Herb Meyer, ARA – ICAP Director reports on the Collinsville ICAP Seminar held on June 12th at the Doubletree Hotel.
Ted Neff (ICAP Director) opened the day with a brief welcome and an introduction of Thomas Kneesel, SRA.
Chief Appraiser for Associated Bank
Collateral Underwriter from a Reviewers Perspective – Fannie Mae Approved Presentation
- CU as just one of several appraisal review tools
- Since implementation at Associated Bank, the number of appraisal resubmits for has now returned to 30%, same rate as pre-Collateral Underwriting
- The 15 and 25 percent net and gross adjustment rules have been officially removed
- Underwriters no longer consider fewer and smaller adjustments as a better appraisal
- A surprising amount of disparity between appraisers found in appraisal reports for square footage and room adjustments. Also in ratings such as quality of construction and condition. For example, different appraiser condition ratings for the same sale can range from C2 to C4.
- OCC is auditing banks to determine if the AMC’s are paying customary and reasonable fees. Tom indicated that it is the OCC’s duty (and other regulators) to complete these audits under Dodd Frank.
- Fannie Mae indicated that the reasons for appraisers being placed in a watch list have to do with some non-appraisal issues. One example was an appraiser that signs 200+/- appraisals per month and indicates in every appraisal that they physically inspected all of the properties that cover a 200 mile radius from the office.
Keith Wolf, SRA, AI-RRS.
Statistics: Gambling with your License
- Several AMV’s and other statistic providers were discussed
- Computer based statistical programs could support better and worse adjustments. The appraiser has to be responsibility to understanding how the programs work and how to make the adjustments meaningful.
- Focused around Standard 6 being Mass Appraisal and also Advisory Opinion 6 on Comparable Sales. Discussed confounding data and confidence ratings.
- Wolf indicated that the banks are charged with determining customary and reasonable fees by the Dodd Frank Law. He spoke briefly about the AMC that was recently charged with not paying customary and reasonable fees in Louisiana.
IL Program Director, USDA
Overview of USDA for Residential Appraisers
- FmHA’s need for appraisers to prepare appraisals for their loan programs including direct loans and loan guarantees for rural residential properties and houses in towns of low population.
- Covered topics regarding requirements in appraisals for the different types of loan products available from the Rural Development division of the USDA.
- Discussed the required components of the home inspection that the appraiser must complete and the requirements for licensed home inspectors.
- The water well inspections and when a borrower is required to connect to available public water and sewer. The water and septic inspections are dependent upon available procedures in each community.
- Mr. Ramsey is seeking appraisers for some highly specialized appraisals on subsidized multi-family residential projects. These properties have interest rate subsidies, extreme long loan amortizations and rental rate controls. They are typically senior housing and other low rent restricted properties where the rent is a percent of the occupant’s income.
Realtor and Owner of Your Home Team Real Estate
IAR Update on Southern Illinois Market Conditions
- Discussed the local housing market and the relationship between Realtors and Appraisers.
- Encouraged appraisers to talk with realtors and know what they can talk about
- Questions the appraiser can expect and don’t take it personal
ICAP’s Compliance Issues on Residential Appraisals
- Discussed Appraiser Compliance
- Appraisers should clean up templates and have multiple templates for various assignment types
- Reminded appraisers of requirement to report the appraisal fee in the report and explained how it helps banks and lenders understand the AMC fee structure
ICAP 2014 Illinois Appraisers Update Seminar – Lisle
August 18, 2014
Lisle Sheraton Hotel, Lisle, Illinois provided the great venue we’ve come to expect each year for ICAPs 2014 Illinois Appraisers Update Seminar. On August 18, 2014, 303 professionals participated, making ICAPs 14th annual Lisle seminar another success. The morning started with registration, fresh fruit, breakfast sandwiches, and an opportunity to meet with exhibitors. A special thanks to the exhibitors this year and their efforts to help make this year’s Lisle seminar excel.
