BILL NUMBER: SB 237 CHAPTERED
BILL TEXT
CHAPTER 173
FILED WITH SECRETARY OF STATE OCTOBER 11, 2009
APPROVED BY GOVERNOR OCTOBER 11, 2009
PASSED THE SENATE AUGUST 27, 2009
PASSED THE ASSEMBLY AUGUST 20, 2009
AMENDED IN ASSEMBLY AUGUST 17, 2009
AMENDED IN ASSEMBLY JUNE 17, 2009
AMENDED IN ASSEMBLY JUNE 3, 2009
AMENDED IN SENATE APRIL 13, 2009
INTRODUCED BY Senator Calderon
FEBRUARY 24, 2009
An act to amend Sections 11302, 11314, 11315.5, 11409, and 11422
of, to add Sections 11315.1, 11320.5, 11328.1, 11345, 11345.05,
11345.1, 11345.2, 11345.3, 11345.4, 11345.45, 11345.6, 11346, and
11406.5 to, and to repeal and add Section 11343 of, the Business and
Professions Code, and to amend Section 1090.5 of the Civil Code,
relating to real estate appraisers, and making an appropriation
therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 237, Calderon. Real estate appraisers.
Existing law, the Real Estate Appraisers' Licensing and
Certification Law, provides for the licensure and regulation of real
estate appraisers and vests the duty of enforcing and administering
that law in the Office of Real Estate Appraisers. Fees and
assessments collected under these provisions are deposited into the
Real Estate Appraisers Regulation Fund, and 5% of the amount of any
license or certificate fee collected is credited to the Recovery
Account in that fund, which account is continuously appropriated.
Existing law subjects applicants for real estate appraisers licenses
to fingerprinting and criminal background checks.
This bill would require appraisal management companies, as
defined, to register with the Office of Real Estate Appraisers, and
would subject those entities to the provisions of the Real Estate
Appraisers' Licensing and Certification Law. The bill would require
the office to adopt regulations governing the implementation of the
registration process, with specified minimum requirements, and
establish the fees to be imposed for registration in an amount
sufficient to cover the costs incurred by the office in administering
the registration. Because 5% of those fees would be credited to the
Recovery Account, a continuously appropriated fund, the bill would
make an appropriation. The bill would also require fingerprinting and
background checks by the Department of Justice of each controlling
person of an applicant for registration, as defined, and would
require the department to charge all applicants for licensure or
registration specified fees for those services. The bill would also
set forth standards with which an appraisal management company would
need to comply, and would provide to the office specified
investigative and enforcement authority, including the authority to
issue citations or administrative penalties for a violation thereof,
to be deposited into the Real Estate Appraisers Regulation Fund. The
bill would make conforming changes within other provisions of the
Real Estate Appraisers' Licensing and Certification Law to
incorporate the changes made by the bill.
This bill would make any provision under the Real Estate
Appraisers' Licensing and Certification Law that relates to appraisal
management companies inoperative 60 days after the effective date of
any federal law that mandates the registration or licensing of
appraisal management companies with an entity other than the state
regulatory authority with jurisdiction over appraisers.
Existing law prohibits a person with an interest in a real estate
transaction involving an appraisal to improperly influence or attempt
to improperly influence, through coercion, extortion, or bribery,
the development, reporting, result, or review of a real estate
appraisal sought in connection with a mortgage loan, and specifies
that a violation of this provision by a person licensed under a state
licensing law also constitutes a violation of that law.
This bill would enumerate specified prohibited acts under that
provision, including, but not limited to, withholding or threatening
to withhold timely payment for an appraisal, or requesting the
payment of compensation to achieve higher priority in the assignment
of appraisal business.
Appropriation: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 11302 of the Business and Professions Code is
amended to read:
11302. For the purpose of applying this part, the following
terms, unless otherwise expressly indicated, shall mean and have the
following definitions:
(a) "Agency" means the Business, Transportation and Housing
Agency.
(b) "Appraisal" means a written statement independently and
impartially prepared by a qualified appraiser setting forth an
opinion in a federally related transaction as to the market value of
an adequately described property as of a specific date, supported by
the presentation and analysis of relevant market information.
