AMC Legislation and How it Affects You

Thirty-eight states have now enacted comprehensive legislation regarding appraisal management companies. As an appraiser you may not think the new AMC laws affect you but that may not be the case. Joining us today with more is attorney, Nanci Weissgold.

Buzz: Nanci, why should appraisers be tuned into what is going on with AMC legislation?

Nanci: AMCs are here to stay. The Dodd-Frank Act legitimized the AMC business. AMCs need appraisers to fulfill orders; appraisers need AMCs for a steady pipeline of business. While appraisers have been subject to state licensing and regulation for many years, the new regulatory obligations of AMCs are still relatively new and continue to emerge as states adopt the AMC minimum standards. Though appraisers are not directly subject to the AMC laws, these laws impact the appraisers’ ability to do business in each state. For example, an increasing number of states have enacted laws relating to the payment of customary and reasonable fees; several also have requirements for disclosures such as:

• An AMC must disclose to the appraiser the total fee that it will receive for the appraisal from its client.
• The fee that it will pay the appraiser for the assignment.
• The appraiser licensing statute may include a requirement for the appraiser to disclose those fees in the body of the appraisal report).

Buzz: I understand that New York just issued its draft legislation and it is open for comments. Anything notable?

Nanci: This is the first new draft legislation we have seen since the final federal minimum standards were published, and for the most part it follows those standards (including requiring confirmation of appraiser competency on an assignment-specific basis). One topic that really stands out is customary and reasonable fees: the measure would require an AMC to compensate an appraiser “at a rate that is customary and reasonable for appraiser or other valuation services being performed in the market area of the property being appraised without the services of an appraisal management company.” In other words, that would require AMCs to use the second presumption of compliance under the interim final rule implementing the Truth in Lending Act (TILA).

Other unique aspects are the limitations on the use of broker price opinions, the requirement to provide notice if an appraiser is taken out of rotation on an appraiser panel (rather than just removed), the requirement to separate appraisal and AMC fees, and the broad enforcement authority that it grants to the State Board of Real Estate Appraisal.

Buzz: Some states have been very proactive in enforcement of their AMC laws. In which state is most of the activity taking place? And, what type of enforcement actions are you seeing?

Nanci: I represent several AMCs, and I have seen an uptick in examination and enforcement activity overall. The types of actions I have seen are quite varied. They may be formal, or a more informal inquiry arising from a complaint generated by the appraisal board or another party. They may arise from information that the AMC supplied to the board, e.g., on its renewal application or otherwise. Illinois and Utah have aggressively enforced surety bond requirements and have subsequently amended their laws to allow for automatic suspension of the license if the term of the surety bond doesn’t coincide with the term of the AMC license. Illinois is also aggressively enforcing its licensing and other provisions of its law. States such as Kentucky, Louisiana, and Mississippi have attempted to enforce customary and reasonable fee provisions. Other states that have been proactive in enforcing their laws include Texas, Pennsylvania, Oklahoma, Montana, Washington, Minnesota, California, and Colorado.

The states generally have broad enforcement authority over an AMC that has violated any provision of the AMC law or has acted in a manner that is unprofessional or incompetent while acting as an AMC. AMCs should be fully aware of the substantive practice obligations that arise under the AMC laws, such as reporting and recordkeeping, reviewer licensure and other requirements for appraisal reviews, and ensuring that appraiser panel members meet competency standards.

Buzz: What if a state does not enact AMC laws? Does that mean there will be no AMC activity in that state?

Nanci: No, but AMCs may be seriously limited in that state. The federal minimum standards for AMCs make clear that in states that do not participate by adopting a regulatory scheme, the only entities that will be eligible to provide appraisal management services in connection with federally related transactions are those that meet the definition of a “federally regulated AMC” and those that do not meet the panel membership threshold in the definition of an “appraisal management company.” The absence of a mandate in the final minimum standards has created uncertainty for AMCs, who will have to wait until the end of the three-year implementation period to see how many states decide to enact (or maintain) an AMC regulatory scheme.

Thank you so much Nanci for speaking with us today. For those interested in more detailed information on compliance issues, join us at the Compliance Symposium on November 16, 2015, at the Hyatt Regency, Reston, VA. For details and to register click here.

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