BILL ANALYSIS Ó
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THIRD READING
Bill No: SB 6
Author: Calderon (D) and Vargas (D)
Amended: 4/11/11
Vote: 21
SENATE BANKING & FINANCIAL INST. COMMITTEE : 7-0, 4/6/11
AYES: Vargas, Blakeslee, Evans, Kehoe, Liu, Padilla,
Walters
SENATE BUSINESS, PROF. & ECON. DEV. COMMITTEE : 9-0, 5/2/11
AYES: Price, Emmerson, Corbett, Correa, Hernandez, Negrete
McLeod, Vargas, Walters, Wyland
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Real estate: appraisal and valuation
SOURCE : California Government Relations Subcommittee of
the Appraisal Institute
DIGEST : This bill updates Californias 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).
ANALYSIS : In recent years, California enacted two bills
intended to ensure the integrity of the real property
appraisal process. SB 223 (Machado), Chapter 291, Statutes
of 2007, prohibited any person with an interest in a real
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estate transaction from inappropriately influencing, or
attempting to inappropriately influence, the development,
reporting, result, or review of a real estate appraisal
sought in connection with a mortgage loan. SB 237
(Calderon), Chapter 173, Statutes of 2009, plugged a hole
in California's appraisal regulatory scheme, by defining
the term "appraisal management company," requiring
appraisal management companies doing business in California
to register with California's Office of Real Estate
Appraisers, and enacting a set of allowable and prohibited
actions by appraisal management companies and the
appraisers who work for them.
At the same time California was changing its laws to ensure
the integrity of the real property appraisal process,
federal agencies were promulgating regulations with similar
intent. Until enactment of the Dodd-Frank in July 2010,
California's laws were more comprehensive, and more
protective of consumers, than the federal rules. Since
enactment of Dodd-Frank, however, California's rules have
fallen behind some of those recently promulgated by federal
regulators. Portions of state law are also now
inconsistent with federal regulations in certain cases.
This bill updates California's Real Estate Law, Appraisal
Law, and Civil Code, to reflect changes made by Dodd-Frank,
and changes contained in regulations released by the
Federal Reserve Board (FRB) on October 18, 2010, pursuant
to Dodd-Frank. The provisions of Dodd-Frank relating to
appraisals became effective on July 21, 2010. The FRB
changes became effective on December 27, 2010. They are
optional from December 27, 2010 through March 31, 2011, and
become mandatory as of April 1, 2011.
This bill:
1. Amends the Real Estate Law to provide that no real
estate licensee that offers or provides an opinion of
value of real property, that is used as the basis for an
origination, refinancing, or modification of a mortgage
loan shall have an interest in that property, as
specified, and shall knowingly or intentionally
misrepresent the value of that property.
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2. Amends the Appraisal Law to provide that:
A. 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, through coercion, extortion, inducement,
collusion, bribery, intimidation, compensation, or
instruction. This bill lists several acts that
represent improper influence pursuant to this
section, and several acts which are allowable
pursuant to this section.
B. No person or entity preparing an appraisal or
performing appraisal management functions in
connection with the origination, modification, or
refinancing of a mortgage loan may have a direct or
indirect interest, financial or otherwise, in the
property or the transaction for which the appraisal
or appraisal management functions are performed.
3. Amends the Civil Code to provide that:
A. No person with an interest in a real estate
transaction involving a valuation shall improperly
influence or attempt to improperly influence the
development, reporting, result, or review of any
appraisal, through coercion, extortion, inducement,
collusion, bribery, intimidation, compensation, or
instruction, as specified. This bill lists several
acts that represent improper influence pursuant to
this section, and several acts which are allowable
pursuant to this section.
B. The term "valuation" means an estimate of the
value of real property in written or electronic form,
other than one produced solely by an automated
valuation model or system. As drafted, this
definition includes both appraisals and broker price
opinions.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
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SUPPORT : (Verified 5/16/11)
California Government Relations Subcommittee of the
Appraisal Institute (source)
California Association of Realtors
ARGUMENTS IN SUPPORT : The California Government
Relations Subcommittee of the Appraisal Institute supports
this bill, as one intended to ensure that federal and state
rules align on important questions of inappropriate
pressure on appraisers and conflicts of interest in rending
real property value conclusions.
JJA:kc 5/17/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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