The term "appraisal" does not include an opinion given by a real
estate licensee or engineer or land surveyor in the ordinary course
of his or her business in connection with a function for which a
license is required under Chapter 7 (commencing with Section 6700) or
Chapter 15 (commencing with Section 8700) of Division 3, or Chapter
3 (commencing with Section 10130) or Chapter 7 (commencing with
Section 10500) and the opinion shall not be referred to as an
appraisal. This part does not apply to a probate referee acting
pursuant to Sections 400 to 408, inclusive, of the Probate Code
unless the appraised transaction is federally related.
(c) "Appraisal Foundation" means the Appraisal Foundation that was
incorporated as an Illinois not-for-profit corporation on November
30, 1987.
(d) (1) "Appraisal management company" means any person or entity
that satisfies all of the following conditions:
(A) Maintains an approved list or lists, containing 11 or more
independent contractor appraisers licensed or certified pursuant to
this part, or employs 11 or more appraisers licensed or certified
pursuant to this part.
(B) Receives requests for appraisals from one or more clients.
(C) For a fee paid by one or more of its clients, delegates
appraisal assignments for completion by its independent contractor or
employee appraisers.
(2) "Appraisal management company" does not include any of the
following, when that person or entity directly contracts with an
independent appraiser:
(A) Any bank, credit union, trust company, savings and loan
association, or industrial loan company doing business under the
authority of, or in accordance with, a license, certificate, or
charter issued by the United States or any state, district,
territory, or commonwealth of the United States that is authorized to
transact business in this state.
(B) Any finance lender or finance broker licensed pursuant to
Division 9 (commencing with Section 22000) of the Financial Code,
when acting under the authority of that license.
(C) Any residential mortgage lender or residential mortgage
servicer licensed pursuant to Division 20 (commencing with Section
50000) of the Financial Code, when acting under the authority of that
license.
(D) Any real estate broker licensed pursuant to Part 1 (commencing
with Section 10000) of Division 4 of the Business and Professions
Code, when acting under the authority of that license.
(3) "Appraisal management company" does not include any person
licensed to practice law in this state who is working with or on
behalf of a client of that person in connection with one or more
appraisals for that client.
(e) "Appraisal Subcommittee" means the Appraisal Subcommittee of
the Federal Financial Institutions Examination Council.
(f) "Controlling person" means one or more of the following:
(1) An officer or director of an appraisal management company, or
an individual who holds a 10 percent or greater ownership interest in
an appraisal management company.
(2) An individual employed, appointed, or authorized by an
appraisal management company that has the authority to enter into a
contractual relationship with clients for the performance of
appraisal services and that has the authority to enter into
agreements with independent appraisers for the completion of
appraisals.
(3) An individual who possesses the power to direct or cause the
direction of the management or policies of an appraisal management
company.
(g) "Director" means the Director of the Office of Real Estate
Appraisers.
(h) "Federal financial institutions regulatory agency" means the
Federal Reserve Board, Federal Deposit Insurance Corporation, Office
of the Comptroller of the Currency, Office of Thrift Supervision,
Federal Home Loan Bank System, National Credit Union Administration,
and any other agency determined by the director to have jurisdiction
over transactions subject to this part.
(i) "Federally related real estate appraisal activity" means the
act or process of making or performing an appraisal on real estate or
real property in a federally related transaction and preparing an
appraisal as a result of that activity.
(j) "Federally related transaction" means any real estate-related
financial transaction which a federal financial institutions
regulatory agency engages in, contracts for or regulates and which
requires the services of a state licensed real estate appraiser
regulated by this part. This term also includes any transaction
identified as such by a federal financial institutions regulatory
agency.
(k) "License" means any license, certificate, permit,
registration, or other means issued by the office authorizing the
person to whom it is issued to act pursuant to this part within this
state.
(l) "Licensure" means the procedures and requirements a person
shall comply with in order to qualify for issuance of a license and
includes the issuance of the license.
(m) "Office" means the Office of Real Estate Appraisers.
(n) "Registration" means the procedures and requirements with
which a person or entity shall comply in order to qualify to conduct
business as an appraisal management company.
(o) "Secretary" means the Secretary of Business, Transportation
and Housing.
(p) "State licensed real estate appraiser" is a person who is
issued and holds a current valid license under this part.
