BILL ANALYSIS                                                                                                                                                                                                    Ó







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        |Hearing Date:June 25, 21012        |Bill No:AB                         |
        |                                   |2519                               |
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                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                          Senator Curren D. Price, Jr., Chair
                                           

                     Bill No:        AB 2519Author:Bill Berryhill
                      As Amended:February 24, 2012    Fiscal:Yes

        
        SUBJECT:  Real estate appraisers: licensing.
        
        SUMMARY:  Specifies a number of required or discretionary disciplinary 
        actions to be taken by the Office of Real Estate Appraisers (OREA) 
        against its licensees, and makes other changes to the law governing 
        real estate appraisers and appraisal management companies (AMCs).  

        Existing law:
        
       1)Defines "appraisal" as 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.  
          (Business and Professions Code (BPC) § 10131)

       2)Authorizes the Director of the OREA to adopt regulations governing 
          the process and procedure of licensing and disciplining real estate 
          appraisers.  (BPC § 13313) 

       3)Authorizes the Director to issue a citation to a licensee or course 
          provider that may impose a requirement to complete an education 
          course or courses, as specified.  If the licensee fails to 
          satisfactorily or timely complete the required education course, the 
          license is automatically suspended.  (BPC § 13315)

       4)Authorizes OREA to publish a summary of public disciplinary actions 
          against licensees and registrants, including resignations while 
          under investigation.  (BPC § 13317)






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       5)Provides that a holder of a valid real estate broker license shall be 
          deemed to have completed the experience requirements for licensure, 
          upon proof that he or she has accumulated 1,000 hours of experience 
          in the valuation of real property.  (BPC § 11340)

       6)Requires fingerprinting and background checks by the Department of 
          Justice (DOJ) for applicants for real estate appraiser licenses and 
          each controlling person of an applicant for registration as an AMC.  
          (BPC § 11343)

       7)Requires AMCs to comply with specified standards regarding appraisers 
          who act as independent contractors, including standards relating to 
          licensure, performance of appraisal services, and appraisal reports. 
           (BPC § 11345.3)
       8)Prohibits a registered AMC from requiring an appraiser to provide the 
          AMC with the appraiser's digital signature or seal.  An appraiser 
          may voluntarily provide his or her digital signature or seal to 
          another person.  (BPC § 11345.6)

       9)Requires licensing and issuance-related fees to be paid to the OREA 
          at the time of submitting the application and allows fees to be 
          paid, among other means, by government purchase order.  (BPC § 
          11400)

       10)Requires applications for a license be submitted to OREA within one 
          year of the successful completion of a required examination.  (BPC § 
          11408)

        This bill:

       1)Prohibits the renewal of a license if the licensee fails to 
          satisfactorily complete the additional education requirements 
          imposed by the citation.

       2)Authorizes the office to institute or continue disciplinary 
          proceedings against a licensee or registrant despite the expiration, 
          suspension, cancellation, forfeiture of the license and certificate 
          of registration.

       3)Requires each real estate appraiser applicant and each controlling 
          person of each applicant for registration as an AMC to submit to the 
          DOJ fingerprint images and information via LiveScan.  If the 
          applicant is located out of state, the applicant shall include his 
          or her fingerprint card with the application package and the OREA 
          shall submit the fingerprint cards to the DOJ.






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       4)Adds employee appraisers of AMCs to existing law requirements that 
          apply to AMC independent contractor appraisers, and makes conforming 
          changes.

       5)Allows an appraiser to voluntarily provide his or her digital 
          signature or seal to another person only to the extent permissible 
          under the Uniform Standards of Professional Appraiser Practice 
          (USPAP).

       6)Deletes a requirement that issuance-related fees be paid at the time 
          the issuance application is submitted, deletes a provision allowing 
          payment of fees by government purchase order, and makes conforming 
          changes.

       7)Specifies that an applicant for licensure shall not be eligible to 
          have a license issued unless he or she notifies the OREA within one 
          year of successful completion of a required examination.

       8)Repeals existing law providing that a holder of a valid real estate 
          broker license shall be deemed to have completed the experience 
          requirements for licensure upon proof of accumulating 1,000 hours of 
          experience in the valuation of real property.

       9)Deletes reference to the Resolution Trust Corporation.

       10)Repeals reference to inclusion of application and issuance fees as 
          part of the fee for an original or renewal certification. 

        FISCAL EFFECT:  According to the Assembly Appropriations Committee, 
        costs are minor and absorbable.

        COMMENTS:
        
       1.Purpose.  The intent of this legislation is to provide technical 
          changes to real estate law as it pertains to real estate appraiser 
          licenses.  The  Author  notes that the language clarifies enforcement 
          powers, modernizes the statutes and in some cases makes changes that 
          are necessary in order to remain in compliance with federal law.
          
          This bill, sponsored by the  California Government Relations 
          Subcommittee of the Appraisal Institute  , makes several 
          non-controversial changes to law governing the OREA and its 
          licensees.

           a)   This bill provides that a license will not be renewed if the 
             licensee has not completed continuing education mandated in an 





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             enforcement citation.  OREA has been advised by legal counsel 
             that OREA may not automatically suspend a license for failure to 
             comply with the terms of a final disciplinary order, although it 
             can refuse to renew a license if a fine is not paid.  Adding this 
             provision will strengthen OREA's ability to enforce terms of 
             citations.

           b)   This bill provides that the suspension, expiration or 
             forfeiture of a license or certification does not deprive OREA of 
             the power to institute or continue disciplinary proceedings.  
             OREA indicates that this clarification is necessary to allow 
             discipline against licensees who voluntarily surrender a license 
             to avoid and investigation.

