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Q1 2020 Washington Report

March 27, 2020

The Appraisal Institute’s Washington Report and State News quarterly e-newsletter summarizes 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. 

CORONAVIRUS NEWS                                                                

The Appraisal Institute continues to monitor how the coronavirus (COVID-19) pandemic affects AI professionals and the rest of the real estate valuation profession, and is updating its website as information becomes available.
ON THE HILL                                                                                
Rep. Brad Sherman, D-Calif., on March 25 introduced HR 6369, legislation that would authorize exterior inspection appraisals in situations where appraisals would previously have required interior inspections. The legislation was originally part of a package developed by Rep. Maxine Waters, chair of the House Financial Services Committee, during consideration of the Coronavirus disaster relief package. It was not included due to timing and negotiations between the Senate and House.  
This legislation may be considered in the “Round 4” discussions on economic relief currently under discussion and could be passed later this year. 
The Appraisal Institute on Feb. 14 submitted a letter to the chairs of the House Financial Services Committee and the Subcommittee on Housing, Community Development and Insurance, thanking them for requesting that the Government Accountability Office study the implementation of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 to protect homeowners from appraisal loopholes. 
In making their request to the GAO, Reps. Maxine Waters, D-Calif., and W. Lacy Clay, D-Mo., highlighted FIRREA’s importance in ensuring the safety and soundness of the financial system. They specifically requested the study of appraisal threshold increases, regulatory exemptions, appraisal waivers and evaluations as substitutes for appraisals, which they say have diluted FIRREA.
The lawmakers wrote, “Title XI was enacted by Congress in response to the numerous valuation related issues that came to light as a result of investigations and hearings into the causes of the savings and loan crisis of the mid-1980s. These appraisal regulatory provisions were enacted to help ensure the future stability of the deposit insurance fund. While Congress envisioned that most real estate related transactions would be covered by Title XI, that is no longer the case.”
The Appraisal Institute stated in its letter to the lawmakers, “[We] stand ready to work with Congress to develop a vision of appraisal oversight that serves consumers and lenders by promoting a competitive marketplace for high quality appraisals.”
The Appraisal Institute is monitoring several actions on Capitol Hill, including one piece of bipartisan legislation that would add two new representatives to the Appraisal Subcommittee and another that would streamline the process for appraiser and appraisal management company licensing and registration. Additionally, AI is watching House and Senate bills that address the disclosure of appraisal fees. 
  • Sens. Jon Tester, D-Mont.; John Thune, R-S.D.; Sherrod Brown, D-Ohio; and David Purdue, R-Ga., on Dec. 12 introduced S 3050, bipartisan legislation that would add two new representatives to the Appraisal Subcommittee, one from the Department of Veterans Affairs and the other from the Department of Agriculture’s Rural Housing Service agency. The legislation was referred to the Senate Banking Committee, but no vote has been scheduled. 
  • The Appraisal Institute is working with the House Committee on Financial Services to develop legislation that streamlines the appraiser and appraisal management company licensing and registration processes. The legislation would authorize the Appraisal Subcommittee to work with state appraiser regulatory agencies to establish a centralized platform for sharing information and processing applications. Appraisers and AMCs also would utilize the platform to submit applications, undergo background checks and track continuing education. 
  • The House on Sept. 19 passed HR 3619, the Appraisal Fee Transparency Act of 2019, but the companion Senate bill currently being debated might not match due to lender opposition to a mandate to disclose appraisal fees. However, the Senate may include a provision that removes the disclosure from the “zero tolerance” requirements of RESPA-TRID rules, which could give appraisers and lenders flexibility to adjust fees if the scope of an appraisal assignment changes between the time a loan estimate is produced and the assignment begins. If this legislation advances, it will require conference or alignment with the House version.

