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Q3 2019 Washington Report

Aug. 7, 2019

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.  

ON THE HILL                                                                                

Appraisal Institute President Stephen S. Wagner, MAI, SRA, AI-GRS, on June 20 testified before the House Financial Services Committee’s Housing, Community Development and Insurance Subcommittee.  He asked them to pass HR 2852, legislation that would confirm verifiable education requirements for Federal Housing Administration appraisals and allow licensed appraisers to perform appraisals for FHA loans.
“We support this bill because it addresses long-standing concerns about the implementation of pre-existing FHA appraisal requirements, which are unique and differ from those of the GSEs [Freddie Mac and Fannie Mae] and the conventional market,” Wagner’s written testimony said.
Wagner also said the Appraisal Institute supports HR 3619, the Appraisal Fee Transparency Act of 2019, a bill that would ensure compliance with federal appraisal standards, create a national registry of appraisers in training and provide consumers with greater transparency into the disclosure of fees paid for appraisals. 
Wagner noted that the discussion draft includes a provision that the Appraisal Institute recommends and strongly supports – to require full disclosure of appraisal management companies’ fees and appraisers’ fees by separating them on the homebuyer’s Closing Disclosure Form. “This provision would … increase consumer awareness around the appraisal process,” his written testimony said.
Wagner made other legislative recommendations during the hearing, titled “What’s Your Home Worth? A Review of the Appraisal Industry.” They included:
  • Remove appraisal from the zero-tolerance category under the Truth in Lending Act’s and Real Estate Settlements Procedures Act’s Integration Disclosure rules, known as TRID.
  • Establish parameters around rulemaking pursuant to the Economic Growth and Paperwork Reduction Act process.
  • Authorize the Appraisal Subcommittee to serve as a “negotiated rulemaking committee” to establish consistent and flexible lender guidelines relating to appraisals that would address issues such as inactive or limited markets where there is an absence of comparable sales.
  • Reform the nation’s appraisal regulatory structure by establishing a nationwide licensing system for appraisers, where appraisers could find “one-stop shopping” for appraiser license application and renewals.
Wagner also addressed the subcommittee’s questions regarding whether the Appraisal Institute is concerned by recent proposed regulation from federal financial regulatory agencies to increase the de minimus threshold and ultimately increase the number of transactions that are exempt from appraisal requirements.
“We believe two pending proposals – one involving the federal bank regulatory agencies, and another involving the credit union regulator – would increase risk to safety and soundness of financial institutions and the health of the financial system,” Wagner’s written testimony said. “The agencies are competing over which sector of the financial community can do the least due diligence. Frankly, this is preposterous and should be a concern to all taxpayers, who ultimately pay the bills for failures in our financial system.”
The subcommittee also asked whether there are ongoing concerns that appraiser independence is being undermined. If so, members asked, what more can Congress do to strengthen appraiser independence protections?
“There are multiple influences on the independence of appraisers and the independence of the appraisal process,” Wagner said in his written testimony. “Our members experience pressure in less overt or masked ways from any number of parties to the transaction.”
He also cited lenders’ focus when selecting an appraiser on price and turnaround time instead of quality of service or competence; a lack of resources for federal regulatory agencies; and most banks’ failure to take responsibility of residential appraisal functions and instead rely on appraisal management companies.
Read Wagner’s written testimony.
Watch a video of the hearing.
Legislation to end abusive conservation easement tax could generate $6.6 billion in federal revenue, according to a review of S 170 (The Charitable Conservation Easement Program Integrity Act) by the nonpartisan Joint Committee on Tax. The Appraisal Institute and the Land Trust Alliance support this bill. 
The estimated revenue illustrates how dramatically taxpayers have been bilked by bad actors abusing a system designed to encourage charitable giving — and it only reflects the amount of known abuse since 2016. The real number could be higher. 
The Joint Committee on Tax also warned that people abusing the conservation incentive can wait out the three-year holding period and continue the cycle of abuse. Legislators are meeting with the Joint Committee on Tax to address this issue.
The John D. Dingell Jr. Conservation, Management and Recreation Act, known as the Dingell Act, received permanent reauthorization earlier this year after a lengthy fight in Congress. The legislation reauthorizes the Land and Water Conservation Fund, which supports the protection of federal public lands and waters and provides the largest source of federal appraisal assignments.
The Appraisal Institute supported the LWCF reauthorization effort through the LWCF Coalition — an alliance of conservation organizations whose goal is to support the program and its protection of national parks, forests, wildlife refuges and recreation areas and encourage the voluntary conservation of private land.   
Legislation that provides dedicated funding for the permanently reauthorized LWCF was advanced June 19 by the House Natural Resources Committee. HR 3195, known as the Land and Water Conservation Fund Permanent Funding Act, is a companion bill to S 1081 and was introduced by Rep. Jeff Van Drew (D-N.J.), Committee Chair Raúl Grijalva (D-AZ) and Rep. Brian Fitzpatrick (R-PA). This bill continues a bipartisan commitment to LWCF to ensure that it receives full and dedicated funding each year.

