HB 5007 -Delay in Florida AMC Regulation - DOWN IN FLAMES!!

Since the beginning of this years' Florida Legislative Session, Appraiser Active has posted about the disaster that was HB 5007, "Reducing and Streamlining Regulations".

Well, yesterday was the last day of the 2011 session. HB 5007 had passed the House. It's companion, SB 1824, had passed the Senate. Both, however, had been amended several times in their respective chambers, and several differences had developed. The differences were significant enough for a Conference Committee to be appointed to iron them out.

The Conference report was adopted by the House, but late last night, my email inbox received this message:

H 5007 (2011) - Reducing and Streamlining Regulations - SENATE - Failed to pass as amended by Conference Committee Report; YEAS 18 NAYS 21.

LINK!!

NAR Statement on Appraiser Independence

Next week, the National Association of Realtors meets in Washington, D.C. for their Mid-Year governance meetings. The NAR Appraisal Committee will meet on Wednesday, May 11, 2011 at 8:00 A.M. We will meet in the Virginia Suite A and B in the Marriott Wardman Park Hotel.

The agenda is full, and it will be a challenge to cover it all in the 2 hours allotted, but we will do our best. One item, not on the agenda, but sure to be a topic of discussion, is the recently released Statement on Appraiser Independence.

NAR Statement on Appraiser Independence

April 2011

"In recent months interference in the appraisal process has unnecessarily put at risk a sustainable housing recovery. Our member appraisers are dealing with changes in the real estate market due to economic conditions in the country, their long time business relationships with market participants have been destroyed and their business models have been shattered. The latest blow is their enduring the consequences of the implementation of aspects of the Dodd-Frank Act.

Appraisers are being asked to include distressed transactions as comparable sales, to complete the appraisal in an unreasonable and unrealistic short time span, and to comply with a scope of work not justified by the fee being offered. In some situations appraisers are required to provide as many as eight comparable sales and/or listings. NAR believes this is interference in appraiser independence, causing harm to the real estate recovery, and harmful to consumers.

This month, compliance with the Federal Reserve's interim final rule amending Regulation Z (Truth in Lending) became mandatory. Early reports indicate that some appraisal management companies may be misinterpreting the reasonable and customary fee requirements of the statute and the interim rule. Although NAR has not commented on the customary and reasonable fee language of the statute or the interim rule, we are concerned that unfair treatment of our member appraisers will further erode their businesses and impact the quality of appraisal reports, adding risk for consumers and lenders.

NAR 2010 President Ron Phipps said "asking for up to 10 comps, reducing turnaround times, and expanding the scope of the assignment without appropriately adjusting the fee is adding unnecessary risk to an already fragile mortgage market system. We must maintain an environment where our independent appraisers are treated fairly as they are the lynchpin of the mortgage transaction." NAR has long advocated for an independent appraisal process and enhanced education requirements to promote public trust in the appraisal profession. NAR wants to ensure the consumer is provided the service bargained for along with a well-supported, credible opinion of value."

Much more will be discussed. If you are a member of the National Association of Realtors, and happen to be attending the meetings, or are in the DC area, stop by. We encourage your participation.

LandSafe Appraisal Services Agreement

This LandSafe Appraisal Services Agreement made its debut within the past couple of weeks. It has prompted heated discussion on appraiser bulletin boards and facebook groups. For those of you not familiar with the name, LandSafe, Inc., established in 1994, is a wholly owned subsidiary of Bank of America. Along with a wide variety of real estate closing services, LandSafe operates LandSafe Appraisal Services, Inc., an Appraisal Management Company.

A copy of the agreement is available at the link above, or below the fold. As an appraiser, it's your decision to become a party to the agreement or not, but you should take a long hard look at the obligations imposed on you.

For instance:

13.11 One aspect of the determination of Appraiser compliance with LandSafe Security Requirements is a review of Appraiser Security Controls. As a condition precedent to performance under this Agreement, Appraiser agrees to satisfy the following validation requirements: (a) participation in LandSafe’s Appraiser assessment process including the completion of online or on-site assessment(s), as appropriate, and remediation of any findings; (b) periodic discussions between LandSafe personnel and Appraiser Information Technology security personnel to review Appraiser Security Controls; and (c) if requested delivery to LandSafe of network diagrams depicting Appraiser perimeter controls and security policies and processes relevant to the protection of Confidential Information. Examples of these policies include, but are not limited to, access control, physical security, patch management, password standards, encryption standards, and change control.

and

14.1 Appraiser shall indemnify, defend, and hold harmless LandSafe and its Representatives, successors and permitted assigns from and against any and all claims or legal actions of whatever kind or nature that are made or threatened by any third party and all related losses, expenses, damages, costs and liabilities, including reasonable attorneys' fees and expenses incurred in investigation, defense or settlement ("Damages"), which arise out of, are alleged to arise out of, or relate to the following: (a) any negligent act or omission or willful misconduct by Appraiser or its Representatives engaged by Appraiser in the performance of Appraiser’s obligations under this Agreement; or (b) any breach in a representation, covenant or obligation of Appraiser contained in this Agreement.