Rick Hilton, IFSA, 2014 ICAP Vice President and our host for the day, opened the seminar with a warm welcome to participants, thanking them for their support and attendance. Throughout the day Rick provided brief introductions for the seminar speakers, in order of schedule: Rich deVerdier, 2014 ICAP President, Ron DeVries, Barton DeLacy, Jim Blaydes, TJ McCarthy, John Brenan, John Torvi, Charlie Franklin, and Brian Weaver. Rich deVerdier, MAI, SRA, AI-GRS started the morning session thanking the exhibitors and presenters. He briefly explained a recent legislative victory with HB5709 and announced ICAP’s new Supervisor/Trainee Seminar offering. After a wonderful lunch, representatives from the vendor showcase were given an opportunity to address the seminar with a brief introduction of their services. Rich deVerdier was presented a plaque of appreciation for his service as ICAP 2014 President. Additionally all attendees participated in a drawing conducted by Rick. Vendor representatives presented winners with gifts donated by each respective vendor. The final opportunity to take advantage of the vendor showcase was during the afternoon break and Ice Cream Social, always a Lisle favorite.
Ron DeVries, MAI, SRA started out the morning session with a presentation on Multi Family Chicagoland. Ron started out with an overview of the Chicago and suburban market and compared it to trends nationally. He then presented an analysis of over 90,000 units in 10 different Chicago markets. Bottom line, the Chicago multi-unit residential market is recovering and projecting and even stronger 2015. True to his form, Ron not only presented the material, but also educated his audience on analyzing the multi-unit residential market, including; market indicators, market segmentation, and building classifications.
Barton DeLacy, MAI, CRE, FRICS, ICAP 2014 Secretary next encouraged appraisers to Grow you Practice – a Primer on Valuation Consulting. Barton suggested we look “inside the box” and exploit what we do already offer beyond just values. Furthermore, appraisers should look beyond appraisals for financial institutions and look towards consulting. Appraisers are trained to offer opinions that are competent, independent, impartial, and objective. “Imagine an appraisal, but without a value.” Consulting can be for only for a portion of the appraisal and not include an opinion of value. Barton particularly urged residential appraisers to explore this space, including litigation support, impact studies, market rent analyses, property tax consulting, and due diligence (prior to sale). Diversifying your business with consulting services will not only increase your production, but also your bottom line.
Jim Blaydes, SRA, Illinois Real Estate Appraisal Licensing Board Member, discussed Illinois Legislation Issues. He first took the opportunity to give a lesson on the legislative process in Illinois. Essentially, 1) Bill is Drafted (House or Senate), 2) Bill is Introduced into originating Chamber, 3) Bill is Referred to Committee, 4) Committee Hearing, 5) 2nd Reading, 6), 3rd Reading, 7) Sent to 2nd Chamber (approval or sent back to original Chamber), 8) If approved sent to Governor (sign or veto), 9) New Law. Jim then explained some of the legislative actions that ICAP has been involved with in 2014, including SB1841 and SB3044. Jim also explained ICAP’s involvement in helping to write the proposed language for the administrative rules for the AMC Act.
TJ McCarthy, SRA provided insight into some of the latest Fannie Mae activities. One area of particular interest for appraisers was the FM Appraiser Quality Monitoring Program. The program can place appraisers on a list that would require their appraisals to be subject to 100% review or a list of appraisers whose appraisals are no longer accepted by Fannie Mae. TJ also encouraged appraisers to read through Fannie Mae letter LL-2014-02: Property and Appraisal Requirements for Properties Located in Small Towns and Rural Areas. He suggested there is quotable text in the letter for appraisers working in rural parts of Illinois. He also explained more about the Supervisor and Trainee Requirements in Illinois related to the new required course.
After lunch, John Brenan, Director of Appraisal Issues for the Appraisal Foundation, provided an overview on the Appraisal Foundation (AF). The AF has nine appraisal sponsors, three affiliate sponsors, and one international sponsor. It is comprised of four Boards: The Appraisal Quality Board (AQB), the Appraisal Practices Board (APB), the Appraisal Standards Board (ASB), and the Board of Trustees which has oversight responsibility for the operations of the AF. There are also three advisory councils: The Appraisal Foundation Advisory Council (TAFAC), the Industry Advisory Council (IAC), and Valuers Global Forum (VGF).
Projects the APB have been working on include, but are not limited to: Collection and Verification of Residential Sales Data in the Sales Comparison Approach, Collection and Verification of Data used in the Sales Comparison Approach for Non-Residential Properties, Valuation Issues in Separating Tangible and Intangible Assets, Identification of Contributory Assets and Calculation of Economic Rents.
Notable initiatives include the partnership with Association of Appraiser Regulatory Officials (AARO) and the ASC which includes the investigator training courses, a five-year memorandum of understanding with the U.S. Department of Energy on Valuation of Green Buildings, creation of Alliance for Valuation Education, eLibrary and new courses development, creation of webinars, brochures and YouTube videos, and consistent USPAP enforcement. APB intends to look at the existing methods and techniques and develop an abstract for education.
