Category Archives: Illinois License Law
On behalf of ICAP, Ken Mrozek, MAI, SRA attended the Association of Regulatory Officials (AARO) 2014 Spring Conference, where discussions included state compliance reviews, national registry, USPAP, Dodd Frank Act, AMC Regulation, mandatory background checks, and more. This year’s spring conference held April 11-13 at the Sir Francis Drake Hotel in San Francisco, California. It was attended by representatives from the TAF, ASC, AQB, APB, ASB, AMCs, Members of the Conference of State Bank Supervisors, AI, IAAO, NAA, IAC, FBI, as well as many state regulator departments (including Brian Weaver ad Mark Thompson from Illinois). Topics of discussion at the conference included:
- Updates from TAF, ASC, AQB, APB and ASB
- Criminal History Reports & Background Checks;
- Reducing Complaint Processing Times: Successful Complaint Reductions Plans & ASC Review Findings
- Mortgage Fraud Investigation
- Supervisor/Trainee Course Development & Maintenance
- Federal Legislation on Background Checks and the February AQB Exposure Draft
- Appraiser and AMC Regulatory Issues and Updates
Additionally, time was allocated to various Advisory Council Meetings, meetings included: ASC Advisory, Qualifications Advisory, USPAP Advisory, AMC Advisory Council, and Appraiser Professional Organizations Advisory Council. The following is a summary of the discussions as presented by the various presenters.
Jim Park, Executive Director of the Appraisal Subcommittee (ASC)
- New State Rating System for State Compliance
The old ASC State Rating system had three ratings: In Substantial Compliance, Not In Substantial Compliance, Not In Compliance. The new rating system, as of June 1, 2013, states have 5 ratings. Eighteen states have been rated so far in 2014 (including Illinois). The rating categories and number of states rated are:
o Excellent (2-year review cycle)/4 States
o Good (2-year review cycle)/8 States
o Needs Improvement (2-year review cycle)/6 States
o Not Satisfactory (1-year review cycle)/ 0 States
o Poor (Continuous Monitoring)/0 States
Illinois was reviewed September 2013 and was rated: Needs Improvement with a 2-Year review cycle with follow-up.
- National Appraiser Registry
There was discussion on how states are keeping the National Appraiser Registry up to date with licensee information. At present, 27% of states are entering all data directly into the National Registry. California is using SOAP System, which is linked to the National Registry and automatically updates the registry daily.
- Appraiser Population
Mr. Park discussed the appraiser population, which peaked in 2008 with approximately 120K appraisers. It had declined at a 3% to 5% annual rate through 2012. He noted that the rate of decline decreased in 2013 to 1%, where we are currently at approximately 100K appraisers. These numbers to not include trainees.
- Dodd Frank Act – Appraisal Complaint National Hotline, Statistics
Since implementation as required by the Dodd Frank Act, the Appraisal Complaint Hotline website has had approximately 6,200 website hits. The call center has taken 287 calls and there were 289 federal referrals and 865 agency referrals.
- AMC Regulation
The AMC Regulation Requirements were released for 60-day Comment Period. The Comment Period ends June 9th. There may be another round of requirement and another 60-day comment period. Once the new requirements are enacted, states will have 36 months to comply (with one possible 12 month extension). The AMC Registration also includes a definition of an AMC, which differs from the current Illinois definition.
- Federal Regulations to Come and ASC 2014 Priorities
Mr. Park discussed additional regulations and other Appraisal Subcommittee priorities that may be seen in the future. These include:
o Interagency guidelines require all valuations to be subject to review. The Appraisal Standards Board is just starting to look at Automated Valuation Modules (AVM’s) and how the board might ensure Quality Control.
o The ASB is looking to develop a Unique Appraiser ID Number that will be tied to the National Appraiser Registry. The number would be used at the state and federal level to identify and track individual appraisers.
o The Dodd Frank Act requires the ASB to develop an AMC National Registry. This is still in progress.