(q) "Uniform Standards of Professional Appraisal Practice" are the
standards of professional appraisal practice established by the
Appraisal Foundation.
(r) "Course provider" means a person or entity that provides
educational courses related to professional appraisal practice.
SEC. 2. Section 11314 of the Business and Professions Code is
amended to read:
11314. The office is required to include in its regulations
requirements for licensure and discipline of real estate appraisers
that ensure protection of the public interest and comply in all
respects with Title XI of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, Public Law 101-73 and any subsequent
amendments thereto. Requirements for each level of licensure shall,
at a minimum, meet the criteria established by the Appraiser
Qualification Board of the Appraisal Foundation. The office may
additionally include in its regulations requirements for the
registration of appraisal management companies consistent with this
part.
SEC. 3. Section 11315.1 is added to the Business and Professions
Code, to read:
11315.1. (a) The director may issue to a registrant or person who
acts in a capacity that requires a certificate of registration under
this part, a citation that may contain an order to pay an
administrative fine assessed by the office, if the person is in
violation of this part or any regulations adopted to carry out its
purposes.
(b) A citation shall be written and shall describe with
particularity the nature of the violation, including a specific
reference to the provision of law determined to have been violated.
(c) If appropriate, the citation may contain an order of abatement
fixing a reasonable time for abatement of the violation.
(d) In no event shall an administrative fine assessed by the
office by citation or order exceed ten thousand dollars ($10,000) per
violation. In assessing a fine, the office shall give due
consideration to the appropriateness of the amount of the fine with
respect to factors such as the gravity of the violation, the good
faith of the person that committed the violation, and the history of
previous violations.
(e) A citation or fine assessment issued pursuant to a citation
shall inform the person cited that, if the person desires a hearing
to contest the finding of a violation, he or she or one of its
controlling persons must request a hearing by written notice to the
office within 30 days of the date of issuance of the citation or
assessment. Hearings shall be held pursuant to Chapter 5 (commencing
with Section 11500) of Part 1 of Division 3 of Title 2 of the
Government Code. The citation or fine assessment shall also inform
the person cited that failure to respond to the citation or fine
assessment shall result in any order or administrative fine imposed
becoming final, and that any order or administrative fine shall
constitute an enforceable civil judgment in addition to any other
penalty or remedy available pursuant to law.
(f) (1) If a registrant or person who acts in a capacity that
requires a certificate of registration fails to pay a fine, penalty,
or required installment payment on the fine or penalty by the date
when it is due, the director shall charge that person interest and a
penalty of the fine or installment payment amount. Interest shall be
charged at the pooled money investment rate.
(2) Failure of a registrant or person who requires a certificate
of registration to pay a fine or required installment payment on the
fine within 30 days of the date ordered in the citation, unless the
citation is being appealed, shall be cause for additional
disciplinary action by the office.
(3) If a citation is not contested and a fine or fine payment is
not paid within 30 days of the date ordered in the citation or other
order of the director, the full amount of the unpaid balance of the
assessed fine shall be added to any fee for renewal of a certificate
of registration. A certificate of registration shall not be renewed
prior to payment of the renewal fee and fine.
(4) The director may order the full amount of any fine to be
immediately due and payable if any payment due on a fine is not
received by the office within 30 days of its due date.
(5) Any fine, or interest thereon, not paid within 30 days of a
final citation or order shall constitute a valid and enforceable
civil judgment.
(6) A certified copy of the final order, or the citation with
certification by the office that no request for hearing was received
within 30 days of the date of issuance of the citation, shall be
conclusive proof of the civil judgment, its terms, and its validity.
(g) A citation may be issued without the assessment of an
administrative fine.
(h) Any administrative fine or penalty imposed pursuant to this
section shall be in addition to any other criminal or civil penalty
provided for by law.
(i) Administrative fines collected pursuant to this section shall
be deposited in the Real Estate Appraisers Regulation Fund.
SEC. 4. Section 11315.5 of the Business and Professions Code is
amended to read:
11315.5. Notwithstanding any other provision of law, the office
may, at any time the director deems it to be in the public interest,
enter into a settlement of any administrative allegation of violation
of this part, or of regulations promulgated pursuant thereto, upon
any terms and conditions as the director deems appropriate. Those
settlements may include, but are not limited to, a plan for abatement
of the violation or rehabilitation or requalification of the
applicant, licensed appraiser, course provider, registrant, or person
acting in a capacity requiring a license, certificate of
registration, or course provider accreditation within a specified
time.
