BILL ANALYSIS Ó ----------------------------------------------------------------------- |Hearing Date:June 25, 21012 |Bill No:AB | | |2519 | ----------------------------------------------------------------------- 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) AB 2519 Page 2 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. AB 2519 Page 3 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 AB 2519 Page 4 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. AB 2519 Page 5 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 AB 2519 Page 6 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 AB 2519 Page 7 Consultant:Michael Lynch