David Bunton, President of The Appraisal Foundation (TAF)
- Investigator Training
TAF developed courses for Investigator training. There were two levels of investigator available and one newly announced training. There are currently 310 Level I Trainers and 204 Level II Trainers. TAF will not be offering a Level III investigator training course which will focus on evaluating appraisal report writing and reporting investigator findings.
- Foundation to Publish a “Digest of USPAP Court Cases”
TAF will publish a collection of court cases across the country which cites USPAP. The volume of court cases citing USPAP has grown exponentially, according to Mr. Bunton. A website subscription will be available in time. There was not timeframe given to when it would be published or when the website would be available.
The foundation has an electronic library available with resources to assist appraisers. Resources highlighted include:
o Training Videos
o AQB Updates
o APB – Its Role and Function
o Understanding the Appraiser Regulatory System
o Introduction to Green Buildings
o Mock Administrative Hearing
o Roundtable – Business Valuation Profession as it Relates to Financial Reporting
Mr. Bunton described a new non-profit organization established with the support of thirteen appraisal-related organizations, known as Alliance for Valuation Education. The alliance’s primary goal is to develop valuation education that broadens and complements those courses currently being offered in the marketplace. The Alliance will not be a provider of education. The education developed by the alliance will be made available for wholesale purchase by education providers and professional organizations who will serve as course presenters. Initial focus of the Alliances is on Continuing Education and may consider development of Basic Qualifying Education Courses or Remedial Courses later.
Wayne Miller, Chair of Appraiser Qualifications Board (AQB)
- Background Checks Mandate
Mr. Miller announced that earlier that day, the Board voted to postpone mandate for background checks to 1/1/2017. States can still implement prior to this date, but after 1/1/2017, states will be required to complete background checks on all new appraiser applicants.
- Personal Property Appraiser Criteria
Mr. Miller stated that the Personal Property Appraiser Criteria have not been updated since 1998. The AQB is working on updating these criteria and there will likely be an Exposure Draft released soon
- Jobs Analysis Survey sent out to appraisers recently
A recent job s analysis survey was sent over 23,000 emails throughout the country. A total of 14.6% completed the entire survey and the board expressed gratitude for all those completing the survey. The results will drive how appraisers are tested in state exams. The initial results from the survey indicate that since 2008, state appraiser exams have been testing the “right” things. The AQB is looking to see how exams could be shortened without losing effectiveness. Mr. Miller also published the success rates for State Exams, nationwide. In 2013, 1st Time Test Taker Pass Rates for Certified Residential was 69% and for Certified General was 54%.
- Other AQB Discussion points
o 466 of 509 USPAP Instructors renewed their instructor’s license this year. There were 24 new instructors.
o The AQB is considering a University Degree Program, where university students would take college courses that would count for college credit as well as Qualifying Education towards their appraiser license.
Barry Shea, Chair of Appraisal Standards Board (ASB)
- The ASB is the largest it has been, currently at 8 members. Members include: 5 Certified Generals, 2 Certified Residential, and 1 Personal Property
- The Second Exposure Draft for 2016-2017 USPAP is out for comment, some changes:
o Definition of “Report”
- Communication of Assignment Results/Drafts
- Standard 3
- Retrospective versus Prospective Value Opinions
- Reasonable Exposure Time
- Statement 9
- Confidentiality & Ethics Rule. This rule as written as a few unintended consequences. As written, an appraiser is unable to show the appraisal report under investigation to their own attorney due. Additionally, the board is considering two confidentially concerns. One, how does the rule apply to clients that are no longer in existence, such as bankrupt banks. Also, how the rule applies to staff members of an appraisal company.
- Courses being worked on by the ASB
o Appraisal Review Courses
o A course providing a more in-depth look at the applications of USPAP (beyond the 7- and 15-hour courses). This would be an optional course which would look at USPAP as it applies to extraordinary circumstances.
