Washington Report and State News
Second Quarter 2013 Issue
April 15, 2013
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.
In This Issue
AI Expresses Concern about Frivolous Complaints
New ASC ‘Hotline’ Elicits AI Response
AI Comments on Investment Property Valuation
Chinese Development, AI Representatives Meet
AI President Speaks to Home Builders
AI ‘Green Expert Addresses Federal Agencies
Mortgage Bankers, AI President Meet
SEC Shares Business Valuation Concerns with AI
AI Stakeholders Forum Set for May 24
Annual LDAC Conference Coming to Washington
Bill Would Prohibit Distressed Sales as Comps
Bipartisan Policy Center Report Proposes Changes
Foundation Proposes Joint Venture
New Jersey Holds Hearings on BPO Bill
Georgia Board Addresses ‘Evaluation Appraisal’
Kentucky Enacts AMC Legislation
Wyoming Legislation Will Regulate, Register AMCs
AMC State Legislation Update
Share Your Issues
LETTERS AND COMMENTS
In response to a new Interagency Appraisal Complaint Form proposed by federal bank regulatory agencies Feb. 28, the Appraisal Institute expressed concern about frivolous complaints over valuation issues. The proposed form (found here) could be used by federal bank regulatory agencies when fielding complaints from appraisers and others regarding the appraisal process. Among other things, the AI encouraged the agencies to revise the form so as not to accept complaints of “inaccurate” appraisals, but rather retain portions of the form relating to USPAP. View the comment letter here.
The Appraisal Subcommittee recently developed an “Appraisal Independence Hotline” to provide referrals to appraisers and others regarding appraisal independence and potential USPAP violations. AI expressed written concern Feb. 12 with the lack of stakeholder input into the development of the new hotline. In addition, AI President Richard L. Borges II, MAI, SRA; President-Elect Ken P. Wilson, MAI, SRA; Immediate Past President Sara W. Stephens, MAI; AI CEO Frederick H. Grubbe, CAE, and AI Washington office staff attended the February meeting of the ASC where a preview of the Hotline was provided to attendees. The ASC released the Hotline in March and information may be found at the following link.
Separately, President Borges and AI Washington office staff also met with ASC staff regarding AI’s recent comment letter on the ASC’s draft Policy Statements. The meeting was productive in reiterating the position and concern of the AI on several issues, including promotion of competency, reciprocity and enforcement issues. The ASC is expected to finalize the Policy Statements this spring.
The Appraisal Institute recently commented on a proposed exposure draft from the International Valuation Standards Council regarding investment property valuation. Among other things, the AI urged caution in maintaining clear lines of distinction between appraisal standards and guidance materials related to methodology. Click here to view the comment letter.
AI President Richard L. Borges II, MAI, SRA, greets
a representative of the National Development
and Reform Commission of China.
In the first quarter of 2012, AI Executive Committee members traveled to Washington, D.C., four times for several real estate-related meetings and conferences. Among other meetings, President Borges and AI staff received a delegation March 8 from the China National Development and Reform Commission to exchange information on appraisal practices in the United States and China. President Borges described various ways in which the services of professional appraisers are used by the judicial branch and for municipal finance, in addition to mortgage finance and real estate risk assessment.
President Borges addressed the National Association of Home Builders Mortgage Roundtable on appraisal policy matters March 12, educating mortgage finance and real estate industry and government leaders on ways in which home builders can improve the appraisal process, in addition to how the two organizations can work together on legislative and regulatory issues.
Sandra K. Adomatis, SRA, demonstrates AI
green education to federal agency staff.
The Appraisal Institute previewed for federal agency and stakeholder organizations all four courses comprising the Valuation of Sustainable Buildings professional development program on March 22. The day-long seminar, which offered abridged versions of all four courses, was taught by Sandra K. Adomatis, SRA, and was hosted by the Environmental Protection Agency. Participating organizations included HUD, FHA, Fannie Mae, Freddie Mac, Veterans Administration, Federal Housing Finance Agency, Department of Energy, National Association of Home Builders, U.S. Green Building Council, National Multifamily Housing Council and the National Association of Realtors, among others.
President Borges and AI staff participated in a March 25 panel discussion with representatives from the Mortgage Bankers Association and the Institute for Market Transformation relating to mortgage finance of green and energy efficient properties. The conference was hosted by the American Council for an Energy-Efficient Economy. AI emphasized the importance of hiring competent appraisers, as well as defined the data and practical business needs of appraisers in the green and energy efficiency space.
President Borges and AI staff met March 26 with the chief accountant and staff of the Securities and Exchange Commission regarding SEC concerns about business valuations and valuation for financial reporting matters. The SEC previously expressed concern about inconsistencies in business valuations, particularly financial instruments. The SEC also is reviewing whether to allow U.S. public companies to report financial statements under International Financial Reporting Standards.
AI staff also has attended several industry conferences where AI has exhibited and promoted the use of designated members, including the Mortgage Bankers Association Servicing Conference in March and the American Bankers Association Real Estate Lending Conference in April.
The next AI Stakeholders Forum is scheduled for May 24 at the Park Hyatt Hotel in Washington, D.C. The focus of the forum will be “Residential Collateral Valuation – Synchronizing Client Needs and Service Delivery.” The Forum will engage users of appraisal services to understand collateral valuation needs in loan origination, portfolio monitoring, servicing and asset disposition. Direct users of residential appraisal services are invited to attend, and all attendees will enjoy complimentary registration. Contact Bill Garber at firstname.lastname@example.org if you are a direct user and would like to shape the future of residential valuation.