17.1 Appraiser shall maintain at no additional cost to LandSafe, in a reasonably accessible location, all Records pertaining to its Services provided to LandSafe under this Agreement for a period of ten (10) years, and if such Records are used in a judicial (or other dispute resolution) proceeding related to an Appraisal Order(s), Appraiser shall retain them for ten (10) years following the disposition of the proceeding. Such Appraiser Records referenced above may be inspected, audited and copied by LandSafe, its Representatives or by federal or state agencies having jurisdiction over LandSafe, during normal business hours and at such reasonable times as LandSafe and Appraiser may determine. Records available for review shall exclude any records pertaining to Appraiser’s other customers deemed proprietary and confidential and Appraiser confidential and proprietary records not associated with the Services provided under the Agreement. Appraiser will give prior notice to LandSafe of requests by federal or state authorities to examine Appraiser’s LandSafe Records. At LandSafe’s written request, Appraiser shall reasonably cooperate with LandSafe in seeking a protective order with respect to such Records.


17.2 During regular business hours but no more frequently than once a year, LandSafe may, at its sole expense, perform a confidential audit of Appraiser’s operations as they pertain to the Services provided under this Agreement. Such audits shall be conducted on a mutually agreed upon date (which shall be no more than ten (10) Business Days after LandSafe’s written notice of time, location and duration), subject to reasonable postponement by Appraiser upon Appraiser’s reasonable request, provided, however, that no such postponement shall exceed twenty (20) Business Days. LandSafe will provide Appraiser a summary of the findings from each report prepared in connection with any such audit and discuss results, including any remediation plans. If audit results find Appraiser is not in substantial compliance with the requirements of this Agreement, then LandSafe shall be entitled, at Appraiser’s expense, to perform up to two (2) additional such audits in that year in accordance with the procedure set forth in this Section. Appraiser agrees to promptly take action at its expense to correct those matters or items identified in any such audit that require correction. Failure to correct such matters shall be considered a material breach of this Agreement.

Of course, there's more. Take a look at the assessment of the agreement at the Appraiser Law Blog, and their sister site, READI.
 
A complete copy of the LandSafe Appraisal Services Agreement is below the fold.

CLICK to Read More

Florida Legislature Committees: Delay AMC Registration Until 2014 - UPDATED

SCROLL DOWN FOR UPDATE

Last year, Florida real estate brokers and appraisers expended a tremendous amount of energy, effort and human capital to ensure HB 303 passed the Florida Legislature and was signed into law by the Governor. It was clear that Appraisal Management Companies were endangering the public, improperly influencing appraisers, utilizing appraisers lacking the necessary competence, and jeopardizing transactions. As part of the negotiations, sponsors agreed to an implementation date of July 1, 2011.

The United States’ Congress recognized the same potential for danger to the public, and included a requirement for states to regulate Appraisal Management Companies in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The minimum requirements in the Dodd-Frank Act are virtually identical to those in the Florida law passed last year.

Unfortunately, the Florida Legislature, in their quest to avoid what they view to be unnecessary regulation, has several bills that seek to delay implementation of Appraisal Management Company registration until July 1, 2014. Of course, this is not explicitly stated in the several bills under consideration, and making their way through the committee process. Among them is CS/HB 5007. The language to delay implementation looks like this:

Section 58. (1) Effective upon this act becoming a law, section 10 of chapter 2010-84, Laws of Florida, is amended to read:



Section 10. This act shall take effect July 1, 2014 2011.


(2) If this act becomes a law after June 30, 2011, this section shall operate retroactively to June 30, 2011.

The rationale provided in staff analysis is that it is wise for Florida to wait until the affected Federal Agencies adopt their rules and regulations for the states to follow. I believe this is faulty reasoning for several reasons. Among them are:

• Florida is a leader, and should not be waiting for Federal Agencies to tell us how to protect our citizens, conduct our business, or toe their line.

• There is no significant conflict between the language of HB 303 and what is required by Dodd-Frank.

• All the reasons the Florida Legislature and their committees cited in support of the law are true now; in some cases even more so.

