BILL ANALYSIS Ó
AB 624
Page 1
Date of Hearing: May 6, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
624 (Wilk) - As Amended April 22, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill authorizes licensed real estate appraisers who perform
non-federally related appraisal activities to use a standard of
valuation practice other than the Uniform Standards of
Professional Appraisal Practice (USPAP) if that practice is
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disclosed to, and agreed upon, by the client, and if that
practice is described in the appraisal.
FISCAL EFFECT:
Unknown costs, likely minor, to the Bureau of Real Estate
Appraisers (special funds) under the Department of Consumer
Affairs for complaint investigations regarding the use of
unknown valuation standards.
COMMENTS:
1)Purpose. According to the author, "[This bill] is designed to
modernize California's appraiser licensing law to permit
licensed or certified appraisers to apply the most relevant
appraisal standards for their assignments. While federal law
requires compliance with the USPAP for federally related
transactions [FRTs], California operates in an international
business environment and foreign entities often need appraisal
reports prepared in accordance with international standards.
Also, entities within the [United States] often do not require
USPAP-compliant appraisals for their non-federally related
transactions. This bill permits the use of recognized
alternative or international valuation standards for
non-[FRTs], if disclosed and consented to by the client and if
identified in appraisal reports. In cases where standards
other than USPAP are employed, appraisal reports must still
comply with foundational USPAP standards relating to ethics,
competency, recordkeeping, and scope of work."
2)Background. In 1989, as a result of the savings and loan
crisis, Congress adopted the Federal Financial Institutions
Reform, Recovery and Enforcement Act (FIRREA) mandating states
to license and certify real estate appraisers who appraise
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property for FRTs. FRTs are transactions involving loans made,
guaranteed or insured by federally-supervised financial
institutions. The FIRREA, and rules promulgated pursuant to
that act, require, at a minimum, that real estate appraisals
be performed in accordance with generally accepted uniform
standards as promulgated by the Appraisal Standards Board
(ASB) of the Appraisal Foundation, and that such appraisals be
in writing.
While federal law requires that FRT appraisals be performed in
compliance with the USPAP, California law goes beyond this
requirement and requires compliance with USPAP for all
appraisals performed by California licensed and certified
appraisers, whether federally-related or not, and thus,
imposes duties beyond those needed by entities requesting
appraisals in non-FRTs. Investors needing portfolio review
analysis, for example, often do not need, and thus are not
willing to pay for, a full USPAP-compliant appraisal.
The author contends that because California law makes USPAP
the standard for all appraisals performed by California
licensed or certified appraisers, California licensees are
unable to accept these assignments. In this regard, California
law acts as a disincentive to hire the most competent
appraisers. As a result, licensed professionals in other
states or unlicensed persons in California could perform those
non-FRT appraisals without following USPAP, while California
licensees would still be required to follow the USPAP.
This bill seeks to address this problem by authorizing
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licensees to comply with recognized valuation standards other
than the USPAP for non-FRTs, with the consent of the client
and if the standards are properly identified in the appraisal
report. This bill would still require USPAP provisions
relating to ethics, competency, recordkeeping and scope of
work to apply if a standard other than the USPAP is used for
an appraisal.
3)Prior Legislation. AB 1317 (Frazier), Chapter 352, Statutes
of 2013, per the Governor's Reorganization Plan No. 2, moved
the former Office of Real Estate Appraisers from the former
Business, Transportation, and Housing Agency to the Bureau of
Real Estate Appraisers under the Department of Consumer
Affairs, within the Business, Consumer Services, and Housing
Agency.
Analysis Prepared by:Jennifer Swenson / APPR. / (916)
319-2081