews. The QC plan must require desk reviews of each staff appraisal reviewer's appraisal reviews on a routine basis, monthly or quarterly.


Sample size. The sample size should be no less than five percent of the staff appraisal reviewer'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.


Review criteria. QC reviews should consider the overall quality of the staff appraisal reviewer's appraisal review, the acceptability of the property in light of VA minimum property requirements and the appropriateness of the reasonable value determination.


VA requirements. The QC system must provide assurance that all current pertinent VA regulations, directives and other releases are maintained and immediately available to quality control personnel and staff appraisal reviewers.


Management notification. 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.


Corrective action. The QC system must require senior management to promptly initiate and document actions to correct deficiencies and provide staff appraisal reviewers with corrective instructions.


Review of fee panel appraisals. In addition to reviews of the staff appraisal reviewer's work, random field reviews of VA fee panel appraisals should be performed. These reviews can be done by the staff appraisal reviewer or an independent appraiser on a contract basis. The plan must require formally reporting any substantive negative findings to the VA regional office where the appraiser is a member of the fee panel.