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Spring 2023 Washington Report

The Appraisal Institute’s Washington Report & State News 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.

  1. Appraisal Institute President Testifies at ASC Hearing on Appraisal Bias
  2. Appraisal Organizations Tell HUD That Proper ROV Policies can be Beneficial
  3. AI Supports IRS Crackdown on Syndicated Conservation Easement Transactions
  4. GSA Finalizes Rules for Leasing High-security Space
  5. AI Supports AQB Proposal on Valuation Bias and Fair Housing Education
  6. Adoption of AI PAREA Continues to Grow, 43 States on Board
  7. State Legislatures Consider Numerous Valuation Issues
  8. Fannie Mae Senior Director of Collateral Policy Talks New Appraisal Waiver Program 
  9. AI Discusses Valuation with Chief Appraiser for the Department of Veterans Affairs
IN THE AGENCIES                                                                       
Appearing at a Jan. 24 Appraisal Subcommittee hearing on appraisal bias, Appraisal Institute President Craig Steinley, MAI, SRA, AI-GRS, AI-RRS, testified that “As the agencies continue development of guidelines and regulations that touch on appraisal topics, we offer the resources of AI, including our Designated Members, to assist with understanding of appraisal standards, appraisal methodology and appraisal practice.” 
Steinley emphasized the importance of a strong consumer appeals processes, encouraging all member agencies of the ASC to support protocols like the Department of Veterans Affairs’ Tidewater Initiative, which is used in VA transactions when the appraised value of a home falls below its contract purchase price. 
The Appraisal Institute along with ASA, ASFRMA and MBREA submitted on Feb. 2 a comment letter to the Federal Housing Administration in response to a draft Mortgagee Letter from the Department of Housing and Urban Development that establishes a process for underwriters when a borrower requests a review of an appraisal associated with an FHA-insured mortgage application. 
The organizations noted in the letter that a well-developed Reconsideration of Value process “can be beneficial to borrowers, underwriters and appraisers in ensuring fair and accurate appraisals in connection with FHA-guaranteed loans.” It was recommended that HUD consider the Department of Veterans Affairs’ Tidewater Initiative as both a template for new policy and as a means for aligning the agencies as closely as possible so participating mortgage lenders have generally consistent protocols and procedures.
The organizations also emphasized that clear guidance must be given to underwriters regarding the circumstances under which a ROV request should be forwarded to an appraiser. They stated, “Absent meaningful guidance, it is our concern that underwriters will err on the side of always forwarding reconsideration requests to the appraiser, as it will be the easiest, and less risky, option to shift borrower complaint risk to the appraiser.”
The Appraisal Institute noted in both a comment to the IRS and in testimony before the agency that it supports the IRS’s proposed rule to curb syndicated conservation easement transactions. However, because the IRS lumped appraisals in with other promotional or sales activity that is more applicable to non-appraisers, AI reminded the agency that “appraisers do not provide ‘advice’ as independent third parties when producing an appraisal. It is simply a value opinion.” 
Additionally, AI asked that any final rule “provide(s) sufficient guidance to appraisers on the application of any material advisor requirements,” specifically stating that appraisers must identify the client and any intended users of the appraisal, which would help align the parlance of IRS rules with appraisal standards and regulation.
The General Services Administration on March 7 issued a final rule that amends the Federal Management Regulation, Real Estate Acquisition, by clarifying policies regarding lease agreements for high-security space in accordance with the Secure Federal Leases from Espionage And Suspicious Entanglements Act, also referred to as the Secure Federal Leases Act. 
The final rule takes effect April 6 and will require the identification of all beneficial owners, meaning “any person that, through a contract, arrangement, understanding, relationship, or otherwise, exercises control over the covered entity or has a substantial interest in or receives substantial economic benefits from the assets of the covered entity, with some exceptions.” 
The amended policy is a response to recently heightened national security concerns about foreign ownership and control, and congressional action in the realm of government contracting.
STANDARDS SETTERS                                                               
The Appraisal Institute on March 9 submitted a letter to the Appraiser Qualifications Board in support of the proposed national education requirements for valuation bias and fair housing, which would ensure that appraisers have the most robust national education requirements of any industry subject to the Fair Housing Act. 
The AQB proposal calls for all credentialed appraisers to complete a seven-hour seminar on valuation bias and fair housing by 2025 and four hours of continuing education requirements for each license renewal cycle thereafter. Aspiring appraisers would have to complete an eight-hour course in qualifying education requirements that includes a one-hour exam. 
The AQB is expected to release a 2nd Exposure Draft that incorporates suggestions from stakeholders, with final action on the proposal expected later this year.
IN THE STATES                                                                            
The incorporation of the Appraisal Institute's Practical Applications of Real Estate Appraisal, known as AI PAREA, into state laws and regulations is gaining momentum. Forty-three states indicate they are willing to accept it fully, partially or by reference as an alternative for residential appraiser licensing experience requirements; 37 states indicate they will accept it to satisfy 100% of experience requirements. 
Additionally, the laws in five states fully incorporate the Real Property Appraiser Qualification Criteria by reference, and because RPAQC includes AI PAREA, it should be fully accepted in those states. 
Kansas has indicated acceptance of AI PAREA, but only to satisfy 50% of the experience requirements. Officials based their level of acceptance on a previous RPAQC allowance wherein only 50% of a trainee’s valuation work used for experience credit can be performed without a typical client or be obtained via a practicum program. The allowance has been changed to 100%, but that does not yet change how the state will accept PAREA. 
