BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 237|
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THIRD READING
Bill No: SB 237
Author: Calderon (D)
Amended: 4/13/09
Vote: 21
SENATE BUS. PROF. AND ECON. DEVEL. COMMITTEE : 8-1, 4/13/09
AYES: Negrete McLeod, Wyland, Corbett, Florez, Oropeza,
Romero, Walters, Yee
NOES: Aanestad
NO VOTE RECORED: Correa
SENATE APPROPRIATIONS COMMITTEE : 8-0, 4/27/09
AYES: Kehoe, Cox, DeSaulnier, Leno, Oropeza, Walters,
Wolk, Yee
NO VOTE RECORDED: Corbett, Denham, Hancock, Runner, Wyland
SUBJECT : Real estate appraisers
SOURCE : California Government Relations Subcommittee
of the
Appraisal Institute
DIGEST : This bill creates a registration program for
appraisal management companies (AMCs), as defined, within
the Office of Real Estate Appraisers, and requires AMCs to
meet similar existing licensing program requirements for
independent appraisers. This bill also specifies and
clarifies prohibited acts by AMCs as well as others who
have an interest in a real estate transaction involving an
appraisal.
CONTINUED
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ANALYSIS :
Existing law, the California Real Estate Appraisers'
Licensing and Certification Law (REALC Law):
1.Provides for the licensure and regulation of real estate
appraisers by the Office of Real Estate Appraisers (REA
Office) and vests the duty of enforcing and
administering the REALC Law in the Director of the REA
Office and provides that the REA Office is under the
supervision and control of the Secretary of the
Business, Transportation and Housing Agency (BT&H).
2.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.
3.Specifies that no person may assume or use the title of
a "state licensed or certified real estate appraiser,"
or perform, make, or approve and sign an appraisal
unless they hold a current valid license issued by the
REA Office.
4.Provides that the Director shall adopt regulations
governing the process and procedure of the licensing and
certification of real estate appraisers and that this
shall include, among other things, background checks
including fingerprinting with the Department of Justice
(DOJ), necessary experience, education, continuing
education, equivalency, and minimum requirements of the
Appraisal Foundation and federal law.
5.Provides that the Director may issue citations and
assess fines, or take other administrative or
disciplinary actions as necessary to enforce the REALC
Law.
6.Authorizes the Director, by regulation, to prescribe
fees lower than the maximum fees specified to offset the
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cost incurred for administration.
7.Requires the REA Office to transmit annually to the
Appraiser Subcommittee a roster of persons licensed or
certified within California.
8.Specifies that a licensee shall report to the REA Office
within 30 days if they have been convicted of a crime,
or the revocation or suspension of a license or any
other authority to practice granted by another agency.
9.Specifies that the Uniform Standards of Professional
Appraisal Practice (USPAP) constitutes the minimum
standard of conduct and performance for a licensee in
any work or service performed that is addressed by those
standards and that if a licensee is also certified by
the Board of Equalization, that he/she shall follow the
standards established by the Board of Equalization when
fulfilling his/her responsibilities for assessment
purposes.
Existing law, the Civil Code , provides that 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, and also specifies permissible acts which can be
requested of an appraiser by a person with an interest in a
real estate transaction.
This bill:
1.Requires that no person or entity shall act in the
capacity of an "appraisal management company" without
first obtaining a certificate for registration from the
REA Office.
2.Defines AMC as any person or entity that administers
networks of independent contractor appraisers to perform
appraisals for clients; receives requests for appraisals
from one or more clients and, for a fee paid by a
client, enters into an agreement with one or more
independent appraisers to complete the appraisals
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contained in the request; otherwise serves as a
third-party broker of appraisals between clients and
appraisers.
3.Specifies under what circumstances or conditions a
person or entity is not an AMC when they contract with
an independent appraiser. This includes a bank, credit
union, trust company, savings and loan association,
etc., or a licensed finance lender or residential
mortgage lender, or a licensed real estate broker, or
any person licensed to practice law in this state who
orders an appraisal in connection with a bona fide
client relationship.
4.Specifies that an AMC also does not include a person or
entity that does one or more of the following:
(1) Exclusively delegates appraisal assignments to
appraisers or trainees as employees rather than
independent contractors, and is responsible for
ensuring that employees complete appraisal
assignments in accordance with the USPAP.
(2) Contracts with independent appraisers as
independent contractors for the completion of
appraisal assignments that the person or entity
cannot complete for any reason, including
competency, workload, scheduling, or geographic
location.
(3) Contracts with independent appraisers acting as
independent contractors for the completion of real
estate appraisal assignments and, upon the
completion of those assignments, consigns the
appraisal reports with the independent contractor.
5.Defines a "controlling person" as one or more of the
following:
(1) Is an owner, officer, or director of an AMC.
(2) Is an individual employed, appointed, or
authorized by an AMC that has the authority to
enter into a contractual relationship with clients
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for the performance of appraisal services and that
has the authority to enter into agreements with
independent appraisers for the completion of
appraisals.
