Two Bills With Appraisal Implications: To Governor's Desk

The regular session of the 2012 Florida Legislature wound up on March 9th. Hundreds of bills were considered, but the papers and news sites spent their time watching the usual subjects. Appraiser Active watched several bills with important amendments to Chapter 475, Part II, and implications for Florida Appraisers. After winding their way through committee meetings, analysis by staff, negotiation and amendments, two bills with significant amendments to Chapter 475, Part II were passed by the Florida House and Senate; HB 517 and HB 887. Both are headed to Governor Scott for his signature.


Here are the highlights. 

Probably the most important is the amendment to 475.6245 Discipline of appraisal management companies. Included among the grounds for discipline is this language:

(v) Has required or attempted to require an appraiser to sign any indemnification agreement that would require the appraiser to hold harmless the appraisal management company or its owners, agents, employees, or independent contractors from any liability, damage, loss, or claim arising from the services performed by the appraisal management company or its owners, agents, employees, or independent contractors and not the services performed by the appraiser.

Both HB 517 and HB 887 revise the definition of appraisal management company and appraisal management services.

(c) "Appraisal management company" means a person who performs appraisal management services regardless of the use of the term "appraisal management company," "appraiser cooperative," "appraiser portal," "mortgage technology company," or other term. (d) "Appraisal management services" means the coordination or management of appraisal services for compensation by: 1. Employing, contracting with, or otherwise retaining one or more licensed or certified appraisers to perform appraisal 370 services for a client; or 2. Acting as a broker or intermediary between a client and one or more licensed or certified appraisers to facilitate the client's employing, contracting with, or otherwise retaining the appraisers.

The term "subsidiary" is defined with respect to the relationship between appraisal management companies and banking entities.

(t) "Subsidiary" means an organization that is owned and controlled by a financial institution that is regulated by a federal financial institution regulatory agency.

To comply with the Dodd-Frank Act, an exemption was created for appraisal management companies owned and controlled by a federally regulated financial institution.

Additional amendments require the Florida Real Estate Appraisal Board to adopt standards of practice that "meet or exceed nationally recognized standards of appraisal practice, including standards adopted by the Appraisal Standards Board of the Appraisal Foundation.

Applicants for appraiser registration, certification, or registration as an appraisal management companies must sign a pledge indicating that upon becoming registered or certified, she or he will comply with the standards of professional practice established by rule of the board, including standards for the development or communication of a real estate appraisal.


If signed by the Governor, HB 517 has an effective date of July 1, 2012, and HB 887 will be effective October 1, 2012. Afterwards, the FREAB will certainly be busy working on rules to implement the new provisions.

Ken Harney Shines a Light on AMC Appraisal Fee Splits

Along with all the appraisal related mandates in the Dodd-Frank Act is the primary reason for the legislation; creation of the Consumer Financial Protection Bureau.


The CFPB and the individual recent appointed to head the agency have been in the news quite a bit recently. Without offering any opinion about the agency, the appointments, and the politics, it is important to be aware of the CFPB's massive rule making authority. 


This week, Ken Harney writes about the CFPB reviewing ways to bring more clarity and better disclosure to fees associated with Real Estate Transactions. The focus of the story is the failure to inform borrowers of the fact a significant part of the fee may be paid to an affiliate or subsidiary of the lender. The CFPB is considering rules to require disclosure of the portion of the appraisal fee retained by Appraisal Management Companies.

Ken writes:

One of the fees being scrutinized might surprise you: appraisal charges. Why do they need clarifying? Doesn’t just about everybody who applies for a mortgage, whether it’s to buy a house or refinance, have to pay $450 to $600 — sometimes more — to find out what the property is worth?

and

Say you’re charged $550. There is no hint that the appraiser may be getting $250, with the rest going to the management company and the lender. The CFPB is considering whether to shed light on this by mandating two disclosures: what the appraiser is paid and what the management company is taking.