The Appraisal Institute continues to work with state regulators to ensure universal acceptance of AI PAREA when it becomes available later this year. See all AI PAREA-related statutes and regulations
The legislatures in 43 states, the District of Columbia and all five U.S. territories are in session. The Appraisal Institute’s Washington office is currently tracking 75 pending measures, and continues to work with its chapters, regions and state coalitions to help shape public policy affecting AI Professionals and the valuation profession. Of note:
  • Arizona is considering HB 2230, a bill that would establish a four-year statute of limitations on most civil claims against real estate appraisers. The bill has passed the House and is being reviewed in the Senate.
  • Florida is considering SB 398 and HB 213, companion bills that would establish a maximum four-year statute of limitations on civil claims against real estate appraisers. Committee hearings on these bills are ongoing.
  • Illinois is considering HB 1020, legislation that would amend the Real Estate Appraiser Licensing Act to reinforce the fact that discrimination in the appraisal of residential or commercial real estate is illegal. The bill would grant a private right of action to parties that have allegedly been aggrieved by an appraiser and give the state attorney general the power to file a lawsuit if its investigation finds “reasonable cause to believe that an appraiser is engaged in a pattern and practice of discrimination.”  
  • Indiana introduced HB 1151, a measure that would clarify and reinforce the state’s appraiser licensing and certification law concerning existing prohibitions on discrimination in real estate appraisals. It also includes a requirement that all appraisers complete qualifying and continuing education in the areas of implicit bias and cultural competencies. No action has been taken on this bill. 
  • Massachusetts is looking at a package of valuation-related bills, including S 147, which would make licensing mandatory in the state; H 276, which says a civil lawsuit against an appraiser can only be filed by the client and named intended users; and H 336, which would update real estate appraiser record retention requirements.
  • Maryland is considering HB 669 and SB 455, two bills that would accept AI PAREA to satisfy the experience requirements for licensing and certification. HB 909 is also under review and would extend the sunset date of the state’s Commission on Real Estate Appraisers, Appraisal Management Companies and Home Inspectors to July 1, 2026. Additionally, it contains a provision that requires the state’s Department of Labor to “hire a consultant to conduct an independent evaluation … to determine if the Commission is adhering to the most recent Uniform Standards of Professional Appraisal Practice's diversity, equity, and inclusion guidelines in its regulation of real estate appraisers and appraisal management companies in the state.”
  • Mississippi considered HB 1187, legislation that to separate the Mississippi Real Estate Appraiser Licensing and Certification Board from the Mississippi Real Estate Commission and become the Mississippi Real Estate Appraisal Board. While the bill passed the House, it died in the Senate.
  • North Carolina is reviewing HB 48, a measure that would disapprove the state’s Appraisal Board rules incorporating AI PAREA that were adopted last year.
  • New Jersey is studying several valuation-related bills. AB 1519 and SB 777 are companion measures that would impose new penalties against real estate appraisers who are found to have engaged in discriminatory conduct. They also would require materials related to appraisal bias to be distributed to property owners and prospective purchasers. AB 4647 and SB 3318 would direct the New Jersey Appraisal Board to accept AI PAREA. SB 3317 and AB 4648 would impose mandatory continuing education requirements related to fair housing and appraisal bias.
  • Oregon is looking at SB 702, legislation that would impose mandatory continuing education requirements on federal and state fair housing laws, implicit bias and racial bias. The bill has passed the Senate and is being considered in the House.
  • Rhode Island is considering S 819, a bill that would mandate solar panels be “included in the appraisal of any real estate for the purpose of financing to purchase or refinancing a loan on the property.” The bill also would require appraisers to include in their reports the past 24 months of invoices for net metering so that “the average income or balance due generated over that time can be utilized for the purchase of or refinancing a loan on the property.” 
  • South Carolina is considering HB 3278, a measure that would update the state’s appraiser and appraisal management company licensing and registration laws.
  • Texas is reviewing HB 2584, a bill that would prohibit state agencies from including in contracts for appraisal services any provisions that require an appraiser to indemnify the agency and hold it harmless from all liability related to an appraisal. Some governmental agency contracts include a provision that requires a contracting appraisal to indemnify the agency against liability that may not have been directly caused by the appraiser.
  • Virginia Gov. Glenn Youngkin on March 21 signed HB 1418, legislation that requires the Virginia Real Estate Appraisal Board to accept successful completion of AI PAREA to satisfy the experience requirements for licensure or certification.
  • Washington is considering HB 1797, a bill that would allow real estate appraisers to complete evaluations for federally regulated financial institutions. It was amended to include a “trigger” mechanism whereby the bill would not take effect until the state adopts administrative requirements related to qualifying and continuing education on fair housing and valuation bias. 
IN CASE YOU MISSED IT                                                            
The AI Government Relations Committee on March 28 hosted a discussion with Lyle Radke, senior director of collateral risk at Fannie Mae, to discuss the new “Value Acceptance” (appraisal waiver) program. The conversation, which also included a panel of designated appraisers, can be viewed on the AI YouTube channel
The Appraisal Institute on Feb. 28 hosted a webinar with James Heaslet, chief appraiser for the Department of Veterans Affairs, in which a wide range of valuation topics was discussed. View the webinar on the AI You Tube channel.

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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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