           c)   This bill repeals language in current law that provides that 
             holders of a valid real estate broker license may receive credit 
             for appraisal license application experience requirements if they 
             provide proof of 1,000 hours of experience in the valuation of 
             real property.  This "broker credit" language has been in the 
             appraiser licensing law since its inception in the early 1990s.  
             It was intended to recognize experience in preparing broker 
             opinions of value to qualify for the appraiser license level.  
             OREA reports that 69 individuals possess an appraiser license 
             based upon real estate broker credit.  However, federal law 
             currently does not permit individuals holding an appraiser 
             license that is based upon broker credit to perform appraisals 
             for federally related transactions, which are the only 
             transactions for which a state appraisal license or certificate, 
             is required.  In other words, these 69 individuals may no longer 
             perform appraisals for federally related transactions.  OREA 
             further indicates that these individuals will no longer be 
             permitted to renew their licenses at all after 2014, pursuant to 
             the Dodd-Frank Wall Street Reform and Consumer Protection Act.  
             Thus, the change in this section conforms to federal law.

           d)   This bill deletes a reference to the Resolution Trust 
             Corporation, as the entity ceased to exist 15 years ago.

           e)   This bill changes language relating to fingerprints, to 
             clarify that in-state applicants must submit fingerprints via 
             LiveScan, while out-of-state applicants must submit fingerprint 
             cards with applications, which OREA then submits to DOJ.

           f)   This bill adds references to "employee appraiser" to existing 
             law regulating AMCs.  AMCs emerged in the appraisal profession 
             after the appraiser licensing law was enacted in the early 1990s. 





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              Before the emergence of AMCs, banks and other lenders maintained 
             lists of approved appraisers and contracted directly with 
             appraisers for services.  More frequently now, lenders maintain 
             contracts with AMCs, which in turn contract with appraisers for 
             these services.  While most AMCs utilize independent contractor 
             appraisers for services, they may also have employee appraisers 
             on staff to appraise property or review the appraisals submitted 
             by others.  OREA indicates that this bill clarifies that employee 
             appraisers of AMCs must comply with the same standard as 
             independent contractor appraisers.

           g)   This bill allows appraisers to voluntarily provide their 
             digital signature or seal to the extent permissible under USPAP.  
             This is a technical change, as state licensing law expressly 
             incorporates USPAP as the standards to which all appraisers must 
             comply.

           h)   This bill makes technical changes to sections relating to 
             fees.  OREA indicates that the current language in the statutes 
             has proven very confusing to licensees, resulting in significant 
             staffing resources dedicated to processing reimbursements for 
             overpayments.  These changes are intended to add clarity for 
             licensees, with no changes in the amounts that licensees must 
             pay.

       1.Background.  The OREA is responsible for regulating the practice of 
          real estate appraisers in California, by ensuring that only 
          qualified persons are licensed to conduct appraisals in federally 
          related real estate loan transactions and that all real estate 
          appraisers licensed by the state adhere to applicable laws, 
          regulations, and standards.  Originally enacted in 1990, the OREA 
          was established and charged with developing and implementing a real 
          estate appraiser licensing program that complied with the federal 
          mandate established by Congress in 1989 as a result of the savings 
          and loan disaster of the late 1980's.  That mandate, Title XI of the 
          Financial Institutions Reform, Recovery and Enforcement Act, 
          requires states to license and certify real estate appraisers who 
          appraise property for federally related transactions.

          OREA currently licenses more than 13,800 licensed appraisers in 
          California, with some 200 new licenses issued and 6,000 licenses 
          renewed in FY 2009/2010.  There are four levels of appraiser 
          licensees:  appraiser trainee (AT); appraiser licensee (AL); 
          certified residential (AR); and certified general (AG).  Levels of 
          licensure are distinguished by increasing levels of education, 
          experience, and scope of practice (property type, transaction value 





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          and supervision level).  When a licensee wishes to move to up to a 
          higher level of licensure, they must meet the qualifications and 
          apply to upgrade the license. 

          The Director of the Office of Real Estate Appraisers, who serves as 
          the chief executive of the OREA, is appointed by the governor, 
          subject to confirmation by the Senate Committee on Rules.  The 
          Director is mandated to administer and enforce the Real Estate 
          Appraisers Licensing and Certification Law.

       2.Related Legislation.   SB 706  (Price, Chapter 712, Statutes of 2011) 
          made numerous enforcement changes to the Department of Real Estate 
          and the OREA, required specified licensing boards to post 
          information about licensees on the Internet, and made updating and 
          conforming changes.  

        

       SB 6  (Calderon, Chapter 716, Statues of 2011) updated California's Real 
          Estate Law, Appraisal Law, and Civil Code, to reflect recent changes 
          enacted at the federal level, pursuant to the Dodd-Frank Wall Street 
          Reform and Consumer Protection Act (Dodd-Frank).

           SB 2357  (Calderon, Chapter 173, Statutes of 2009) created a 
          registration program for AMCs, as defined, within the OREA, and 
          required AMCs to meet similar existing licensing program 
          requirements for independent appraisers.  This bill also specified 
          and clarified prohibited acts by AMCs as well as others who have an 
          interest in a real estate transaction involving an appraisal.
          
          AB 33  (Nava) of 2009 proposed to consolidate the OREA with the DRE.  
          The bill also proposed a number of other changes, including a 
          complete reorganization of several departments in BTH.  This bill 
          was amended to address a different subject.

        
        SUPPORT AND OPPOSITION:
        
         Support:  

        California Government Relations Subcommittee of the Appraisal 
        Institute (Sponsor)

         Opposition:  

        None received as of June 14, 2012





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        Consultant:Michael Lynch