Frank Gregoire, a past chairman of the Florida Real Estate Appraisal Board, which oversees and regulates the industry in that state, says that while appraiser independence is important, banks and their affiliated management firms are raising the costs of appraisals to consumers without improving services.

Defenders of management firms, such as Donald E. Kelly, executive director of the Real Estate Valuation Advocacy Association, strongly disagree. Kelly says management firms perform the “back office” functions — including reviews and quality control — “that in the past were done by lender staff and employees.” In other words, they earn the money they get. And there’s no pressing need for consumers to see additional disclosures. They just need to know the bottom line.

Read the article HERE.
On the floor, next to my desk, is a stack of appraisal reports. Borrowers, lenders, real estate agents, and other appraisers sent them my way as examples of shoddy work and lack of quality control by AMCs. How do appraisal reports pass through a quality control check when the appraiser cites ZILLOW or TRULIA as the source of his date of sale, time, or market conditions adjustment, and that it is based on data from a zip code, not a market area? >
Wondering.

Florida Realtors Mid-Winter Meetings - January 11 - 15, 2012

Florida Realtors meet in Orlando this week. There is an Appraisal Council meeting on Friday, January 13, 2012 at 1:00-2:30pm in the Captain room at the Buena Vista Palace. The agenda includes quite a bit of interesting topics for discussion.

If you are a Florida Realtor - Appraiser, it would be great to have you attend. You may register onsite. There is no registration fee for Realtor - Appraisers.

AMC Indemnification: Bill Introduced to Limit Use in Florida

Over the past six months, Appraiser Active has posted several times about the use of indemnification clauses in Appraisal Management Company agreements with their panel appraisers. NAR has called for a ban on such agreements, particularly those that indemnify and hold harmless the AMC against any suit, threat, or claim on any work product or service provided as part of the contract agreement.

The 2012 Florida Senate and House have stepped up to the plate with the introduction of SB 1252 and H 887. The bills are virtually identical. Both include this language: (proposed amended/added text is underlined)

475.6245 Discipline of appraisal management companies.—


(1) The board may deny an application for registration of an appraisal management company; may investigate the actions of any appraisal management company registered under this part; may  reprimand or impose an administrative fine not to exceed $5,000 for each count or separate offense against any such appraisal management company; and may revoke or suspend, for a period not to exceed 10 years, the registration of any such appraisal management company, or place any such appraisal management company on probation, if the board finds that the appraisal management company or any person listed in s. 475.6235(2)(f):


(v) Has required or attempted to require an appraiser to sign any indemnification agreement that would require the appraiser to hold harmless the appraisal management company or its owners, agents, employees, or independent contractors from any liability, damage, loss, or claim arising from the services performed by the appraisal management company or its owners, agents, employees, or independent contractors and not the services performed by the appraiser.

It's a start. Next on the list of things to do is propose some amendments to pare the size of the FREAB back down to 7 members, and limit the guaranteed AMC representation down to 1 member.

In the meantime, let Senator Dennis Jones and Representative Clay Ingram know you of your appreciation and support.

Happy New Year. Stay tuned.

Merry Christmas

Wishing you all the best for this Holiday Season from the Sunshine City in the Sunshine State.

Just in case you might believe all my time is spent at the beach, the clipboard has a list of 12 sales and listings in St. Pete Beach. After 5 minutes on the beach to take a few photos for my northern US friends, it was back to work.

Appraisal Management Companies - Background Checks

In the past week a reporter for my local paper, the St. Petersburg Times, wrote an  article about applicants for real estate licenses with criminal convictions. Marc Puente described how some folks with what appear to be convictions for serious crimes find that is not an impediment to getting a Florida Real Estate License.

As a former member of the Florida Real Estate Appraisal Board (FREAB), I found the article interesting and informative. Although the "character" requirements for real estate licensees and real estate appraisers are similar, on more than one occasion the FREAB denied an applicant the Florida Real Estate Commission found acceptable. After reading the article I took at look at the agenda for the December meeting of the Florida Real Estate Appraisal Board. Their meeting is December 8th and 9th, 2011.

