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Washington Report & State News

The Appraisal Institute’s Washington Report and 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 Research Addresses Valuation Issues and the Upcoming Elections
  2. PAVE Continues Work on Action Plan to Advance Property Appraisal and Valuation Equity
  3. Appraisal Subcommittee Releases Final Rule on Temporary Waiver Requests
  4. Comments Open for Employee or Independent Contractor Classification
  5. Adoption of PAREA Gains Momentum in the States
  6. Colorado, Maryland and Delaware Among States Addressing Valuation Legislation

ON THE HILL                                                                                

The Appraisal Institute along with its government relations consulting firm Rich Feuer Anderson produced a comprehensive pre-election 2022 outlook that addresses how the upcoming elections relate to the financial services sector. 
 
Several bills affecting the valuation profession may see action during the post-election lame duck congressional session, a period that typically is reserved for must-pass legislation that has general concurrence from both the respective chair and ranking members of the committee of jurisdiction. It also involves items that can easily be negotiated between House and Senate members. Some of those bills include: 
 
  • S 4208 / HR 7735, the Improving Access to the VA Home Loan Act, which would require the Department of Veterans Affairs to update appraisal requirements for the loans it guarantees. The legislation is an attempt to align VA policies related to desktop appraisals and other flexibilities offered by the government-sponsored enterprises. Earlier this year, the VA released new policy regarding desktop appraisals, but it also has had rules in place for years related to appraisal waivers through refinance policies.One provision in S 4208 would require the VA to consider changes in quality control processes, which concerns the Appraisal Institute because as written it is undefined and subject to broad interpretation if applied to such issues as the VA Fee Panel itself. Action on this bill is likely given that it has bipartisan support in both chambers of Congress and the apparent general support from the VA.  
  • HR 3008, the Homebuyer Assistance Act, is legislation that would modify appraiser requirements for mortgages insured by the Federal Housing Administration. Currently, FHA appraisers must be “certified” by state or national entities, but this bill would eliminate national entity certification and instead allow appraisers for single-family housing to be state-licensed (not only state-certified). Additional specified FHA educational requirements would also apply. This bill is an amendment to the National Defense Authorization Act, which likely will receive consideration during the lame duck session. The FHA amendment has received strong support in recent sessions of Congress and stands a chance to be included. 
  • The National Defense Authorization Act contains another appraisal-related amendment, one that borrows a provision from HR 2553, the Real Estate Valuation Fairness and Improvement Act, which served as an early model for the Property Appraisal and Valuation Equity Task Force, known as PAVE. This provision relates to the Appraisal Subcommittee establishing a grant program authorizing $50 million over a three-year period for states, nonprofit organizations and institutions of higher education to promote diversity and inclusion in the valuation profession. Complicating the passage of this provision are several questions about the authorization and appropriations process and how it would apply to the Appraisal Subcommittee as an independent agency as authorized by a national defense bill. 
  • S 4808, the Enhancing American Retirement Now Act, is a bill with an amendment added during Senate committee consideration that attempts to reign in syndicated conservation easement transactions. AI has long supported such provisions and currently is reviewing additional provisions added to the amendment and working with historic preservation advocates to address concerns about potential unintended consequences. Chances for this legislation to move forward are moderate, given its inclusion in an important piece of legislation that has momentum but also several issues that must be resolved for it to receive clearance. 
 
The Property Appraisal and Valuation Equity task force continues its work to implement its action plan, and in the process several themes are emerging:
  • Task force members and the Appraisal Subcommittee are honing in on appraisal standards and qualification issues, as evidenced by communications sent by the ASC to The Appraisal Foundation. The Appraisal Standards Board is in the middle of an exposure period related to changes to the Ethics Rule in the Uniform Standards of Professional Appraisal Practice that aims to address concerns from the agencies about fair housing law recognition and prioritization within appraisal standards. Likewise, the Appraiser Qualifications Board is developing proposals related to valuation bias and fair housing training requirements for appraisers. Both proposals are expected to be released for further exposure in the coming months. 
  • Development is underway on standards and guidance related to reconsideration of value processes and procedures. The Consumer Financial Protection Bureau on Oct. 6 posted information on ROV policies, and the Office of the Comptroller of the Currency has been working on this issue for several months. AI expects ROV to be part of future work streams within the agencies, and guidance development is likely. 
  • Diversity efforts remain a priority both within the agencies and the valuation profession, with programs such as the Appraiser Diversity Initiative — which involves Fannie Mae, Freddie Mac, the National Urban League and the Appraisal Institute — receiving significant attention. ADI programs have so far awarded more than 300 scholarships, with more than 60 scholarship recipients having already completed their trainee education. There is broad recognition and support for furthering these efforts. 
Additionally, the agencies are entering into information sharing agreements to evaluate and study appraisal work products and trends. Appraisers are encouraged to pay close attention to identified risk management issues and best practices, such as those noted in the Fair Housing and Discrimination article published in the second quarter 2022 edition of Valuation magazine.   
 