IN THE AGENCIES                                                                       

President Trump on June 25 signed HR 299, the Blue Water Navy Vietnam Veterans Act of 2019, legislation that authorizes the Department of Veterans Affairs to permit VA fee appraisers to make appraisals “based solely on information gathered by someone with whom the appraiser has entered into an agreement for such services.”
The law authorizes the VA to release guidance on the matter prior to issuing any regulations, which should explain when, where and how the provision might work in real-world applications. The provision had been supported by the VA, which has wanted to address a perceived appraiser shortage, particularly in rural areas. 
The Appraisal Institute expressed its concern to Congress about loosening the VA’s appraisal process, citing veteran protections. AI also argued that a better system entails an appraiser directly entering into an agreement for services rather that a siloed approach.  
The IRS has closed the comment period for additional rulemaking and guidance around Opportunity Zones and held a public hearing July 9 to address comments from stakeholders and program participants.
The National Council of State Housing Agencies in June reported the most recent stats from its Opportunity Zone Fund Directory, which showed the creation of nearly 150 funds and identified more than $29 billion in anticipated investment. 
AI professionals are encouraged to familiarize themselves with the Opportunity Fund program, as they are increasingly being relied upon for advice and assistance with planning and due diligence. Appraisers can learn more about their role by reading Is Opportunity Knocking?.
View the proposed IRS rule and listen to a recording of the July 9 public hearing.
The Appraisal Subcommittee on July 9 approved a request from North Dakota for a temporary waiver from appraisal licensing requirements, declaring a scarcity of appraisers. The ASC granted the one-year waiver from licensing requirements by a 5-2 vote; an additional year is possible if state officials again seek a waiver based on the scarcity argument. 
The Federal Financial Institutions Examination Council still needs to approve the decision, which was anticipated in July but has not happened. It’s important to note that the temporary waiver is not a waiver from appraisals, but from appraisal licensing requirements. All appraisals still need to comply with the Uniform Standards of Professional Appraisal Practice. 
The waiver will cover both residential and commercial appraisals; however, the residential waiver could be sunset 60 days after banking regulators raise the appraisal threshold, if they choose to do so. A decision by the regulators on the threshold could come as soon as this month. 
During the ASC’s special meeting, North Dakota Appraisal Board Chair Corey Kost, MAI, argued against granting the temporary waiver, citing no evidence of a scarcity of appraisers. He also argued that Congress has already addressed this issue with the rural appraisal waiver granted in the regulatory relief bill signed by President Trump last year.
Arguing for the waiver were North Dakota State Banking Board Commissioner Lise Kruse and members of the North Dakota Association of Bankers. They blamed a lack of appraisers in rural areas for the slow turnaround times for loans — despite little evidence supporting their argument. 
Representatives of the Federal Housing Finance Agency and the U.S. Department of Housing and Urban Development voted “no.” Representatives of the Consumer Finance Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Reserve, the National Credit Union Administration and the Office of the Comptroller of the Currency voted “yes.”