(3) Is an individual who possesses, directly or
indirectly, the power to direct or cause the
direction of the management or policies of an AMC.
6.Requires that all of the aforementioned licensure
procedures, requirements and standards that are
applicable to state licensed real estate appraisers
shall also be similarly applicable to AMCs.
7.Requires AMCs to identify their "controlling persons,"
as defined, and prohibits certain persons from serving
as controlling persons (generally persons who have been
convicted of specified crimes or had their appraisal
licenses revoked).
8.Provides that the Director shall adopt regulations
governing the process and procedure of applying for
registration as an AMC and to provide information as
specified.
9.Specifies that an AMC applicant, prior to receiving
registration, must demonstrate to the satisfaction of
the Director that it has established systems to ensure
the independent contractor appraisers contracted by the
applicant possesses all required licenses and
certificates from the REA office; review the work of all
independent contractor appraisers contracted by the
applicant to ensure that appraisal services are
performed in accordance with the USPAP; maintain a
detailed record of each service request and the
independent appraiser selected for the assignment.
10.Requires that no person or entity acting in the capacity
of an AMC shall improperly influence or attempt to
improperly influence the development, reporting, result,
or review of any appraisal and specifies prohibited
acts.
11.Provides that a person or entity may not structure an
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appraisal assignment or a contract with an independent
appraiser for the purpose of evading this law relating
to AMCs.
12.Specifies that no AMC may alter, modify, or otherwise
change a completed appraisal report submitted by an
independent appraiser.
13.Provides that the Director shall, by regulation,
establish the fees to be imposed on AMCs and that they
shall be sufficient to cover the costs incurred by the
REA Office in administering this law.
14.Specifies within the Civil Code pertaining to the
unlawful influence of appraisers what would be
considered as prohibited acts.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11
2011-12 Fund
AMC registration program $60 $120
$120 Special*
Registration fee (revenue) ($120)
($120) Special*
*Real Estate Appraisers Regulation Fund
SUPPORT : (Verified 4/28/09)
California Government Relations Subcommittee of the
Appraisal Institute (source)
OPPOSITION : (Verified 4/28/09)
Fidelity National Financial (oppose unless amended)
Lender Processing Services
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Title Appraisal Vendor Management Association (oppose
unless amended)
ARGUMENTS IN SUPPORT : According to the Sponsor, the
Appraisal Institute (AI), this bill is designed to respond
to the growth of AMCs in real estate transactions. As
federal regulators have required greater separation of real
estate lenders and brokers from those who order appraisals,
more lenders have engaged the services of third-party AMCs
to manage the process of ordering and receiving appraisals.
The problem, as stated by AI, is that while lenders,
brokers and appraisers are all regulated entities, no
entity has any enforcement authority whatever over the
activities of AMCs. No regulator has any authority to make
sure that AMCs do not engage in activities that is
prohibited by lenders or brokers, including pressuring
appraisers to inflate the values of real estate; the exact
activity that has been identified as one component of the
subprime lending crisis.
The Sponsor indicates that this bill is narrowly tailored
to fill this regulatory gap within the existing structure
of California's appraiser licensing and certification law
and simply requires AMCs to register with REA Office,
identify owners and controlling persons within the
companies, and refrain from specified acts designed to
pressure appraisers into achieving pre-determined values.
The Sponsor states that this bill is actually narrower than
bills enacted recently in other states, creates no new
licensing scheme and has nothing to do with limiting
competition or regulating fees.
ARGUMENTS IN OPPOSITION : The Title Appraisal Vendor
Management Association (TAVMA) is opposed to this bill
unless it is amended to provide some type of
registration-only process for AMCs with operations in
California. TAVMA believes that AMCs should not be
micromanaged by a state administrative agency. As
explained by TAVMA, AMC's administer networks of certified
and licensed appraisers to fulfill real estate appraisal
assignments on behalf of mortgage lending institutions.
Appraisal management involves recruiting, qualifying, and
verifying licensure of appraisers and negotiating fee and
service level expectations with lenders and appraisers.
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AMCs perform additional administrative duties like order
entry and assignment, order tracking and statusing,
pre-delivery quality control and preliminary and hard copy
appraisal report delivery. In addition, appraisal
management involves ongoing quality control, payment
accounting, market value dispute resolution, warranty
administration, and record retention. As argued by TAVMA,
contrary to the views of some who support this bill, AMCs
are subject to significant regulation at the federal and
state level and must comply with a variety of laws that
apply to their clients and with federal and state laws that
specifically regulate appraisals. An example given is the
Home Valuation Code of Conduct and other state and federal
lending laws, and recent laws that specifically prohibit
improper influence of appraisers. TAVMA asserts that AMCs
protect appraisers and absorb some of their overhead.
Lenders us AMCs as a "buffer" between loan production staff
and appraisers to avoid improper pressure. Further, an
independent appraiser survey in 2007, confirmed that AMCs
were the least likely industry participants to pressure
appraisers. TAVMA also notes that AMCs do not control
appraiser fees and facilitates lower costs to
homeownership.
JJA:do 4/28/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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