IN THE AGENCIES                                                                       

The Appraisal Institute in a March 17 letter to the Federal Highway Administration said it supports a proposal that would allow appraisers to perform waiver valuations, but also expressed concern about the method by which that would be accomplished.
The proposal released for public comment on Dec. 18 revealed that a jurisdiction exception rule would be established in federal regulation, but as currently written, the amendment would prohibit appraisers from complying with standards rules 1–4 of the Uniform Standards of Professional Appraisal Practice. The amendment would create a potentially unworkable situation for appraisers in restricting their ability to do anything required by standards. 
AI President Jefferson L. Sherman, MAI, AI-GRS, questioned the proposal, asking how an appraiser could complete a waiver valuation if the appraiser must not do any of the things required within Standards 1 and 2 — e.g., employ recognized methods and techniques, or use the cost, income or sales comparison approach. He said the agency’s intent to position appraisers to complete waiver valuations is sound, but its plan to utilize the jurisdictional exception is not. 
The Appraisal Institute was one of eight organizations that signed a Jan. 24 comment letter to the National Credit Union Administration stating their opposition to a proposed rule to increase the threshold for residential real estate transactions requiring an appraisal from $250,000 to $400,000. 
The proposal would bring the NCUA in line with the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, which raised the residential appraisal threshold from $250,000 to $400,000 last year. The increase was instituted despite a review of the Economic Growth and Regulatory Paperwork Reduction Act that concluded a threshold increase would not be “appropriate.”
The organizations stated in their letter that the proposal “puts regulatory relief ahead of consumer protection and safety and soundness, focusing strictly on loosening risk management protocols,” and with the NCUA’s recent increase of the commercial appraisal threshold to $1 million, “places NCUA at the forefront of increasing transactional risk, a strange position to take considering the role credit unions have traditionally held in the finance space.”
The NCUA is expected to approve the residential appraisal threshold increase this year. 
The Appraisal Institute was among five organizations that submitted a comment letter on Jan. 21 to the Consumer Financial Protection Bureau asking it to consider amending the TILA-RESPA Integrated Mortgage Disclosures rule to reestablish reasonable tolerances for appraisal fees. The amendment would help appraisers and other professional service providers better understand the complexity and scope of an assignment before providing a quote for their fees.
An appraisal fee is currently considered a service that “cannot be shopped for” by consumers and is subject to a zero-tolerance requirement that greatly constrains any adjustments in fees, and might cause appraisers to complete an assignment for a lower fee than would be required or withdraw from the assignment altogether. 
A previous version of TILA-RESPA included a 10% tolerance that provided appraisers with flexibility for unforeseen changes.
The TILA-RESPA review is being conducted in accordance with a provision in the Dodd-Frank Act that requires the CFPB to reassess significant rules or orders adopted under Federal consumer financial law.

STANDARDS SETTERS                                              

The Home Innovation Research Labs, an accredited developing organization for the American National Standards Institute, on Feb. 7 released a draft of proposed changes to the ANSI standard for Single-Family Residential Buildings, Square Footage – Method of Calculating, ANSI Z765-2003. The public comment period closed March 23, and comments are under review. The Appraisal Institute supports this effort, recognizing that the standard is referenced throughout the AI body of knowledge and is an important underpinning of residential property valuation.
The Appraisal Standards Board on Feb. 13 released its first exposure draft of proposed changes to the 2022-23 edition of the Uniform Standard of Professional Appraisal Practice. The deadline for making comments is April 30, and the public is invited to comment during the ASB Public Meeting on April 3 in San Antonio, Texas. Register to watch the livestream of that meeting.