IN THE STATES                                                            

Appraisers in Alabama, Louisiana and Oregon may now perform evaluations for real estate-related financial transactions where federal law does not require appraisals to comply with the Uniform Standards of Professional Appraisal Practice. These three states join Florida, Georgia, Illinois, Indiana, Tennessee, Utah and Virginia in allowing appraisers to perform evaluations. 
Alabama’s legislation took effective May 29, allowing state-licensed appraisers to perform evaluations for federally regulated financial institutions. 
HB 304 states that appraisers “shall not be subject to any provision” of the state’s appraiser licensing law when performing an evaluation that includes a disclaimer stating it is not an appraisal, and the requirements for a licensed real estate appraiser to comply with the USPAP do not apply.
Additionally, the law clarifies that evaluations are “governed by federal law and rules of the federal financial institution regulatory agencies, and not the board.”
Louisiana Gov. John Bel Edwards on May 30 signed HB 340, legislation that allows appraisers in the state to provide evaluations for federally insured depository institutions. The law took effect Aug. 1. 
The legislation states that appraisers are not prohibited by the state’s appraiser licensing law from providing evaluations to federally regulated institutions in accordance with “federal law, regulation or the guidance for evaluations established by the federal financial institutions regulatory agency of the depository institution.”
Oregon Gov. Kate Brown signed SB 109 on May 13, which allows state-licensed and state-certified appraisers to provide evaluations to financial institutions beginning Jan. 1. 
The law clarifies that licensed or certified appraisers who are providing evaluation services to financial institutions are not engaging in real estate appraisal activity if the evaluation includes a disclaimer stating the evaluation was not prepared in their capacity as a real estate appraiser and that it might not comply with USPAP. Providing evaluations is not considered a real estate appraisal activity, and therefore appraisers are not subject to the jurisdiction of the Oregon Appraiser Certification and Licensure Board. 
In testimony supporting the legislation, the Coalition of Oregon Real Estate Appraisers stated, “We believe Oregon’s citizens and financial institutions would be best served and protected by allowing appraisers to perform evaluation services.” COREA concluded, “We are not opposed to qualified nonā€appraisers performing evaluations, however, [sic] we strongly feel that it is in the best interest of Oregonians that those most qualified to perform evaluations (appraisers) not be prohibited from doing so.”
Louisiana Gov. John Bel Edwards on June 1 signed SB 191, legislation that limits a cause of action against an appraiser or appraisal company in civil court to one year from the date that an alleged harmful act occurred or was discovered or should have been discovered. The law takes effect Jan. 1.
The law also states that a civil action cannot be filed more than three years after the alleged harmful act, omission or neglect. In cases where assignments resulted in appraisal reports, no civil action may be filed three years from the date that the appraiser signed the report. 
The law applies to “all causes of action without regard to the date when the alleged act, omission or neglect occurred.” However, any alleged act, omission or neglect that occurred prior to Aug. 1, 2019, must be filed by Aug. 1, 2020, regardless of when the act, omission or neglect occurred. 
The Louisiana Chapter of the Appraisal Institute partnered with the Louisiana Real Estate Appraisers Coalition to advance this important legislation. 
Minnesota Gov. Tim Walz on May 30 signed HF 2, legislation that makes several changes to the state’s appraiser licensing law.
The law adopts by reference the Real Property Appraiser Qualification Criteria that took effect May 1, 2018, and clarifies that temporary practice permits are available in the state for all appraisal assignments — not just federally related transactions. Additionally, appraisers in Minnesota no longer have to disclose whether they have previously been to the subject property. However, appraisers still must comply with Uniform Standards of Professional Appraisal Practice requirements to disclose any services they have performed related to the subject property within a three-year period immediately preceding acceptance of the assignment. 
The legislation also updates or removes several obsolete definitions, and allocates $5,000 per year to compensate members of the newly reconstituted Appraiser Advisory Board. 
Eighteen states and Washington, D.C., have enacted legislation this year to bring their laws governing appraisal management companies into compliance with the federal minimum requirements. Those states are: 
  1. Arizona (SB 1333)
  2. Arkansas (SB 393)
  3. Colorado (SB 46)
  4. Connecticut (HB 7286 / HB 7299)
  5. Georgia (HB 192)
  6. Indiana (HB 1569)
  7. Maryland (SB 69; SB 20)
  8. Mississippi (SB 2697; SB 2451)
  9. Nebraska (LB 77)
  10. Nevada (SB 39)
  11. New Mexico (SB 56)
  12. North Carolina (SB 462)
  13. North Dakota (SB 2075)
  14. Oklahoma (SB 731)
  15. Washington (SB 5124)
  16. West Virginia (SB 597)
  17. Wyoming (SF 83)
Massachusetts became the 50th state to enact a comprehensive program to regulate AMCs on July 31 when Gov. Charlie Baker signed HB 3904. The legislation took immediate effect and should enable the state to meet the Appraisal Subcommittee’s Aug. 10 deadline to have AMC policies in place to be in compliance with the AMC registry rule and avoid operational restrictions for federally related transactions. 
The legislation is mostly consistent with the federal minimum requirements for states as it relates to the regulation of AMCs.   
Washington, D.C., Mayor Muriel Bowser on July 31 signed B23-0382, legislation that establishes a comprehensive registration and oversight program for AMCs operating in Washington — and while the legislation takes immediate effect, it will only be in place for 90 days. 
The D.C. Council is considering B23-0383, which would establish the same AMC registration and oversight program for no more than 225 days after mayoral and congressional review while the Council continues work on permanent legislation. The legislation will receive further consideration when the Council returns from its summer break in September. 
An unusual aspect of both bills is that they place responsibility for AMC licensing and oversight within the Department of Insurance, Securities, and Banking, even though federal law requires that AMCs be “subject to supervision by a state appraiser certifying and licensing agency in each state. 
Read more about the unique Washington, D.C., lawmaking process.
New York awaits Gov. Andrew Cuomo’s signature on A8024. The legislation would repeal and replace a provision in the state’s law prohibiting AMCs from hiring, employing or engaging anyone other than state-licensed or state-certified appraiser, and clarify that the prohibition only applies to appraisal assignments. The legislation also clarifies that AMCs are permitted to hire appraisers, brokers/salespersons and home inspectors to perform property inspections and evaluations and BPOs.

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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