John stated that out of approximately 85,000 appraisers nationwide, the AF only receives 30 to 35 respond to the various exposure drafts issued by the Boards. He stressed the importance of appraisers responding to requests for public. All comments are read by all members of the applicable board. For information on any of these topics please visit the AF at appraisalfoundation.org. Mr. Brenan can be contacted at email@example.com.
John Torvi, Landy Insurance Agency and Charles Franklin, Franklin Law Group discussed Buy Back Claims made against appraisers and their Errors and Omissions (E&O) Insurance. It is not surprise that one of the top two E&O insurance claims is by primary loan originators for overvaluation after a loan defaults. John explained what he is seeing related to E&O claims. He strongly urged appraisers to read and understand their E&O Insurance as a risk management tool. Charles explained what they are seeing related to defending against these claims. He described the litigation process and options the appraiser may or may not have related to their defense. As usual, Charles baffled the audience with stories of real court cases.
Brian Weaver, Illinois Coordinator, presented Legislative Updates. During 2014 the Division of Real Estate was created, SB3044 passed, criminal background checks begin January 2015, and there were member changes to the Appraisal Advisory Board. The Illinois Governor signed an Executive Order on March 31, 2014 creating the Division of Real Estate resulting in a structural change and creating a Director of Real Estate. The Appraiser Act was amended through SB3044 to comply with the AQB criteria. Effective January 1, 2015, background checks for new licensees will be required. Other changes included in SB3044 pertain to BPOs and waiver valuations. The newest member appointed to the Illinois Real Estate Appraisal Licensing Board is Peter Poulos, MAI. Retiring from the Board is Timothy J McCarthy, SRA. Currently, there are 4,427 Illinois appraisers: 515 Trainees (94% in IL), 2,452 Certified Residential (91% in IL), and 1,460 Certified General (73% in IL). Brian gave a One Year Later status of AMC’s in Illinois. There are currently 189 AMC’s registered in Illinois. Since August 2013, approximately a dozen licensed AMCs have closed. Brian anticipates the total number of AMC’s in Illinois will either stay relatively the same or decrease as more AMCs leaving the business. Brian shared some interesting results of a survey sent to all registered AMC’s in Illinois related to an AMC Compliance Audit. Brian ended by stating the best way to contact himself or Mary Bates is by email, firstname.lastname@example.org and email@example.com.
~~~Ken Mrozek, MAI, SRA
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).
The Illinois Coalition of Appraisal Professionals has started to draft legislation that would correct some unintended consequences that resulted from a 2011 law regulating the state’s appraisal management companies.
ICAP hopes to resolve problems where AMC registration and oversight requirements are being applied to appraisal firms using independent contractor or employee appraisers but that are not fully owned by Illinois certified appraisers. The law has been interpreted to apply to some large commercial appraisal firms that are located outside of the state, as well as to some small appraisal companies that have ownership structures that may not include certified appraisers exclusively.
The legislation that ICAP will propose will attempt to clarify that appraisal firms that exclusively employ appraisers are exempt from registration and oversight requirements regardless of their ownership structure. This legislation likely will be introduced in the Illinois General Assembly in 2014.
The new law provides for registration of appraisal management companies with the Department of Financial and Professional Regulation beginning January 1, 2012. It provides that it is unlawful for a person or entity to act or assume to act as an appraisal management company, to engage in the business of appraisal management service, or to advertise or hold himself or herself out to be a registered appraisal management company without first obtaining a certificate of registration issued by the Department.
The new law provides that persons practicing as an appraisal management company in Illinois on the effective date of the Act may continue to practice until the Department has adopted rules implementing the Act. Further provides that persons shall apply for registration within 180 days after the effective date of the rules and the person may continue to practice until the Department acts to grant or deny registration. The new law will set forth the powers and duties of the Department, registration qualifications, grounds for discipline, civil and criminal penalties, and administrative procedure.
Most importantly the law contains provisions concerning standards of practice and prohibited activities. Brian Weaver will be the Coordinator for the Appraisal Management Company Registration Unit.
