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First Quarter 2015

First Quarter 2015

January 15, 2015

The Appraisal Institute’s Washington Report and State News quarterly e-newsletter is intended to summarize AI’s recent federal and state legislative, regulatory and related activities in representing the interests of Designated members, Candidates for Designation, Practicing Affiliates and Affiliates. 

ON THE HILL                                                                                

114th Congress Commences; Partisanship, Gridlock Expected

Under Democratic leadership in the 113th Congress, the Senate Banking Committee was reluctant to provide much oversight of the Consumer Financial Protection Bureau — but that’s set to change with a new majority led by Sen. Richard Shelby, R-Ala., in the 114th Congress, the Appraisal Institute’s Washington office reported Jan. 9.

However, with fewer centrists in the Senate, continued partisanship is anticipated, and while control has changed, Republicans still will need 60 votes to pass legislation, so gridlock is expected relating to banking and financial services legislation.

In the House
Republicans added more seats to their majority in the House. The Financial Services Committee will continue to be chaired by Rep. Jeb Hensarling, R-Texas, who has been open to hearing about and responding to valuation concerns. The new chair of the Financial Intuitions Subcommittee likely will be Rep. Blaine Leutekemeyer, R-Mo., who has helped appraisers with regulatory relief and aided in their dealings with the Small Business Administration over issues involving going concern appraisals.

Fannie Mae and Freddie Mac reforms and possibly general housing finance reform will be on the table again, and a different path than that offered by the Johnson-Crapo bill will be expected because Chairman Shelby voted against the bill does not support the government-sponsored enterprises. In 2015, legislation introduced in the Senate could be closer to a bill that came out of the House that is considered very conservative and had no government guarantee. President Obama was talking with Sens. Johnson, D-S.D., and Crapo, R-Idaho, about their bill, but he isn’t expected to be as willing to support GSE Reform that has no government backing.

President Obama signed legislation Dec. 19 that retroactively extended 55 tax incentives through Dec. 31, 2014, that had expired at the end of 2013. Among the extensions is the enhanced deduction for conservation easement donations, which relies on qualified appraisals prepared by qualified appraisers.
The incentive increased the amount landowners can deduct for donating a conservation easement, raising it from 30 percent of their income in any year to 50 percent; qualifying farmers and ranchers can deduct up to 100 percent of their income. The legislation also extended the carry-forward period for donors to take tax deductions for voluntary conservation agreements from five to 15 years. 
The incentive only applies to easements donated between 2006 and 2014; efforts to pass a two-year extension or to make permanent some of the expiring provisions were unsuccessful. However, the new Congress is considering these expired tax provisions, perhaps in the context of an effort to reform the corporate tax code.
The Appraisal Institute’s Washington Office expects new chairmen of the House Ways and Means Committee and of the Senate Finance Committee to begin holding a series of hearings on tax reform, efforts the White House supports. However, getting the President’s view and the viewpoint of Congressional Democrats to match that of Congressional Republicans will be difficult, especially once the 2016 Presidential race kicks into gear. 

Obama to Veto Keystone XL Legislation

President Obama announced Jan. 6 that he would veto any legislation in which the new Republican-controlled Congress approves the Keystone XL pipeline; the Republican-dominated Senate is considering similar legislation, which has bipartisan support.

The controversial pipeline would bring crude oil from Alberta, Canada, to the Gulf of Mexico, and has been the center of a lengthy and contentious debate between politicians, the energy industry and environmentalists. Several Appraisal Institute professionals have been involved in the early stages of pipeline planning, and many more are expected to be engaged if pipeline legislation is signed into law.

AI PAC Presidential Club Ends First Cycle

The Appraisal Institute’s Political Action Committee Presidential Club successfully concluded its first two-year cycle on Dec. 31. The Presidential Club is a recognition program for elite and passionate Designated members and Candidates for Designation who have contributed a minimum $500 to AI PAC during the two-year Congressional cycle. Designated members and Candidates who contribute at Presidential Club levels receive special benefits and recognition. All funds contributed to AI PAC are used to support the election of pro-appraiser and pro-real estate Congressional members.

Find more information on AI PAC, and the AI PAC Presidential Club.   

IN THE AGENCIES                                                                       

SEC Asked to Ensure Valuation Standard Setters Stay Independent

2014 Appraisal Institute President Ken P. Wilson, MAI, SRA, and members of AI’s Washington office met with the U.S. Securities and Exchange Commission on Dec. 16 to discuss the agency’s policy on allowing public U.S. companies to utilize International Financial Reporting Standards.

During the meeting, which involved SEC commissioners, chief staff members and the agency’s new chief accountant, who is spearheading the IFRS review, the Appraisal Institute asked the agency to remain vigilant in its efforts to ensure that valuation standard setters and accounting standard setters maintain their independence.
AI offered to help the SEC navigate valuation standards, methodology and education issues. Additionally, AI provided the SEC with examples of how IFRS has successfully been applied globally relative to investment properties. 