Rick Baumgardener, Chair of Appraisal Practices Board (APB)
- Subject Matter Expert (SME) Process
o Mr. Baumgardener discussed the Subject Matter Expert (SME) Process. There is currently a SME pool of approximately 100 experts in various topics. Once a project has been identified, SME’s will define the Scope of Work for the project and the AQB will approve before the project moves forward. This is not meant to be a “How To” guide, but only provide the basic information for appraisers. The current SME project is the Valuation of Green Buildings. There is a Second Exposure Draft – Valuation of Green Buildings: Background & Core Competency out for comment. Future projects will divide Valuation of Green Buildings into Residential and Non-Residential buildings. The APB is now considering new projects, including:
- Collection and Verification of Sales Comparable Data
- Green Buildings Residential
- Green Buildings Non-Residential
- Tangible and Non-Tangible Assets
- Valuation of Financial Reporting
Criminal History Reports and Background Checks – Defensible Decisions
- Anne Petit, Superintendent of the Ohio State Division of Real Estate & Professional Licensing discussed Defensible Decisions in Administrative Regulation. Ohio has been completing Background Checks on appraiser applicants for some time. She covered the ethical and legal concerns related to implementation. Denials are appealable, but the applicant must appeal to the state board.
- Alec Stone, Legal Counsel for California Bureau of Real Estate Appraisers stated that California statute now requires all new applicants to pass a background check. It is not yet clear if upgrades are required to pass a background check. Mr. Stone stated that 15% to 30% of initial applicants have a “rap” sheet, and over half of these are related to DUI’s. Less than 5% of offences are related to drug felonies or sexual misconduct, and less than 1% is related to fraud.
NMLS System (National Multiple Licensing Services)
- Tim Doyle, Senior VP, Conference of State Bank Supervisors discussed the NMLS System. It is available to State Regulators as a method to track their Appraiser licensees. It tracks pertinent data, including licenses, education, and discipline. It is also compliant with 2017 background check requirement. The systems are an approved channel for the FBI national database, required for proper background checks. Submitted background checks are received back in 2 to 12 hours.
Panel Discussion: Reducing Compliant Processing Times: Successful Complaint Reductions Plans and ASC Review Findings
o Mark Mrnak, Enforcement Director, Texas
o Danitra Kourkounakis, Enforcement Chief, Ohio
o Elizabeth Seaters, Enforcement Chief, California.
- Brian Weaver, Illinois Appraisal Coordinator asked Mark Mrnak on the panel about “Contingent Dismissals” used in Texas. Mr. Mrnak stated that Contingent Dismissals are successfully used in Texas to avoid formal disciplinary. This is available for 1st time offenders with minor or major deficiencies or 2nd time offenders with minor deficiencies. The offender must agree to the terms of the conditional dismissal. Terms may include courses, mentorship, or written assignments. It is usually a short timeframe for completing terms (~6 months). If offender meets required actions, the offense is dismissed with a warning letter which stays in the record, but it is not reported to ASC or AMC’s. A future offense would still be considered a 1st time offense. There are consequences if the terms are not met. The mentorship program includes board approved mentors and the offenders must pay for the mentor’s time. The offender is able to select their own mentor.
- Scott DiBiasio, Appraisal Institute’s Manager of State and Industry Affairs asked panel how states might enforce compliance if appraiser was not required to comply with USPAP, only the USPAP Ethics and Competency Section, for Non-FRT (Federally Regulated Transactions) work. Panel was unsure how to respond, and stated that states require appraisers to be compliant with USPAP. Scott alluded to potential future changes that may require appraisers of Non-FRT appraisals to only comply with the Ethics and Competency Section of USPAP.
Panel Discussion: Supervisor/Trainee Course Development & Maintenance
o John Brenan, The Appraisal Foundation (TAF) – introduced the Supervisory Appraiser/Trainee Appraiser Education Q&A published by The Appraisal Foundation. Worth checking out if you’re a trainee or supervisor. Note: State may add to the requirements beyond the federal requirements.
o Craig Steinley, South Dakota – implementation of a Supervisory/Trainee Appraiser course in South Dakota. Mr. Steinley discussed the implementation of the education in South Dakota. There is a core content section where the AQB provides minimum content. A second portion is the jurisdictional topics related to supervisory and trainee topics specific to the state. AQB allows the states to decide whether the course is considered Continuing Education or not. AQB does not stipulate time requirements. Training has ranged for various states has ranged from around four hours to two days. Illinois course is not yet complete, but is likely going to be a one day 7-hour course for both sections, and likely to be available on the fall of 2014. More to follow.
