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 second 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 Two- Background Checks, AMC Regulation, Experience Training Concerns & Mass appraisals
The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) was signed into law in 1989. Under Title XI of FIRREA, the Appraiser Qualifications Board (AQB), a board of the Appraisal Foundation, establishes the minimum education, experience, and examination requirements for real property appraisers to obtain a State license or certification. In 2010 The Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was signed into law which made a number of changes to FIRREA.
The AQB has come out with changes to the real estate appraiser qualifications that will be effective January 1, 2015. A component of those changes includes background checks for all applicants of a real estate appraiser credential. Beginning on January 1, 2015, federal standards will include submitting fingerprints to the Federal Bureau of Investigation (FBI). While the AQB does not require States to check the background of existing credential holders, it does encourage it.
States must not issue a license to an applicant that has had an appraiser license revoked in the preceding five years, has had a felony conviction in the last five years, or has had a felony conviction at any time for fraud, dishonesty, breach of trust, or money laundering. States must also consider any criminal conviction that goes to the honesty or veracity of the applicant, any action or order by a state, federal, or foreign regulatory agency, and any license encumbrances by a state, federal, or foreign regulatory agency.
Speakers Robert Keller from Castle Branch, Tim Doyle from the Conference of State Bank Supervisors and Joan Trice, Founder and CEO of Clearbox discussed background checks for appraisers. The panel indicated FBI checks include only criminal offences and not civil offences and that Consumer Reporting Agencies have access to data that the FBI might not have.
It was noted that most State agencies check with the FBI for national background checks. However, it’s the States responsibility to accurately report to the FBI, and not all data provided to the FBI is accurate. It was suggested that the costs of background checks be borne by the appraiser and appraisers should order their own background check, providing them with the opportunity to correct any erroneous information.
A brief introduction to the Nationwide Mortgage Licensing System & Registry (NMLS) was presented. The NMLS was created by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR)and began operations in January 2008. The goal of NMLS is to employ the benefits of local, state-based financial services regulation on a nationwide platform that provides for improved coordination and information sharing among regulators, increased efficiencies for the industry, and enhanced consumer protection.
The panel indicated that the AQB does not specify what type of background report is required, and that each State could do it differently. Other questions raised in regards to background checks include:
- Should background checks be done on each license renewal?
- Who should pay for the background check?
- What are the guidelines?
- Should the States require existing credential holders to summit to an FBI background investigation?
- Are there incidences that would not disqualify an appraiser from doing their job?
- What does it mean to be “in good standing”?
- How many years should background checks cover?
- What weight should be given to background checks?
- What is the cost and effectiveness in maintaining and managing the checks?
AMC Registration & Regulation Issues were presented by Tony Pistilli of Axios Valuation Solutions, David Cherner from Rels Valuation, and Greg Stephens of Metro-West Appraisal Co. During the discussion it was noted that Appraisal Management laws have been enacted in 38 states and that there is a need for a consistent set of core AMC requirements.
Current challenges facing Appraisal Management companies include the lack of reciprocity and a national registry, along with disparities between:
- Business and Corporate Requirements;
- Licensing Requirements;
- Registration Process;
- Renewal Schedules;
- Audit Requirements;
- Ordering Requirements;
- Payment Requirements;
- Appraiser Panel Requirements; and
- Appraisal Review Requirements
Appraisal Management Companies are hoping for standardization among the individual States and are proposing an AMC Oversight Guidance Model administered by the ASC, which would:
- Provide a standardized approach to oversight, registration and renewal forms;
- Provide consistent processes and pricing for national background checks;
- Establish a National Recovery Fund; and
- Create a National repository of AMC registrations & audits.
Noted benefits of an AMC Oversight Guidance Model were said to include more consistent regulation and an adoption of best practices from all States with more effective enforcement at lower costs. To access the report titled the complexities of compliance written by Tony Pistilli EVP, Chief Appraiser at Axios Valuation Solutions click here.
Additional topics discussed included:
- Mandatory reporting requirements;
- Fee panel management policies;
- Engagement letters;
- Appraiser qualifications and application process;
- Indemnity agreements;
- Written policies and procedures; and
- Appraisal reviewing.