SBA Continues to Review Special Purpose Property Policies

The U.S. Small Business Administration continues to review its going concern appraisal policy relative to special purpose properties and changes in ownership, and its outreach over the past year has given the agency a better understanding of the issues and appraiser concerns, the Appraisal Institute reported Jan. 8.

AI believes the SBA is exploring ways to verify an appraiser’s experience with valuing the specific property type involved in the business real estate, and anticipates that qualifications may require an appraiser to have completed a specific number of those assignments both during the past 24 months and throughout the appraiser’s career.

AI will continue to lead advocacy efforts on this issue.

AI Rebukes APB on Green Valuation Exposure … Again

The Appraisal Institute, in a Dec. 12 comment letter, once again reiterated its concern to the Appraisal Foundation’s Appraisal Practices Board regarding an exposure draft that contains numerous errors and could damage the appraisal process and impose additional burdens on appraisers.

AI noted in its letter that the APB has no statutory authority, and is strongly opposed to the Appraisal Foundation encouraging regulators to consider utilizing information in the materials for enforcement purposes.

View the Appraisal Institute’s comment letter to the APB.

Appraisal Organizations Caution USDA on Raising Appraisal Threshold

The Appraisal Institute and the American Society of Farm Managers and Rural Appraisers jointly submitted a letter Nov. 14 to the U.S. Department of Agriculture in which they cautioned against proposed changes to the Business and Industry Guaranteed Loan Program that would raise the threshold for when appraisals are required.

The USDA’s B&I program provides loan guarantees to banks and other approved lenders to finance private businesses located in rural areas.

The proposed changes would raise the threshold for when an appraisal is required by the USDA from $100,000 to $250,000 on all collateral being released. Similarly, the appraisal threshold in liquidations would increase from $200,000 to $250,000.

AI and ASFMRA cautioned the USDA against raising the threshold, noting that many valuation professionals have “reported concerns with the quality of appraisals prepared for lenders participating in the B&I program, which are often engaged with turnaround time and price at the forefront and minimally reviewed by USDA lenders. Further, our members have reported widespread concerns with the lack of independence within the USDA B&I loan process, which is reported to enable borrower influence on appraisals.”

The appraisal organizations also urged the USDA to emphasize the importance of appraisal review in the final rule. As it stands today, appraisal reviews are sometimes completed by lender staff with minimal training, despite the wealth of information and development programs that are available on the subject from such organizations as the Appraisal Institute.

The USDA’s final rule on its B&I program is expected in the first half of 2015.

Read the joint AI, ASFMRA letter to the USDA.

Builders Receive Residential Green and Energy Efficient Addendum

The Appraisal Institute entered into a licensing agreement Nov. 10 with Home Innovation Research Labs, a subsidiary of the National Association of Home Builders, to auto-populate AI’s Residential Green and Energy Efficient Addendum with information from the Home Innovation database.

Builders in the NAHB’s National Green Building Standard Green certification program will receive a partially completed version of the Residential Green and Energy Efficient Addendum with their certificate for every certified single-family home. Home Innovation encourages builders to add to the addendum additional information about a home's features and to share that information with their appraisers.

Home Innovation’s resource page on appraisal information for home builders includes contract language that encourages hiring competent appraisers, promotes the Appraisal Institute’s professional development programs on the valuation of sustainable buildings and shares information on the Residential Green and Energy Efficient Addendum.

IN THE STATES                                                                            

Tennessee Proposes Background Check Requirements

The Tennessee Real Estate Appraiser Commission in a Nov. 4 regulatory filing proposed various changes to the state’s administrative rules for appraisers, including a requirement that new applicants for real property appraiser credentials who currently are not licensed or certified but are in good standing in another jurisdiction undergo a state and national background check.

Among the other proposed changes: clarifying the definition of “good standing;” requiring all new applicants for a real property appraiser credential who currently are not licensed or certified but are in good standing in another jurisdiction undergo a state and a national background check; clarifying the grounds that the commission may use to deny the issuance of an appraiser credential; adopting various changes to the education and experience requirements in the 2015 Real Property Appraiser Qualification Criteria; adopting new AQB requirements for supervisors and trainees; and clarifying that the Commission will grant a reciprocal credential to an appraiser from a state that has “meaningful requirements” for the licensure of appraisers and is determined by the Appraisal Subcommittee to be “in compliance” with the Financial Institutions Reform, Recovery, and Enforcement Act.

A public hearing on the Tennessee Real Estate Appraiser Commission’s proposed rules was scheduled for Jan. 12.

Texas Wants Clarification on Appraisal Rules

The Foundation Appraisers Coalition of Texas in a Dec. 1 memo asked the Texas Appraiser Licensing and Certification Board to clarify a rule on state appraisers performing appraisal reviews of subject properties in Texas without holding a Texas license as long as the appraiser does not offer an opinion of value.