Panel Discussion: Regulatory Issues: Federal Legislation on Background Checks & the February AQB Exposure Draft
o Tim Doyle (NMLS) – Further discussed NMLS as a possible method for meeting background check compliance through the NMLS system. Noted: NMLS is owned by the Office of Comptroller and is a Not-for-Profit which is owned and regulated by state regulators. Potential future additions to system include: Examination Suite, Risk, Electronic Surety Bonds
o John Brenan (TAF) – Discussed Exposure Draft – 2015 Real Property Appraiser Qualification Criteria as it relates to Background Checks
o Doug Oldmixon (Texas) – Texas considering Background Checks for AMC’s. Also considering statute that would prevent AMC’s from passing on cost to appraiser for excess requirements beyond state requirements.
Panel Discussion: Regulatory Issues: Appraiser and AMC Regulatory Issues and Updates
o Scott DiBiasio, Appraisal Institute – Federal Guidance.
- Mr. DiBiasio discussed risk management guidance. Regulated Institutions are responsible for actions of 3rd Part Entities, such as AMC’s. This has moved more institutions (banks) to bringing AMC functions back in-house. He stated that there are approximately 60% to 80% less residential appraisals ordered through AMC’s currently than in the past year.
- 38 States have passed Comprehensive AMC Oversight & Registration Law and 17 jurisdictions have yet implemented any law. There are many states now looking to update their AMC law. Several states are considering a Recovery Fund versus Surety Bond. Additionally, several states are finding Surety Bonds at $25,000 or less inadequate and increasing to $100,000.
- Some states have added a State Board Member for AMC’s and others have developed an AMC Advisory Board to advise the State Board
- Other Issues being discussed concerning AMC’s are what constitutes an AMC. Dodd Frank Act, which currently relates primarily to residential appraisals, and if/how it relates to commercial appraisals. There is also discussion on what distinctions (if any) should be made between companies with employees versus independent contractors.
- New Proposed Rules for AMC Act were released last week. Mr. DiBiasio offered a checklist he developed to help states analyze if they meet requirements (but stated it is only a working document, not a definitive guide).
Illinois Governor Pat Quinn filed an Executive Order with the Secretary of State reorganizing the IDFPR Real Estate licensing bureaus by creating the Division of Real Estate.
The Executive Order proposes to reorganize the Department of Financial and Professional Regulation by creating a Division of Real Estate in the Department to be headed by a Director of Real Estate and transferring the functions of the Bureau of Real Estate Professions of the Department’s Division of Professional Regulation to the Division of Real Estate.
To view the December Illinois State Appraisal Board Meeting click the following links:
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On behalf of ICAP Karen Emerle, SRA attended the Association of Appraiser Regulatory Officials (AARO) Fall Conference, where discussions included reciprocity, USPAP updates, mandatory background checks, and more. This article is the third in a three-part series summarizing the four days of regulatory discussions that will impact the future of real estate appraising.
The Association of Appraiser Regulatory Officials (AARO) has a new mission statement and updated Bylaws, which were adopted October 2013. According to their website, www.aaro.net, their mission is to improve the administration and enforcement of real estate appraisal laws in member jurisdictions.
This year’s fall conference held October 19-22, 2013 at the Westin Hotel, Washington D.C. was attended by representatives from the ASC, AF, ASB, AQB, APB, AMCs, Members of the Conference of State Bank Supervisors, AI, IAAO, Farm Credit Mid-America, and the NC Deputy Director and Legal Counsel. Topics of discussion at the conference included:
- Federal Updates;
- Background Checks-Alternatives to the FBI;
- AMC Registration and Regulation Issues;
- USPAP Update for Regulators;
- Experience Training Concerns;
- Differing Terminology, Expectations and Requirements in Review Appraisal;
- A Town Hall covering a potpourri of topics and issues impacting the Appraiser Regulatory Agencies;
- Experience Training Today and Beyond; and
- Enforcement-Hearing Preparation.