• Delay in implementation will assist Appraisal Management Companies in transferring hundreds of thousands of dollars from Florida to other states.

• Delay in implementation will allow unscrupulous individuals with criminal records and administrative sanctions to continue to operate appraisal management companies in our state.

If real estate brokers and appraisers are serious about the immediate need to regulate appraisal management companies, it’s time to do something about it.

UPDATE - Bills to delay implementation of AMC Registration until July, 2014 are moving in both the House and the Senate.

House - CS/HB 5007

Senate - CS/CS/SB 1824

....and in the meantime, Appraisal Management Companies are routinely interfering with appraiser independence.

Appraiser Blacklists

Along with discussions of Customary and Reasonable Fees, the subject of Appraiser Blacklists is most likely near the top of the list of concerns for real property appraisers. Appraiser Active has discussed them previously, and those posts are some of the most widely read on this site.

The folks at Live Valuation Magazine asked me for some comments about blacklists from an appraiser's perspective for their April issue. It's been published and delivered, and is available online. My comments are included at THIS LINK.

Ken Verrett also provided comments from an appraiser's perspective. In addition, the views of a lender and appraisal management company are presented.

I've got a few more things to say on the subject, but would like to hear what you think about the articles and the topic first. You comments are encouraged.

A New Spin on Short Sale Fraud

This is a couple of weeks old, but is certainly timely. The podcast is about 18 minutes long, but you can listen while you search the interwebs for the perfect comparable sales.

Courtesy of the National Association of REALTORS.

Freddie Mac Investigator Robert Hagberg in a podcast from NAR Legal Affairs discusses some of the recent short-sale payoff fraud schemes, such as "flopping," that he’s seeing. He also discusses the various ways—good and bad—that real estate professionals are involved.


HERE is the LINK.

Florida Legislature - Major Fail

Appraiser Active has already posted about CS/HB 5007. The bill is making its way through the legislative committee process. The bill, originally with the title, "Reducing and Streamlining Regulations" includes amendments to statutes regulating several professions. Among them are real estate brokers and real estate appraisers. Two sections related to real estate with the potential to weaken consumer protection.

In addition, the legislature appears to be making an attempt to solve a problem related to how the Uniform Standards of Professional Appraisal Practice is interpreted by some Administrative Law Judges as a result of a Florida Appellate Court ruling. See pages13 and 14 of the Staff Analysis for the explanation.

Below is the language proposed. Other specific references to the Uniform Standards of Professional Appraisal Practice in Chapter 475 Part I and Part II are removed. I'm not sure if the amendments will do what is intended because the section below, from page 19 of the bill, is a major FAIL.

Section 19. Section 475.628, Florida Statutes, is amended to read:


475.628 Professional standards for appraisers registered, licensed, or certified under this part. The board shall adopt rules establishing standards of professional practice that meet or exceed nationally recognized standards of appraisal practice, including those standards adopted by the Appraiser Qualifications Board of the Appraisal Foundation. Each appraiser registered, licensed, or certified under this part must shall comply with the rules Uniform Standards of Professional Appraisal Practice. Statements on appraisal standards which may be issued for the purpose of clarification, interpretation, explanation, or elaboration through the Appraisal Foundation shall also be binding on any appraiser registered, licensed, or certified under this part.

 Please join me, and let your representatives know that the Appraiser Qualifications Board of the Appraisal Foundation does NOT adopt standards of appraisal practice. That would be the Appraisal Standards Board of the Appraisal Foundation.
 
I'm anxious to see what the Appraisal Subcommittee has to say about the proposed language.
 
 

Florida Legislature: Weaken Consumer Protection, Delay AMC Regulation

As if there are not enough negative vibes surrounding the appraisal profession, the Florida Legislature seems to be hell bent on weakening consumer protections in Florida's real estate and appraiser licensing laws, and delaying implementation of Appraisal Management Company registration and regulation.

CS/HB 5007 is making its way through the legislative committee process. The bill, originally with the title, "Reducing and Streamlining Regulations" includes amendments to statutes regulating several professions. Among them are real estate brokers and real estate appraisers. Although some new, necessary language was added to the Committee Substitute bill, there are two sections related to real estate with the potential to weaken consumer protection.

Section 21 of the bill effectively eliminates criminal penalties for certain violations or Chapter 475, Part I, and Sections 22 eliminates criminal penalties for certain violations of Chapter 475, Part II. The logic(?) is spelled out in pages 8 and 9 of the Staff Analysis.

After spending 8 years as an appraisal regulator, the explanation does not wash with me.