That issue was one of several changes and clarifications to the Appraiser Licensing and Certification Act that FACT would like to see enacted during the 2015 state legislative session.

Other proposals included in the memo focus on clarification that unfounded allegations of misconduct do not constitute formal complaints and are not subject to public disclosure, providing the agency with the means to recover its prosecution costs in the event of a hearing default or a frivolous defense and allowing the TALCB to approve valuation standards for use in non-federally related transactions.

These issues are likely to be considered during the 2015 session once the Texas legislature convenes Jan. 13.

Oregon Considers Rule on Appraiser Background Checks

The Oregon Appraiser Certification and Licensure Board on Dec. 1 proposed various changes to its administrative rules, including one that would require all first-time applicants for an Oregon appraiser credential provide fingerprints for background checks.

The proposed rule would clarify that the ACLB may issue a reciprocal credential to an appraiser from a state that is in compliance with Title XI of Financial Institutions Reform, Recovery, and Enforcement Act, as determined by the Appraisal Subcommittee, and the state has requirements that meet or exceed those of Oregon. Applicants for an Oregon license via reciprocity would be subject to a background check.

Another proposal involves adopting new requirements for supervisory and trainee appraisers, as outlined in the 2015 Real Property Appraiser Qualification Criteria.

AQB Releases Fourth Exposure Draft on Background Check Requirements

The Appraiser Qualifications Board on Dec. 4 released a Fourth exposure draft of a proposed revision to the 2015 Real Property Appraiser Qualification Criteria and Guide Note 9 that focuses on qualification criteria and a requirement that all applicants for a state real estate appraiser credential “possess a background that would not call into question the public trust.”

Under the proposed revision, applicants would be required to furnish state appraiser regulatory agencies with all information and documentation necessary for the jurisdiction to determine the applicant’s fitness for licensure. Applicants would not be eligible for a real property appraiser credential if they have been convicted of or pleaded guilty or nolo contendere to a crime that would call into question their fitness for licensure within a five-year period immediately preceding the date of application. Proposed Guide Note 9 provides state appraiser regulatory agencies with some guidance on evaluating an applicant’s fitness for licensure, including the types of infractions that would result in a disqualification.

Previous versions of AQB exposure drafts on background checks would have required state appraiser regulatory agencies perform formal, fingerprint-based background checks using information from the Federal Bureau of Investigation for first-time applicants for an appraiser credential.

Comments on the exposure draft, which can be viewed here, were due Jan. 15. If adopted, the new requirements will take effect Jan. 1, 2017.

Montana Mulls Updates to Appraiser Licensing and AMC Oversight Laws

During its 2015 session, the Montana legislature will consider House Bill 29, which would revise the state’s appraiser licensing and appraisal management company oversight laws, the Appraisal Institute reported Jan. 8.

If enacted into law, provisions of H.B. 29 would grant the Board of Real Estate Appraisers the authority to regulate and establish minimum requirements and qualifications for real estate appraiser mentors. The bill also would establish requirements for applicants to submit their fingerprints for a background check by the state’s Department of Justice and by the Federal Bureau of Investigation. An applicant with a history of criminal convictions would have the opportunity to demonstrate to the Board that they have been sufficiently rehabilitated to warrant the public trust.

Additionally, the bill would clarify that an AMC  may not prevent or otherwise restrict a trainee from performing work, so long as the work is done in accordance with Uniform Standards of Professional Appraisal Practice and under the supervision of a mentor. Finally, the bill would clarify that an AMC may not restrict an appraiser on an approved appraiser panel from transferring an assignment to an employee as long as that employee also is on the approved appraiser panel.

View a copy of the current version of H.B. 29.

MEETINGS OF NOTE                                                    

Staff from the Appraisal Institute’s Washington office and professionals from AI’s Massachusetts and Rhode Island Chapter attended the New England Appraisers Expo & American Mortgage Conference in Norwood, Massachusetts, Oct. 6. They heard presentations from federal and state appraiser regulators and from senior economists from the Federal Reserve Bank of Boston. 
During the event, participants split into separate breakout sessions for residential and commercial appraisers. Residential appraisers heard presentations on recent legal developments while commercial appraisers heard about functional obsolescence and the valuation of convenience stores.
Sandra K. Adomatis, SRA, and Laura Stukel from Elevate Energy, a nonprofit focused on electricity use and conservation, co-presented a U.S. Department of Energy webinar Dec. 22 entitled “Sales and Value Recognition for DOE Zero-Energy Ready Homes.” The webinar focused on how lenders and appraisers can overcome the challenges of zero-energy ready homes and how the homes can be better marketed. 
The free Sales and Value Recognition for DOE Zero-Energy Ready Homes webinar provides an excellent overview of current challenges in the valuation of high-performance properties.

 TIP LINE                                                                                       

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The AI Washington office wants to know if you have relationships with critical policymakers, or are aware of a burgeoning issue of opportunity or concern. Please contact any member of the Government Relations Committee or Washington office staff with more information.












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