BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 237
Author: Calderon (D)
Amended: 6/17/09
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
SENATE FLOOR : 35-0, 5/6/09
AYES: Alquist, Ashburn, Benoit, Calderon, Cogdill,
Corbett, Correa, Cox, Denham, Ducheny, Dutton, Florez,
Hancock, Harman, Hollingsworth, Huff, Kehoe, Leno, Liu,
Lowenthal, Maldonado, Negrete McLeod, Oropeza, Padilla,
Pavley, Romero, Simitian, Steinberg, Strickland, Walters,
Wiggins, Wolk, Wright, Wyland, Yee
NO VOTE RECORDED: Aanestad, Cedillo, DeSaulnier, Runner,
Vacancy
ASSEMBLY FLOOR : 63-9, 8/20/09 - See last page for vote
SUBJECT : Real estate appraisers
SOURCE : California Government Relations Subcommittee
CONTINUED
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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.
Assembly Amendments revise the definition of an AMC, (2)
revise the definition of the controlling person of an AMC,
(3) clarify the information that must be included by an AMC
in its application for registration, (4) clearly identify
the requirements that apply to AMCs, by placing these
requirements into code sections separate from those that
apply to existing appraisal licensees, and (5) make related
technical and clarifying changes.
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
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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
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
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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.Prohibits any person or entity from acting in the
capacity of an AMC without first obtaining a certificate
for registration from the Office of Real Estate
Appraisers (OREA)
2.Defines "AMC" as any person or entity that employs 11 or
more appraisers, or administers networks of 11 or more
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, employs
or enters into an agreement with one or more independent
appraisers to complete the appraisals contained in the
request, or 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 on behalf of a client.
4.Defines a "controlling person" as one or more of the
following:
A. An officer or director of an AMC, or an
individual with a 10 percent ownership interest in
an AMC.
B. An individual employed, appointed, or authorized
by an AMC who has the authority to enter into a
contractual relationship with clients for the
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performance of appraisal services and who has the
authority to enter into agreements with independent
appraisers for the completion of appraisals.
C. An individual who possesses the power to direct
or cause the direction of the management or
policies of an AMC.
5. Authorizes OREA to impose administrative fines of up to
$10,000 per violation and establishes related appeals
processes.
6. Requires AMCs to identify "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).
7. Requires OREA to adopt regulations governing the process
and procedure of applying for registration as an AMC and
to provide information as specified.
8. Requires an applicant for an AMC certificate of
registration to demonstrate that its contracts include
the following provisions:
A. Any independent contractor appraisers possess
all required licenses and certificates from OREA.
B. The work of independent contractor appraisers
are performed in compliance with Uniform Standards
of Professional Appraisal Practice (USPAP).
C. The AMC maintains a detailed record of each
service request and the independent contractor
appraiser selected for the assignment.
9.Prohibits any person or entity acting in the capacity of
an AMC from improperly influencing or attempting to
improperly influence the development, reporting, result,
or review of any appraisal.
10.Prohibits any person or entity from structuring an
appraisal assignment or a contract with an independent
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appraiser for the purpose of evading the law relating to
AMCs.
11.Prohibits an AMC from altering, modifying, or otherwise
changing a completed appraisal report submitted by an
independent appraiser.
12.Repeals the provisions of this bill 60 days after the
effective date of a federal law that mandates
registration or licensing of AMCs.
13.Requires OREA to establish the fees to be paid by AMCs
and that are sufficient to cover the costs incurred by
the OREA.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Assembly Appropriations Committee
analysis:
1. One-time special fund costs of approximately $60,000 in
addition to absorbable costs for promulgating regulation
changes, updating the existing database, developing
application and complaint forms, and staff training.
2. On-going special fund costs of approximately $120,000
which under the provisions of the bill will be fully
offset by fee revenue.
3. Cost estimates are based on the assumption that 150
appraisal management companies may be required to
register, resulting in annual fees of about $800 per AMC
to cover all costs.
SUPPORT : (Verified 8/20/09)
California Government Relations Subcommittee of the
Appraisal Institute (source)
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
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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 :
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Arambula, Beall, Bill Berryhill, Tom
Berryhill, Block, Blumenfield, Brownley, Buchanan,
Caballero, Carter, Chesbro, Coto, Davis, De La Torre, De
Leon, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuentes, Fuller, Furutani, Gilmore, Hall, Harkey,
Hayashi, Hernandez, Hill, Huber, Huffman, Jones,
Krekorian, Lieu, Bonnie Lowenthal, Ma, Mendoza, Monning,
Nava, Nestande, Niello, Nielsen, John A. Perez, V. Manuel
Perez, Portantino, Ruskin, Salas, Saldana, Silva,
Skinner, Smyth, Solorio, Audra Strickland, Swanson,
Torlakson, Torres, Torrico, Tran, Yamada, Bass
NOES: Anderson, Conway, DeVore, Gaines, Garrick, Hagman,
Jeffries, Knight, Logue
NO VOTE RECORDED: Blakeslee, Charles Calderon, Cook,
Duvall, Galgiani, Miller, Villines, Vacancy
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JJA:do 8/24/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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