An item on the agenda is labeled "Summary of Applicants". The individuals named fall in to one or both of two categories:

• Their application disclosed a criminal history record, or disciplinary action against a professional license.
• Their application did not disclose a criminal history record, but the check of fingerprints by the Florida Department of Law Enforcement and/or the Federal Bureau of Investigation revealed a conviction.

Florida appraiser and appraisal management company applicants are required to disclose any criminal history and actions against any professional license in Florida or any other state.

Do you all find it interesting that of 11 names on the list of Summary of Applicants, 8 are with Appraisal Management Companies?

Knowing that folks with dubious backgrounds have started Appraisal Management Companies, and that a well known AMC recently folded and left a reported $3,000,000 in unpaid appraisal invoices, I expect the members of the FREAB will give these folks the scrutiny the law demands

Florida Real Estate Appraisal Board - New Rule to Regulate Signatures

Effective as of December 20, 2011, there is a new Rule that updates signature requirements on an appraisal report and certification. This new rule, 61J1-7.0065 Signatures on Appraisal Report and Certification, was adopted by the Florida Real Estate Appraisal Board (FREAB) to comply with a recent amendment to Chapter 475, Part II. The amendment, adding 475.614(2) requires the FREAB to adopt to include requirements for protecting the security of an appraiser’s signature and prohibiting practices that may discredit the use of an appraiser’s signature to authenticate the work performed by the appraiser.

Here's the way it reads:

61J1-7.0065 Signatures on Appraisal Report and Certification.



(1) Each appraiser signing a certification of an appraisal report must sign the certification with the name that the licensee has registered with the Department. A signature may be represented by a handwritten mark or a digitized image controlled by a personal identification number, password, or other security feature. A facsimile signature may be either affixed by hand or electronically by computer software. An appraiser shall at all times maintain direct control of the appraiser’s signature.

(2) An appraiser shall develop and maintain a written method by which his or her signature shall be affixed, for its security protection and the prohibition of practices that might discredit its use.

(3) An appraiser shall not grant blanket authority to another to affix the appraiser’s signature to an appraisal report or other work performed by the appraiser. Any grant of permission to another to affix an appraiser’s signature to an appraisal report or other work performed by the appraiser shall meet the following requirements:

(a) Be in writing;

(b) Extend only to one specific appraisal report; and

(c) Be maintained in the appraiser’s work file.

Rulemaking Authority 475.614 FS. Law Implemented 475.613(2), 475.614 FS. History–New 12-4-06, Amended 12-20-11.

It might be wise to keep this rule in mind and ready for quick reference when some folks (like those mentioned in THIS post) attempt to require you to upload a copy of your digital signature.

Appraisals: What You Absolutely Need to Know

This morning, November 12, 2011, along with several other speakers, I will be participating in a panel discussion as part of the National Association of REALTORS Annual Conference and Expo. Given the number of headlines, news stories and blog posts about appraisals in today's market, the topic and title is appropriate: Appraisals: What You Absolutely Need to Know.

If you're here in Anaheim attending the Conference, please stop by. The program starts at 9:00 A.M and runs until 10:30. We'll be in the Anaheim Convention Center, Ballroom A.

They're bound to put a hook on me if I talk too long, but I plan to reference the Continuing Education Course I wrote for the Bert Rodgers School to help folks get a better understanding of the appraisal process. Follow the link to he free pdf of the Bert Rodgers book, and take a look at the course starting on page 79. For you non-appraisers, I hope it helps you understand why things are the way they are. If you have a Florida real estate license, you just might like to use this course for your continuing education.

Note: I do not get a royalty on the number of courses taken; I just believe it might be informative.

Valuation Support Services (VSS) - Appraiser Panel Agreement

As long as we're talking about AMC Appraiser Indemnification, here is a copy of the Valuation Support Services (VSS) Standards & Approval Documentation Requirements and their Appraiser Panel Agreement. This gem has some interesting twists and language. The full copy is available after the jump, but here are a couple of clauses I find interesting:

Page 4:

The intent of this Agreement between Valuation Support Services (VSS) and Appraiser is to outline the roles, responsibilities, commitments and escalations of the parties.