SEC. 5. Section 11320.5 is added to the Business and Professions
Code, to read:
11320.5. No person or entity shall act in the capacity of an
appraisal management company without first obtaining a certificate of
registration from the office.
SEC. 6. Section 11328.1 is added to the Business and Professions
Code, to read:
11328.1. If the director has a reasonable belief that a
registrant, or person or entity acting in a capacity that requires a
certificate of registration, has engaged in activities prohibited
under this part, he or she may submit a written request to the
registrant, person, or entity, requesting copies of written material
related to his or her investigation. Any registrant, person, or
entity receiving a written request from the director for information
related to an investigation of prohibited activities shall submit
that information to the director or the office within a reasonable
period of time, which shall be specified by the director in his or
her written request. Any material submitted shall be kept
confidential by the director and the office.
SEC. 7. Section 11343 of the Business and Professions Code is
repealed.
SEC. 8. Section 11343 is added to the Business and Professions
Code, to read:
11343. (a) The office shall submit to the Department of Justice
fingerprint images and related information required by the Department
of Justice of all real estate appraiser license applicants and each
controlling person of each applicant for registration as an appraisal
management company, for the purposes of obtaining information as to
the existence and content of a record of state or federal convictions
and state or federal arrests and also information as to the
existence and content of a record of state or federal arrests for
which the Department of Justice establishes that the person is free
on bail or on his or her own recognizance pending trial or appeal.
(b) When received, the Department of Justice shall forward to the
Federal Bureau of Investigation requests for federal summary criminal
history information received pursuant to this section. The
Department of Justice shall review the information returned from the
Federal Bureau of Investigation and compile and disseminate a
response to the office.
(c) The Department of Justice shall provide a response to the
office pursuant to paragraph (1) of subdivision (p) of Section 11105
of the Penal Code.
(d) The office shall request from the Department of Justice
subsequent arrest notification service, as provided pursuant to
Section 11105.2 of the Penal Code, for persons described in
subdivision (a).
(e) The Department of Justice shall charge a fee sufficient to
cover the cost of processing the request described in this section.
SEC. 9. Section 11345 is added to the Business and Professions
Code, to read:
11345. The director shall adopt regulations governing the process
and procedure of applying for registration as an appraisal
management company. Applications for a certificate of registration
shall require, at a minimum, all of the following:
(a) The name of the person or entity seeking registration.
(b) The business address and telephone number of the person or
entity seeking registration.
(c) If the applicant is not a person or entity domiciled in this
state, the name and contact number of a person or entity acting as
agent for service of process in this state, along with an irrevocable
consent to service of process in favor of the office.
(d) The name, address, and contact information for each
controlling person employed by the applicant who has operational
authority to direct the management of, and establish policies for,
the applicant. If the applicant employs more than 10 individuals
meeting the criteria of this subdivision, the applicant may list the
names, addresses, and contact information for the 10 individuals
meeting the criteria who hold the greatest level of management
responsibility within its organization.
SEC. 10. Section 11345.05 is added to the Business and Professions
Code, to read:
11345.05. (a) A registrant shall notify the office within 10
business days, on a form developed by the office, of any additions,
deletions, or changes in the names, addresses, and contact
information for the individuals listed on its application.
(b) A registrant shall correct information on file with the office
within 10 business days of discovering an error in that information,
and shall not be subject to disciplinary action by the director or
the office for incorrect information the registrant corrects within
10 business days of its discovery as being inaccurate.
SEC. 11. Section 11345.1 is added to the Business and Professions
Code, to read:
11345.1. A certificate of registration as an appraisal management
company shall be valid for a period of two years, unless otherwise
extended or limited by the director.
SEC. 12. Section 11345.2 is added to the Business and Professions
Code, to read:
11345.2. (a) No individual may act as a controlling person for a
registrant if any of the following apply:
(1) The individual has entered a plea of guilty or no contest to,
or been convicted of, a felony.
(2) The individual has had a license or certificate to act as an
appraiser or to engage in activities related to the transfer of real
property refused, denied, canceled, or revoked in this state or any
other state.