The second problem with the bill is the DELAY in the implementation of AMC Registration and Regulation until July 1, 2014. Take a look at the logic(?) presented on page 12 of the Staff Analysis.

This delay is unwise, unnecessary and foolish. Consumers, real estate brokers, real estate appraisers have been paying the price for the lack of AMC regulation. All the reasons for AMC regulation are still valid. Why does the legislature believe folks like THIS deserve to continue operating AMCs in Florida?

Alert the media, and let your representatives know that delay of AMC registration and regulation will hurt consumers.

Harold Huggins Realty, et al v. FNC, Inc. - Going to Trial - UPDATED

Scroll for UPDATE

Although Appraiser Active has not posted about this, we have been following the case for a while. A quick synopsis is provided on the Valuation Review blog.

In Harold H. Huggins Realt, Inc., P.E. Turner & Company, LTD., Residential Appraisal and Consulting, Inc. and Alfonoso V. Torres doing business as Front Door Appraisals vs. FNC, Inc., a trio of appraisers filed a federal class action lawsuit against the technology firm seeking damages for negligent misrepresentation, misappropriation, breach of implied contract and other charges.

A copy of the complaint against FNC, Inc. and their AppraisalPort service was posted over on WorkingRE way back when.

As with any complex litigation, particularly a class action suit, the clock and calendar have gone around several times while parties make and argue motions, and the defendant seeks to have the action dismissed. The latest action was the plaintiff's appeal of the district court’s order granting the defendant's (FNC, Inc.)  motion to dismiss the case under Federal rule of Civil Procedure 12 (b)(6). (NOTE: I will not even pretend to know what that means.)

An audio of the oral argument before the United States Court of Appeals for the Fifth Circuit (New Orleans, Louisina) is available at this LINK. It takes a while to listen to the entire proceeding, but it's WORTH IT!

Yesterday, the Court of Appeals rendered their decision in favor of the plaintiffs. The Appeals Court reversed the decision to dismiss and remanded the case back for further proceedings.

Here is the Court of Appeals' decision:
FNC Case - Opinion 24Feb2011

UPDATE - March 30, 2011

The Letter of the Law page on Realtor.org has been updated with a synopsis of the case and an informative explanation of the decision.

A federal appellate court has considered whether to reinstate a possible class action lawsuit against a vendor that had allegedly promised its appraiser clients that information submitted through its system would be confidential but the vendor actually collected the information and offered it for resale.

Four real estate appraisal firms (collectively, “Appraisers”) brought a lawsuit against FNC, Inc. (“Company”). The lawsuit sought class action status for other similarly-situated appraisers and alleged that the Company had violated the Lanham Act (“Act”) by informing the Appraisers that their appraisals submitted through the Company’s AppraisalPort would be confidential when the Company was actually repackaging the data for resale.

Here is a link to the full article.

Pick a Number - Take #2

On Valentine's Day, KCBS out of San Francisco, aired a story about homeowners with low appraisals, and how they are "fighting back". It's not a new story, nor is it a new argument. Appraiser Active has posted on the topic several times since the HVCC took hold back in 2009. HERE, HERE, and HERE. Folks in the brokerage community have documented plenty of sad tales and a number of stories have been written in newspapers and magazines.




Some of the claims appear to have merit; others are outrageous. The video at the link above  is included because we take issue with a couple of statements made by the "experts".

“An appraisal is just an opinion,” said Tara-Nicholle Nelson, consumer educator at Trulia.com.

Sorry, Ms. Nelson, but I must disagree. An appraisal may be stated as "an opinion" but the opinion is stated in the appraisal report after research and analysis of relevant evidence, application of reason and logic, and development of the necessary approaches to value. An appraisal must be developed and reported in accordance with applicable standards, such as the Uniform Standards of Professional Appraisal Practice (USPAP), and standards and guidelines required by client groups, government agencies, and individual clients.

Ms. Nelson also claims that “Appraisers are under regulation and under pressure to be much more conservative because they took so much pressure for inflating values at the top of the market,”

Appraiser Active has heard plenty of claims from appraisers about pressure from clients and some AMCs to be conservative, but must have missed the regulation that requires "conservative" opinions of value.

A real estate broker in the video makes the claim that 1 out of 7 deals is killed because of the appraisal. That may be her experience, but she goes on to whine about the buyer's reaction "when an appraisal doesn't come in at value".

Here's a clue for you, my dear: The negotiated sales price is not necessarily the value of the property. It may be an indication, and should certainly be considered in the development of the appraisal, but it's only one small bit of the mountain of data that will be collected, verified and analysed.


Take a look at their story, HERE, and make sure to read the comments.

Just had to get that off my chest.