Additionally, time was allocated to various committee meetings and closed sessions related to specific job functions of investigators, attorneys, board members, administrators and AMCs.
Part Three- Appraisal review, third party oversight, experience training, the Real Property Appraiser Qualification Criteria (effective January 1, 2015), & Enforcement and Hearing Preparation.
A Town Hall Discussion moderated by Danitra Koukounakis included topics including; complaints against Board Members, legal counsel, reciprocity from the enforcement side, resources, politics, and jurisdiction, license classifications, AQB instructor standings, and a discussion of what it means to be in “in good standing.”
Issues relating to appraisal review were presented by Frank O’Neill (DataQuick), Tim O’Brien (RELS), and Danny Wiley (LSI-LP). Topics discussed included: When is it an appraisal review and when does a review have to be done? The conversation involved a range of activities and terms, such as Administrative Review, Field Review, Technical Review, Quality Control, Desk Review, Standard 3 Review, Audit, and Appraisal Review. It included what can be done by a person who is not an appraiser, and what must be done by a licensed appraiser.
During the conference The Consumer Financial Protection Bureau (“CFPB”) Bulletin 2012-03 was discussed. The CFPB Bulletin 2012-03 indicates that supervised banks and nonbanks are expected to oversee their business relationships with service providers in a manner that ensures compliance with Federal consumer financial law, which is designed to protect the interests of consumers and avoid consumer harm.
The CFPB expects supervised banks and nonbanks to have an effective process for managing the risks of service provider relationships. The CFPB will apply these expectations consistency, regardless of whether it is a supervised bank or nonbank that has the relationship with a service provider. To limit the potential for statutory or regulatory violations and related consumer harm, supervised banks and nonbanks should take steps to ensure that their business arrangements with service providers do not present unwarranted risks to consumers. These steps should .include, but are not limited to:
- Conducting thorough due diligence to verify that the service provider understands and is capable of complying with Federal consumer financial law.
- Requesting and reviving the service provider’s policies, procedures, internal controls, and training materials to ensure that the service provider conducts appropriate training and oversight of employees or agents that have consumers contact or compliance responsibilities.
- Including in the contract with any service provider clear expectations about compliance, as well as appropriate and enforceable consequences for violating any compliance-related responsibilities, including engaging in unfair, deceptive, or abusive acts or practices.
- Establishing internal controls and on-going monitoring to determine whether the service provider is complying with Federal consumer financial law; and
- Taking prompt action to address fully any problems identified through the monitoring process, including terminating the relationship where appropriate.
Click to read the entire Bulletin (2012-03) written by the The Consumer Financial Protection Bureau (“CFPB”). Click here:
The panel for the topic Experience Training Today and Beyond, included Greg Stephens-Metro West Appraisal, Tony Pistilli-Axios Valuation Solutions, Alan Hummel-Forsythe Appraisal, and Cassandra Karinen-Metro West Appraisal. The discussion included a brief history of training programs from “pre-FIRREA” to the current and proposed minimum criteria set by the AQB, and the supplemental requirements that are being implemented by individual States.
The panel reminded the attendees that effective January 1, 2015 all individuals with a position of Supervisory Appraiser and Appraiser Trainees must meet or exceed the applicable minimum AQB Criteria including being required to complete a Supervisory/Trainee Appraiser course prior to being supervised or supervising an appraiser trainee. Click here to read the Supervisory Appraiser / Trainee Appraiser Course Education & Q & As including Objectives and Outline issued by the Appraisal Foundation.
Additionally, it was noted that beginning January 1, 2015 the Real Property Appraiser Qualification Criteria states “Supervisory Appraisers may not supervise more than three Trainee Appraisers at any one time, unless a state program in the licensing jurisdiction provides for progress monitoring, supervisory certified appraiser qualifications, and supervision and oversight requirements for Supervisory Appraisers.”