(b) Any individual who acts as a controlling person of an
appraisal management company and who enters a plea of guilty or no
contest to, or is convicted of, a felony, or who has a license or
certificate as an appraiser refused, denied, canceled, or revoked in
any other state shall report that fact or cause that fact to be
reported to the office, in writing, within 10 days of the date he or
she has knowledge of that fact.
SEC. 13. Section 11345.3 is added to the Business and Professions
Code, to read:
11345.3. The director may not issue a certificate of registration
to an appraisal management company unless the appraisal management
company confirms in its application for registration that all of its
contracts with clients include provision of each of the following as
standard business practices, as and where applicable:
(a) Ensuring that independent contractor appraisers contracted by
the applicant possess all required licenses and certificates from the
office.
(b) Reviewing the work of all independent contractor appraisers
contracted by the applicant to ensure that appraisal services are
performed in accordance with the Uniform Standards of Professional
Appraisal Practice.
(c) Maintaining records of each of the following for each service
request:
(1) Date of receipt of the request.
(2) Name of the person from whom the request was received.
(3) Name of the client for whom the request was made, if different
from the name of the person from whom the request was received.
(4) The appraiser or appraisers assigned to perform the contracted
service.
(5) Date of delivery of the appraisal product to the client.
SEC. 14. Section 11345.4 is added to the Business and Professions
Code, to read:
11345.4. No person or entity acting in the capacity of an
appraisal management company shall improperly influence or attempt to
improperly influence the development, reporting, result, or review
of any appraisal by engaging, without limitation, in any of the
following:
(a) Withholding or threatening to withhold timely payment for an
appraisal.
(b) Withholding or threatening to withhold future business for an
independent appraiser, including removal from approved panels of
appraisers.
(c) Expressly or impliedly promising future business, promotions,
or increased compensation for an independent appraiser.
(d) Conditioning the request for an appraisal service or the
payment of an appraisal fee or salary or bonus on the opinion,
conclusion, or valuation in an appraisal report, or on a preliminary
estimate or opinion requested from an independent appraiser.
(e) Requesting the payment of compensation to achieve higher
priority in the assignment of appraisal business.
(f) Requesting that an appraiser provide an estimated,
predetermined, or desired valuation in an appraisal report, providing
to an appraiser an anticipated, estimated, encouraged, or desired
valuation in an appraisal report, or requesting that an appraiser
provide estimated values of comparable sales at any time before the
appraiser completes an appraisal report.
SEC. 15. Section 11345.45 is added to the Business and Professions
Code, to read:
11345.45. A person or entity may not structure an appraisal
assignment or a contract with an independent appraiser for the
purpose of evading the provisions of this part relating to appraisal
management companies.
SEC. 16. Section 11345.6 is added to the Business and Professions
Code, to read:
11345.6. (a) No registered appraisal management company may
alter, modify, or otherwise change a completed appraisal report
submitted by an independent appraiser, including, without limitation,
by doing either of the following:
(1) Permanently removing the appraiser's signature or seal.
(2) Adding information to, or removing information from, the
appraisal report with an intent to change the value conclusion.
(b) No registered appraisal management company may require an
appraiser to provide it with the appraiser's digital signature or
seal. However, nothing in this subdivision shall be deemed to
prohibit an appraiser from voluntarily providing his or her digital
signature or seal to another person.
SEC. 17. Section 11346 is added to the Business and Professions
Code, to read:
11346. The provisions of this part relating to appraisal
management companies shall cease to be operative 60 days after the
effective date of a federal law that mandates the registration or
licensing of appraisal management companies with an entity other than
the state regulatory authority with jurisdiction over licensed and
certified appraisers.
SEC. 18. Section 11406.5 is added to the Business and Professions
Code, to read:
11406.5. The director shall, by regulation, establish the fees to
be imposed on appraisal management companies. The fees shall be
sufficient to cover the costs incurred by the office in administering
the changes to this part made by the act adding this section.