 
The Federal Registry on Oct. 7 published the Appraisal Subcommittee’s long-awaited final rule, which amends its existing policies on temporary waiver requests. This rule addresses waivers of appraisal licensing requirements, not appraisals, which still must comply with the Uniform Standards of Professional Appraisal Practice. The rule will take effect Dec. 6.
 
The amended policy redefines “petition” to include state financial institutions’ regulatory agencies as potential petitioners, which could possibly lead to more temporary waiver requests. It also states that mandatory and discretionary waiver terminations must be published in the Federal Register, the latter requiring a 30-day comment period.
 
The Appraisal Institute and a coalition of valuation organizations submitted a letter in March to the ASC in which they expressed support for actions involving temporary waiver requests, but expressed concerns about unintended negative consequences and continued misunderstanding regarding the nature of relief provided through the grant of a waiver.
 
 
OPEN FOR COMMENT                                                                
 
The U.S. Department of Labor is seeking comments on its proposal to modify regulations that its Wage and Hour Division uses to analyze employee or independent contractor classification under the Fair Labor Standards Act, or FLSA. The changes are intended to make regulations more consistent with judicial precedent and the FLSA's text and purpose. Valuation firms are among the organizations affected by the proposal, as are appraisal management companies, appraisers operating under independent contractor arrangements and financial institutions. Comments are due Nov. 28
 
 
IN THE STATES                                                                          
 
The incorporation of the Practical Applications of Real Estate Appraisal, known as PAREA, into state laws and regulations is gaining momentum. PAREA is an alternative method to satisfy experience requirements for residential appraiser licensing.
 
Thirty-five states have indicated that they will accept PAREA to some degree, with 27 of those indicating they will accept it to satisfy 100% of experience requirements. Additionally, the laws in six states fully incorporate the Real Property Appraiser Qualification Criteria by reference, and because RPAQC includes PAREA, it should be fully accepted in those states. California and Kansas have indicated acceptance of PAREA, but only to satisfy 50% of the experience requirements. They based their lower 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%.
 
During the past few months, laws and regulations regarding PAREA have been proposed or finalized in Florida, Louisiana, Michigan, New Jersey, South Dakota, Texas and Utah. Appraiser regulatory authorities in several other states are reviewing PAREA as an acceptable alternative for appraiser licensure.
 
The Appraisal Institute continues working with regulators to ensure universal acceptance of PAREA when it becomes available in 2023.
 
Review the compilation of state laws and regulations regarding PAREA. 
 
 
Only eight state legislatures are still in session, but the year has seen a bevy of activity related to valuation — the Appraisal Institute has tracked nearly 80 bills. State regulatory agencies have also been busy proposing new rules, mostly related to synchronous and live-stream distance education. AI’s Washington office continues to work with its chapters, regions and state coalitions to help shape public policy affecting AI professionals and the valuation profession.
  • Colorado Gov. Jared Polis on June 2 signed HB 1216, legislation that allows appraisers to perform evaluations.
  • Louisiana Gov. John Bel Edwards on June 17 signed SB 367, a law that reestablished the licensed residential credential and requires the Louisiana Real Estate Appraisers Board to accept the Practical Applications of Real Estate Appraisal, known as PAREA.
  • Maryland enacted HB 1097 (without the governor’s signature) to create a task force on property appraisal and valuation equity that will research the undervaluation of and any valuation errors with minority-owned properties.
  • New Jersey is considering multiple bills (S 777; A 1518; A 1519; A 4647; and A 4648) that address valuation bias and PAREA.
  • The New York Assembly is considering A 9264, legislation that would add any discrimination by an appraiser on the basis of a protected characteristic to the state’s list of violations of its Human Rights Law.
  • Delaware and Maryland legislators are moving forward with drafts of regulations that would require appraisers to complete a specified number of hours of continuing education on valuation bias and fair housing during each licensing cycle. Similar legislation likely will be introduced in Pennsylvania next year.

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