The law defines an AMC as:
Any corporation, limited liability company, partnership, sole proprietorship, subsidiary, unit, or other business entity that directly or indirectly performs the following appraisal management services: (1) administers networks of independent contractors or employee appraisers to perform real estate appraisal assignments for clients; (2) receives requests for real estate appraisal services from clients and, for a fee paid by the client, enters into an agreement with one or more independent appraisers to perform the real estate appraisal services contained in the request; or (3) otherwise serves as a third-party broker of appraisal management services between clients and appraisers.
The law defines an Appraisal Firm as:
An appraisal entity that is 100% owned and controlled by a person or persons licensed in Illinois as a certified general real estate appraiser or a certified residential real estate appraiser. An appraisal firm does not include an appraisal management company.
Customary and Reasonable Fees:
Appraisal management companies are required to be in compliance with the appraisal independence standards established under Section 129E of the federal Truth in Lending Act, including the requirement that fee appraisers be compensated at a customary and reasonable rate when the appraisal management company is providing services for a consumer credit transaction secured by the principal dwelling of a consumer. To the extent permitted by federal law or regulation, the Department shall formulate rules pertaining to customary and reasonable rates of compensation for fee appraisers. The appraisal management company must certify to the Department that it has policies and procedures in place to be in compliance under the Final Interim Rule of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act.
What can’t an AMC do?
No person or entity acting in the capacity of an appraisal management company shall improperly influence or attempt to improperly influence the development, reporting, result, or review of any appraisal by engaging, without limitation, in any of the following:
(1) Withholding or threatening to withhold timely payment for a completed appraisal, except where addressed in a mutually agreed upon contract.
(2) Withholding or threatening to withhold, either expressed or by implication, future business from, or demoting, or terminating, or threatening to demote or terminate an Illinois licensed or certified appraiser.
(3) Expressly or impliedly promising future business, promotions, or increased compensation for an independent appraiser.
(4) Conditioning an assignment for an appraisal service or the payment of an appraisal fee or salary or bonus on the opinion, conclusion, or valuation to be reached in an appraisal report.
(5) Requesting that an appraiser provide an estimated, predetermined, or desired valuation in an appraisal report or provide estimated values or sales at any time prior to the appraiser’s completion of an appraisal report.
(6) Allowing or directing the removal of an appraiser from an appraisal panel without prior written notice to the appraiser.
(7) Requiring an appraiser to sign a non-compete clause when not an employee of the entity.
(8) Requiring an appraiser to sign any sort of indemnification agreement that would require the appraiser to defend and hold harmless the appraisal management company or any of its agents, employees, or independent contractors for any liability, damage, losses, or claims arising out of the services performed by the appraisal management company or its agents, employees, or independent contractors and not the services performed by the appraiser.
(9) Prohibiting or attempting to prohibit the appraiser from including or referencing the appraisal fee, the appraisal management company name or identity, or the client’s or lender’s name or identity within the body of the appraisal report.
(10) Require an appraiser to collect a fee from the borrower or occupant of the property to be appraised.
(11) Knowingly withholding any end-user client guidelines, policies, requirements, standards, assignment conditions, and special instructions from an appraiser prior to the acceptance of an appraisal assignment.
A person or entity may not structure an appraisal assignment or a contract with an independent appraiser for the purpose of evading the provisions of this Act.
No registrant or other person or entity may alter, modify, or otherwise change a completed appraisal report submitted by an independent appraiser, including without limitation, by doing either of the following:
(1) permanently or temporarily removing the appraiser’s signature or seal; or
(2) adding information to, or removing information from, the appraisal report with an intent
to change the value conclusion or the condition of the property.
No appraisal management company may require an appraiser to provide it with the appraiser’s digital signature or seal. However, nothing in this Act shall be deemed to prohibit an appraiser from voluntarily providing his or her digital signature or seal to another person on an assignment-by-assignment basis, in accordance with USPAP.
This bill also amends numerous sections of the Real Estate Appraiser Licensing Act.
The appraisal law now states the following for Customary and Reasonable Fees:
Within 12 months after the effective date of this amendatory Act of the 97th General Assembly, the Department or its designee shall conduct a survey of fees for appraisal services for single-family residences, two-family residences, three-family residences, and four-family residences. The fee survey shall exclude assignments ordered by known appraisal management companies and complex assignments.
The Department may conduct additional surveys as necessitated by rules adopted pursuant to the federal Dodd-Frank Wall Street
Click on the following link to read the full text:
The RULES are being written at this time and should be sent to the Joint Committee on Administrative Rules – JCAR for consideration and approval in the next 30 days.