The panel indicated that there is an aging of the experienced appraiser population, and the statistical data from The Appraisal SubCommittee reveals the number of appraisers continues to decline. The report indicated that about 4% of appraisers leave the industry annually with only about 1% entering the industry annually. The panel indicated that there are barriers to entry into the appraisal profession including:
- Current and upcoming federal regulations;
- States supplemental requirements;
- A Bachelor’s degree or higher from an accredited college or university;
- Plus 175 hours of additional education hours;
- Certified Residential and Certified General Classifications from 2,000 to 2,500 hours, and from 2,000 to 3,000 hours, respectively;
- The reluctance of appraisers to take on a trainee;
- The economics of low starting wages compared to other professional degree programs; and
- Additional industry issues including increasing turnaround times and Scope creep.
To read the entire report titled Experience Training – Today and Beyond click here.
Training qualification criteria is established by AQB, and State appraiser regulatory agencies are required to implement real property appraiser licensing and certification requirements that are no less stringent than those issued by the AQB in the Real Property Appraiser Qualification Criteria. According to the Real Property Appraiser Qualification Criteria (effective January 1, 2015), a Real Estate Trainee Appraiser does not require any experience, however, does requires that the training supervisor be certified, in good standing and accept responsibility for the training, guidance, and direct supervision of the Appraiser Trainee by:
- Accepting responsibility for the appraisal report by signing and certifying the report complies with USPAP;
- Reviewing and signing the Appraiser Trainee appraisal reports; and
- Personally inspecting each appraised property with the Appraiser Trainee until the supervising appraiser determines the Appraiser Trainee is competent, in accordance with the Competency Rule of USPAP for the Property Type.
Some States require supervision be through the entire training period. The panel, however, encouraged the States to revise the statutes to be “competency” based, and also recommend a “fast track” for advanced trainees.
North Carolina Deputy Director Tom Lewis and Roberta Ouellette, Legal Counsel discussed Enforcement and Hearing Preparation. The process from Probable Cause to Hearing was described from the perspective of the investigator and the Board Attorney. The discussion gave the audience a summary of the typical “flow of events”, which include:
- Preliminary Findings
The report made note that areas of concentration in the “flow of events” include the Preliminary Findings and Hearing. In addition, and among other things, the discussion provided appraiser “tips” for proper composure during Cross Examination:
- Don’t allow the questioner to put words in your mouth;
- Don’t answer a compound question;
- Do not try to fill a silence;
- Pay no attention to the questioner’s tone or attitude;
- Keep your temper; and
- Always glance at your attorney before answering the question to see if he or she is going to object to the question.
This article concludes the third in the three-part series summarizing the four days of regulatory discussions at Association of Appraiser Regulatory Officials (AARO) Fall Conference held October 19-22, 2013 at the Westin Hotel, Washington D.C. As always ICAP will continue to keep its membership informed on issues that have the potential to impact the appraisal profession.
~ Karen T. Emerle, SRA
There is still time to Comment on the Appraisal Foundations Draft White Paper-Alternative Valuation Products and the Uniform Standards of Professional Appraisal Practice.
The paper describes an Alternative Valuation Product (AVP) as a product that communicates an opinion of value (or price) other than a “traditional” appraisal. In the residential mortgage valuation sector, this means something other than an appraisal developed and reported using “standard” Fannie Mae/Freddie Mac appraisal report forms.
The (Draft) White Paper notes that because it is possible that an AVP complies with USPAP, it is possible that a state licensed or state-certified appraiser can perform AVP’s, it also states that if an AVP does not allow for compliance with USPAP, a state-licensed or state-certified appraiser may be able to perform the assignment; however, that is based on the state law where the appraiser is credentialed.
Several states have already implemented specific legislation that address AVPs. The State of Nevada allows a a real estate broker/salesperson to perform a BPO for the purpose of listing/selling a property; however, if a real estate broker/salesperson prepares a BPO for any reason other than listing and selling a property and receives compensation they have violated Nevada Revised Statues 645C. This is because Nevada is a mandatory licensing state which requires anyone who provides an opinion of value (or market value) on any real property located in the State of Nevada to first obtain a license or certification.
ICAP will keep you updated as the State of Illinois develops its stance on Alternative Valuation Products.