The Appraisal Institute’s annual Leadership Development & Advisory Council conference will be held May 23-23 in Washington, D.C. LDAC strives to foster creative thought from talented individuals involved in the real estate appraisal profession, while developing future leaders of the Appraisal Institute. LDAC also establishes an “appraiser-presence” on Capitol Hill during an afternoon of lobbying and demonstrates that the Appraisal Institute is made up of professionals who recognize the importance of being actively involved in the political process.
H.R. 1255, the Home Construction Lending Regulatory Improvement Act, was re-introduced by Reps. Gary Miller, R-Calif., and Carolyn McCarthy, D-N.Y., to address liquidity credit issues with new homes. The bill was introduced in the last Congress but did not come up for a vote. This legislation proposes to prohibit use of distressed sales as comparables in an appraisal, as well as mandating appraisers to use “as completed” value when assessing collateral on projects with a reasonable chance of being completed.
Appraisal Institute staff has been meeting with members of Congress and their staff to discuss the importance of not “rigging the appraisal” by attempting to legislate the appraisal process or codify appraisal methods and techniques. Protecting the integrity of the appraisal process will be a focal point of AI’s upcoming Leadership Development & Advisory Council conference in Washington.
The Bipartisan Policy Center issued a report focused on reducing the government’s role in the nation’s housing finance system, but it also proposed changes to current appraisal policy. Appraisal-specific recommendations contained within the report, titled “Housing America’s Future: New Directions for National Policy,” focused on banning the use of distressed home sales as comparables by appraisers, a practice the BPC said was helping to depress local home values and impacting buyers’ ability to secure financing.
The report suggested that Fannie Mae, Freddie Mac and the Federal Housing Administration should refuse to accept distressed sales as valid comps, which would force a reassessment of non-distressed properties. The Senate held a hearing on this report, but is not expected to adopt these ideas.
At The Appraisal Foundation’s Advisory Council meeting in March, representatives of The Appraisal Foundation announced the proposed formation of the Alliance for Valuation Education, a potential joint venture between the Foundation and its sponsoring organizations in the development and delivery of appraisal education. Details on AVE are scant, but it has been described publicly as a proposed separate non-profit organization that would operate under a management contract with the Foundation. For its part, the Foundation is said to be planning to provide seed funding (reportedly around $200,000 to $250,000) to initiate AVE education development efforts. The Appraisal Institute is closely monitoring this development and will update chapters and its professionals as merited.
IN THE STATES
Two hearings were held in Trenton, N.J., in mid-March on legislation that has been proposed by the New Jersey Association of Realtors to expand the ability of real estate sales professionals to provide broker price opinions and comparative market analyses outside of the real estate brokerage context. Representatives from each of the three AI chapters in New Jersey and AI staff testified at both the Senate and Assembly hearings. Following these hearings, the sponsor of the Assembly bill agreed to convene a meeting of all of the relevant stakeholders in mid -April to attempt to reach a mutually acceptable compromise.
The Georgia Real Estate Appraisers Board has published regulations regarding standards for developing and reporting an “evaluation appraisal.” The regulations clarify that, where permitted by federal law and policies, a state-licensed or certified appraiser performing an evaluation appraisal need not comply with the Uniform Standards of Professional Appraisal Practice. The rules officially were adopted March 18 and may be found here.
Kentucky has enacted legislation to create a new appraisal management company recovery fund to replace its current surety bond requirement. The recovery fund is supported by an annual surcharge of up to $800 on each AMC registered in the state. The fund has a cap of $300,000, at which point the surcharge will be suspended until the fund needs to once again be replenished. The Kentucky Real Estate Appraisers Board will establish procedures for making claims against the fund and will administer the funds in order to provide restitution to licensed or certified real property appraisers who have suffered pecuniary harm by an AMC. Appraisers will also be able to seek reimbursement for “reasonable and appropriate court costs.” The bill may be viewed here.
Wyoming has enacted legislation that requires the regulation and registration of appraisal management companies. The Wyoming Appraisal Management Company Registration and Regulation Act includes an amendment that exempts some professionals from registering as an AMC, including attorneys, certified public accountants, financial advisors, insurance agents, real estate brokers and other professionals who request an appraisal of the client’s property on behalf of the client. The Wyoming and Western South Dakota Chapter of the Appraisal Institute helped negotiate the contents of the bill. The chapter worked with the Wyoming Certified Real Estate Appraiser Board, the Wyoming Chapter of the American Society of Farm Managers and Rural Appraisers, and many other stakeholders for two years to help pass this bill. The Act takes effect July 1, 2013.
Thirty-six states have enacted appraisal management company registration and regulation legislations: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, North Dakota, Nebraska, New Hampshire, New Mexico, North Carolina, Nevada, Oklahoma, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington and Wyoming.
Legislation is pending in four states: Massachusetts, New Jersey, South Carolina and West Virginia.
Do you have relationships with critical policymakers, or are you aware of a burgeoning issue of opportunity or concern? Please contact any member of the AI Government Relations Committee or Washington office staff with more information.