SEC. 19. Section 11409 of the Business and Professions Code is
amended to read:
11409. (a) Except as otherwise provided by law, any order issued
in resolution of a disciplinary proceeding may direct a licensee,
applicant for licensure, person who acts in a capacity that requires
a license under this part, registrant, applicant for a certificate of
registration, course provider, applicant for course provider
accreditation, or a person who, or entity that, acts in a capacity
that requires course provider accreditation found to have committed a
violation or violations of statutes or regulations relating to real
estate appraiser practice to pay a sum not to exceed the reasonable
costs of investigation, enforcement, and prosecution of the case.
(b) Where an order for recovery of costs is made and payment is
not made within 30 days of the date directed in the office's
decision, the order for recovery shall constitute a valid and
enforceable civil judgment. This judgment shall be in addition to,
and not in place of, any other criminal or civil penalties provided
for by law.
(c) (1) Failure of a licensee, applicant for licensure, person who
acts in a capacity that requires a license under this part,
registrant, applicant for a certificate of registration, course
provider, applicant for course provider accreditation, or a person
who, or entity that, acts in a capacity that requires course provider
accreditation to pay recovery costs or make a recovery cost payment
within 30 days of the date ordered, shall result in disciplinary
action by the office. If the person fails to pay recovery costs
within 30 days, that person shall pay interest and a penalty of 10
percent of the recovery costs or payment amount. Interest shall be
charged at the pooled money investment rate.
(2) If recovery costs are not paid as ordered, the full amount of
the assessed fine shall be added to any fee for renewal of a license
or a certificate of registration. A license or a certificate of
registration shall not be renewed prior to payment of the renewal fee
and recovery costs.
(3) The director may order the full amount of any recovery costs
to be immediately due and payable if any payment on the recovery
costs, or portion thereof, is not received within 30 days of its due
date.
(4) Any recovery costs, or interest thereon, not paid within 30
days of a final order shall constitute a valid and enforceable civil
judgment.
(d) A certified copy of the office's decision shall be conclusive
proof of the validity of the order and its terms.
(e) The office shall not renew or reinstate the license of any
licensee or the certificate of registration of any registrant who has
failed to pay all of the costs ordered under this section.
(f) Nothing in this section shall preclude the office from
including the recovery of the costs of investigation and enforcement
of a case in any default decision or stipulated settlement.
SEC. 20. Section 11422 of the Business and Professions Code is
amended to read:
11422. The office shall, on or before February 1, 1994, and at
least annually thereafter, transmit to the appraisal subcommittee
specified in subdivision (e) of Section 11302 a roster of persons
licensed pursuant to this part.
SEC. 21. Section 1090.5 of the Civil Code is amended to read:
1090.5. (a) No person with an interest in a real estate
transaction involving an appraisal shall improperly influence or
attempt to improperly influence, through coercion, extortion, or
bribery, the development, reporting, result, or review of a real
estate appraisal sought in connection with a mortgage loan.
Prohibited acts include, but are not limited to, the following:
(1) Withholding or threatening to withhold timely payment for an
appraisal.
(2) Withholding or threatening to withhold future business for an
independent appraiser, including removal from approved panels of
appraisers.
(3) Expressly or impliedly promising future business, promotions,
or increased compensation for an independent appraiser.
(4) Conditioning the request for an appraisal service or the
payment of an appraisal fee or salary or bonus on the opinion,
conclusion, or valuation in an appraisal report, or on a preliminary
estimate or opinion requested from an independent appraiser.
(5) Requesting the payment of compensation to achieve higher
priority in the assignment of appraisal business.
(6) Requesting that an appraiser provide an estimated,
predetermined, or desired valuation in an appraisal report, providing
to an appraiser an anticipated, estimated, encouraged, or desired
valuation in an appraisal report, or requesting that an appraiser
provide estimated values of comparable sales at any time before the
appraiser completes an appraisal report.
(b) Subdivision (a) does not prohibit a person with an interest in
a real estate transaction from asking an appraiser to do any of the
following:
(1) Consider additional, appropriate property information.
(2) Provide further detail, substantiation, or explanation for the
appraiser's value conclusion.
(3) Correct errors in the appraisal report.
(c) If a person who violates this section is licensed or
registered under any state licensing or registration law and the
violation occurs within the course and scope of the person's duties
as a licensee or registrant, the violation shall be deemed a
violation of that law.
(d) Nothing in this section shall be construed to authorize
communications that are otherwise prohibited under existing law.