Barry Shea (ASB, Chairman) provided the regulators with an USPAP Update covering the changes to the 2014-15. To view a detailed written description of the changes, please see the USPAP Summary of Actions Document
A discussion regarding experience training concerns was lead by Rick Borges-AI, John Ryan-IAAO, and Dennis Badger-Farm Credit Mid-America. Mr. Borges indicated that the near term outlook for trainees is weak, and noted that most new trainees are entering the commercial field. Rick asked the question, “Is supervisory education really necessary?,” indicating that this is not required by Dodd Frank. Rick went on to say that wherever possible, the supervisory course should be delivered by private providers indicating that State Boards creeping into education is a concern. Mr. Borges discussed some common errors and issues in both general and residential appraisal reports including:
- Highest and best use;
- Intended use;
- Intended user;
- Analysis of prior sales;
- Extraordinary assumptions; and
- Hypothetical conditions
Mr. Borges mentioned that it would be helpful for the supervisory course highlight to supervisors the areas where trainees often make mistakes, and indicated that States should consider alternative ways to satisfy the experience requirements referencing the Appraisal Institutes rigorous Capstone Program which he used as a good example of a “demonstration of knowledge”. To access the report written by Richard L. (Rick) Borges II, MAI, SRA (Appraisal Institute President) click here.
John F. Ryan, CAE discussed the distinction between Market Value and Ad Valorem Value and some of the challenges facing appraisers, especially those who focus on Mass Appraisals. In addition, Mr. Ryan provided an overview of the appraisal services available to farmers, agribusinesses and rural residents. Some of the challenges Mr. Ryan discussed include the new AQB requirements, the lack of supervisors, education and the affordability of appraisal education. John also indicated that with the new, stricter AQB requirements comes a narrow time frame to accomplish them.
Mr. Ryan indicated the need for a white paper to facilitate the use of mass appraisal experience acceptability, indicating that some States allow no mass appraisal experience while others allow 100%. Mr. Ryan asked AARO and the AQB for support in establishing a Standardized Reporting Format. To access the full report written by John F. Ryan titled Experience Training Concerns click here.
~Karen T. Emerle, SRA
As of June 30, 2013, the number of active real estate appraisers in the U.S. stood at 82,250. According to a June 2013 sudy by the Appraisal Institute the number of appraisers decreased at an average rate of 3.0 percent per year over the past five years. As shown in the following data released from the Illinois Department of Financial and Professional Regulation (IDFPR) Illinois is no exception to the national trend:
As illustrated Illinois lost 519 (10.89%) licensed or certified appraisers over the last two-year renewal period. Data suggest that this rate of decrease could rise sharply over the next 5 to 10 years due to increased retirements, reduced numbers of new people entering the appraisal profession, economic factors, and greater use of data analysis technologies.
Uniform State Certification Examination
In 2008 the Appraiser Qualifications Board (AQB) began offerering its Uniform State Certification Examination. The authority for the AQB to set standards and approve examination content was established by Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Below are the latest pass/fail statistics for Illinois of the Uniform State Certification Examination:
The Associate, Certified Residential and Certified General examinations are based upon 14 major content areas. Although the topics of the major content areas are the same for all three examinations, the emphasis devoted to the content areas differs in each examination. In Illinois Certified General Appraisers had the highest pass/fail ratio of 64% (on average), followed by the Certified Residential Appraisers (58%) and the Associate Real Estate Trainee Appraisers has the lowest pass/fail ratio at 52%:
The Associate Exam is composed of 100 questions plus five unscored pretest questions. The Certified Residential and the Certified General are composed of 150 questions. In addition to the number of questions that are used to determine your score, the examinations may contain up to 15 questions that are being pretested for future versions of the examination.
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.
ICAP in conjunction with the IDFPR will be putting on an AMC Registration Program for AMCs who want to become registered in Illinois. The cost is $75 per person and is open to representatives of AMCs and those interested in registering in Illinois. Brian Weaver-Real Estate Appraisal Coordinator at the State of Illinois will walk through the laws, the forms, the fees, and compliance issues.
The AMC Registration Program was designed specifically for principals and/or employees of AMCs to learn about the Illinois Appraisal Management Company Registration Act and Administrative Rules. Participants will become familiar with how to apply for registration, AMC forms, fees, and how to conduct business in Illinois. Attendance is encouraged but is NOT mandatory. The goal of the program is to put potential applicants at ease with the registration process. There will be NO CE offered for this presentation. This is a one-time offer. The presentation will NOT be repeated.
AMC Registration in Illinois April 3, 2013205 W. Wacker Drive, Suite 200, Chicago, IL