IN THE STATES                                                            

The Appraisal Institute Board of Directors at its Nov. 14-15 meeting in Chicago adopted amendments to Regulation Nos. 7 and 8 to require chapters to create a Government Relations Subcommittee for each state or territory. The move is intended to strengthen government relations efforts through enhanced coordination of policy development, advocacy and implementation. 
The policy was written to give chapters maximum flexibility with implementation. In most cases, the structure and funding of each state Government Relations Subcommittee will be based on agreement between the chapters, including the total size of the subcommittee, how many representatives each chapter will have, if and how the subcommittee will be funded, and when and how often the subcommittee will meet. Amendments to chapter bylaws and other governing documents may be necessary to implement this policy. 
The chair and vice chair of the state subcommittee will be chosen by the members of the subcommittee and must be Designated Members of the Appraisal Institute. 
Additional items of note:
  • In states with a single chapter, the existing Government Relations Committee satisfies the new requirement. 
  • In states with multiple chapters, each chapter is required to select at least one Designated Member, Candidate for Designation or Practicing Affiliate to serve on the state's Government Relations Subcommittee. 
  • If a chapter’s territory covers multiple states, the chapter is required to select at least one Designated Member, Candidate for Designation or Practicing Affiliate to participate as part of the Government Relations Subcommittee for each state in which the chapter has territory.
The Appraisal Institute is providing assistance with implementation of the new requirement. Contact Scott DiBiasio at or 202-298-5593. 
The California Bureau of Real Estate Appraisers on Jan. 1 significantly increased license renewal fees. The cost to renew a certified general or certified residential license increased from $525 to $925, and the cost to renew a trainee or licensed appraiser credential increased from $450 to $850. California also requires a $25 state registration fee, while all credential holders (except trainees) must pay an $80 federal registration fee.
The application review fee accounts for the bulk of the increase for each license, increasing from $150 to $400. While the BREA is legally authorized to charge an initial application fee, appraisers are questioning whether the statute allows for the BREA to apply this fee to renewal applications. 
Additionally, the state increased the issuance fees for all three licensing categories, reaching the statutorily imposed maximum of $450 (for trainee and licensed residential) and $525 (for certified residential or certified general).
The BREA claims the increased licensing fees are necessary to compensate for a declining number of individuals seeking licenses. They report that approximately 10,000 individuals sought licenses in 2019, down from around 20,000 in fiscal year 2006-07. The BREA also reported that surplus funds accrued during the years when there was a high number of licensees have been used to partially subsidize licensing fees for the past 12 years and are now exhausted.
New York Gov. Andrew Cuomo on Dec. 16 signed AB 8024, which limits who an appraisal management company can hire, employ or engage to provide property inspections or evaluations. AMCs are now required to engage appraisers, real estate brokers, associate real estate brokers, real estate salespersons and home inspectors to perform these services. 
Thirty-nine state legislatures are in session, as are those in the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands. The legislatures in Montana, Nevada, North Dakota and Texas do not meet this year. 
The Appraisal Institute’s Washington office continues to work with chapters, regions and state coalitions to help shape public policy affecting AI professionals and the valuation profession. 
Legislative activity this year:
  • California is deliberating several bills that would make further changes to the state’s worker classification laws. AB 5 took effect Jan. 1 and has disrupted many professions, including valuation, where the engagement of service providers as independent contractors is the norm. One appraisal management company operating in California eliminated its entire appraiser panel and instead will only use employee appraisers. The Appraisal Institute and a coalition of industry partners are working to retain the ability to have appraisers engaged as independent contractors. 
  • Florida is reviewing HB 1399 and SB 776, two companion bills aimed at reducing the size of the Florida Real Estate Appraisal Board from nine members to seven. One seat reserved for a representative of an appraisal management company would be eliminated as would one reserved for a member of the general public. The board increased its size in 2010 to include two members representing AMCs, but the change resulted in AMCs having disproportionate representation.
  • Mississippi is considering SB 2430, a measure that would establish a three-year statute of limitations on civil claims against real estate appraisers. 
  • Pennsylvania is debating SB 491, legislation that would add two certified evaluators to its Board of Certified Real Estate Appraisers. The BCREA regulates assessors but they have had no representation on the board. The legislation is supported by the Coalition of Pennsylvania Real Estate Appraisers, which primarily consists of the state’s five Appraisal Institute Chapters.
  • South Carolina is considering HB 4151, legislation that would require appraisal management companies operating in the state to post a $25,000 surety bond. Currently, AMCs have the option to provide “a detailed statement of current financial condition” or a $50,000 surety bond. 
  • South Dakota is reviewing HB 1127, a measure that would allow appraisers to perform evaluations for federally insured depository institutions.
  • The Tennessee legislature is considering SB 1914/HB 1945, two bills that would allow 27 different services — including appraisals — to be performed without a license. Normally, an individual performing any of the services in question would be required to have a license, a registration or a certificate. The legislation includes protections for consumers who work with individuals who decide to forgo licensing. The Appraisal Institute Tennessee Chapter opposes the legislation. 
  • Numerous states are considering legislation that would make minor changes to laws regarding the registration, oversight and operation of appraisal management companies. Most of the measures are intended to bring the states into compliance with the federal minimum requirements for the registration and oversight of AMCs. States considering such legislation are Connecticut, Idaho, Kentucky, Maine, Michigan, Minnesota, Mississippi, Nebraska, Oregon, South Carolina, Tennessee, Utah, Wisconsin and Wyoming.

TIP LINE                                                                                        

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The Appraisal Institute's Washington office wants to know if AI professionals have relationships with critical policymakers, or are 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.    












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