Conviction of Crimes: VSS is unable to enter into associations with individuals, who have been convicted of or plead guilty to any crime involving dishonesty or breach of trust, or have been convicted of or plead guilty to any felony or misdemeanor. Appraiser warrants he/she has truthfully and accurately answered the "Additional Information" questions on the VSS Appraiser Application, has provided full disclosure through letter(s) of explanation for all questions answered affirmatively. Appraiser acknowledges and agrees he/she will be directly involved in providing services in accordance with this Agreement and has met this standard.

Fees: VSS Reserves the right to charge fees for appraisal panel services rendered to Appraiser, such as systems access, technology and website applications utilized by Appraiser, and/or allocate the cost of state or federal appraiser/panel registration and similar fees. Advance notice, as practical, shall be provided to Appraiser along with a description of the fees to be charged. Appraiser agrees to pay VSS promptly per the payment terms specified in the notice provided. (Red Added for Emphasis) (It's RED in their agreement)

Page 6:

3. Appraiser will not accept orders directly from VSS' clients. Appraiser agrees that all orders must be received from Valuation Support Services (VSS) electronically.

4. VSS clients Appraiser may service include, but are not limited to: CoreLogic Appraisal Services, Prime Valuation Services, and RelsValuation.

Page 7:

17. Revisions to Sales Contracts: Appraiser acknowledges that in connection with his/her appraisals, he/she may receive revised sales contracts that change the purchase price due to alterations of the improvements. Upon receipt of a revised sales contract that modifies the purchase price due to alterations of the improvements, Appraiser will analyze the change(s) and make appropriate revisions to the appraisal report. The revisions to the report include changing the terms of the contract for sale in the contract section, adjusting the comparable sales as needed, and if the opinion of value is changed, providing a detailed explanation for the change in value.

(Hmmm. I wonder what a state regulatory board would have to say about this provision?)

Of course, on Page 9:

Indemnification: Appraiser will indemnify and hold harmless VSS, a division of RELS, LLC, and each VSS entity for any liability arising out of Appraiser's work product or for the release of any appraisals without VSS' permission. Appraiser is liable for payment of any legal fees, claims, damages, losses and liabilities resulting from Appraiser's work product or non-performance of the duties and obligations identified herein.

One of the best, however, is the requirement on Page 2:

Appraiser (signature)(Requires Digital Signature to be uploaded.):

All very interesting. Also interesting is the number of Florida Appraisers asked to send in a copy of a digital signature to OK this agreement, given the fact that VSS is NOT currently registered as an Appraisal Management Company with the Division of Real Estate or the Florida Real Estate Appraisal Board. The MyFloridaLicense site does not show an application in process either. Does this outfit look like a Management Company for Appraisal Management Companies?

Agreement in full is after the jump.

CLICK to Read More

AMC Indemnification Clauses - Comments From Peter Christensen

Back in August, Appraiser Active posted about NAR President, Ron Phipps'  letter to the heads of the Department of Housing and Urban Development, Federal Financial Institutions Examination Council, Veteran's Administration and the Federal Housing Finance Agency encouraging the bar of indemnification clauses used by Appraisal Management Companies (AMCs).  Robert  Freedman provided some context in a later post on the Speaking of Real Estate blog.

Needless to say, the issue is has not yet been resolved. In the November issue of REALTOR Magazine, there is a piece written by Peter Christensen about indemnification clauses. Follow this link to his post on the Appraiser Law Blog. Peter links to the REALTOR Magazine article too.

Among many other things, indemnification clauses and appraiser independence are on the agenda for the NAR Appraisal Committee meeting next week during the NAR Annual Conference in Anaheim, California. The NAR Appraisal Committee meets Friday, November 11, 2011 from 2:00 - 4:00 P.M. at the Anaheim Marriott Hotel in Grand Ballroom F. See you there!