No. 43165 (Amendment): Rule R162-2e. Appraisal Management Company Administrative Rules

(Amendment)

DAR File No.: 43165
Filed: 08/24/2018 02:39:32 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of these proposed rule amendments is to designate and clarify the manner by which an appraisal management company (AMC) can offer appraisal assignments to appraisers, to designate and clarify required disclosures and explanations between an AMC and its appraisers, and to provide a presumption of compliance for an AMC that pays an appraiser for a completed appraisal assignment consistent with the Department of Veterans Affairs (VA) Fee Schedule.

Summary of the rule or change:

In Section R162-2e-102, the definition of business day is amended. Subsection R162-2e-304(1) is amended to require an AMC to notify its appraisers of the criteria the AMC uses to rank an appraiser on a panel when an appraiser is first added to a panel, and, if the AMC changes ranking criteria, to notify appraisers of the changes the AMC uses to rank the appraisers. Subsection R162-2e-304(2) is renumbered and a new subsection added that would require an AMC to reply to a written request from an appraiser within 10 days regarding the status of the appraiser on an appraiser panel and the removal of the appraiser from an appraiser panel. Subsection R162-2e-304(3) is renumbered and provides the manner by which an AMC may respond to a written request from an appraiser. Subsection R162-2e-304(4) is renumbered and clarifies the term "general criteria" as used in ranking appraisers in an appraiser panel. Subsection R162-2e-304(5) is added to prevent an AMC from having to respond to multiple requests from an appraiser which are unreasonably duplicative. Subsection R162-2e-304(6) is added to provide a safe harbor to an AMC for compliance with the requirement that the AMC pay a customary and reasonable fee for an appraisal assignment if the AMC chooses to pay consistent with the applicable VA fee schedule. Section R162-2e-306 is added to the current rule and would limit the timing for awarding an appraisal assignment which is communicated by an AMC simultaneously to two or more appraisers. The assignment could not be awarded to an appraiser for a minimum of 120 minutes following the offer or until each appraiser has affirmatively responded or, if offered on a day other than a business day, the assignment could not be awarded to an appraiser until 9:00 a.m. on the next business day. An AMC is not restricted from contacting an appraiser or group of appraisers for reasons other than awarding an assignment.

Statutory or constitutional authorization for this rule:

• Section 61-2e-301
• Section 61-2e-103
• Section 61-2e-306
• Section 61-2e-304

Anticipated cost or savings to:

the state budget:

The Division of Real Estate has the staff and budget in place to administer these proposed amendments. After conducting a thorough analysis, it was determined that these proposed rule amendments will not result in a fiscal impact, affect those resources, or result in any additional cost or savings to the state budget.

local governments:

Local governments are not required to comply with or enforce the AMC administrative rules. After conducting a thorough analysis, it was determined that these proposed rule amendments will not result in a fiscal impact to local governments.

small businesses:

These proposed amendments do create new obligations for AMCs that are small businesses. These compliance costs for small businesses are detailed below in the Compliance costs for affected persons, and in Appendix 1: Regulatory Impact Summary Table. Only small businesses that are Appraisal Management Companies will incur compliance costs from these proposed amendments. These proposed amendments do not create new obligations for small businesses that are not AMCs.

persons other than small businesses, businesses, or local governmental entities:

These proposed amendments do create new obligations for AMCs that are non-small businesses. These compliance costs for non-small businesses are detailed below under costs for affected persons, and in Appendix 1: Regulatory Impact Summary Table. Only non-small businesses that are AMCs will incur compliance costs from these proposed amendments. Except for non-small businesses that are AMCs, the proposed amendment does not create new obligations for persons other than small businesses, businesses, or local government entities.

Compliance costs for affected persons:

There are 136 AMCs registered to do business in the state of Utah. Nine of these companies are established and operated from Utah. 127 companies are operated from outside Utah. Approximately 75% of AMCs are small businesses and 25% are non-small businesses. The fiscal impact of the proposed rule amendment may vary significantly between AMCs, depending on the current business model and business practices of each AMC and depending on the industry representative estimating the compliance cost. Initial one-time compliance cost estimates for the proposed rule amendment received from representatives of the appraisal management industry range from of $3,750 per company to $350,000 per company. These various assertions by industry members are combined and extrapolated in Appendix 1. The actual Fiscal Year Impact for 2019 may be somewhat higher or much lower than the table indicates, depending on the accuracy of the assertions of industry members. Annual compliance costs for years subsequent to the initial first year costs are estimated to be $180 per company.

Comments by the department head on the fiscal impact the rule may have on businesses:

There are an estimated 34 large businesses in the AMC industry (NAICS 531320) operating in Utah. These businesses account for an estimated 25% of the total number of AMCs. There are 136 AMCs registered to do business in the state of Utah. Nine of these companies are established and operated from Utah. 127 companies are operated from outside Utah. Approximately 75% of AMCs are small businesses and 25% are non-small businesses. The fiscal impact of these proposed rule amendments may vary significantly between AMCs, depending on the current business model and business practices of each AMC. Industry representatives estimating the compliance costs have not agreed on the amount of these costs. In this regard, initial one-time compliance cost estimates for these proposed rule amendments received from representatives of the appraisal management industry range from of $3,750 per company to $350,000 per company. These various assertions by industry members are combined and extrapolated in Appendix 1. The actual Fiscal Year Impact for 2019 may be somewhat higher or much lower than the table indicates, depending on the accuracy of the assertions of industry members. Annual compliance costs for years subsequent to the initial first year costs are estimated to be $180 per company, see Appendix 1: Regulatory Impact Summary Table.

Francine A. Giani, Executive Director, Commerce

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Commerce
Real Estate
HEBER M WELLS BLDG
160 E 300 S
SALT LAKE CITY, UT 84111-2316

Direct questions regarding this rule to:

• Justin Barney at the above address, by phone at 801-530-6603, by FAX at , or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

10/15/2018

This rule may become effective on:

10/22/2018

Authorized by:

Jonathan Stewart, Director

RULE TEXT

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs

FY 2019

FY 2020

FY 2021

State Government

$0

$0

$0

Local Government

$0

$0

$0

Small Businesses

$752,500

$18,360

$18,360

Non-Small Businesses

$820,000

$6,120

$6,120

Other Persons

$0

$0

$0

Total Fiscal Costs:

$1,572,500

$24,480

$24,480

Fiscal Benefits

State Government

$0

$0

$0

Local Government

$0

$0

$0

Small Businesses

$0

$0

$0

Non-Small Businesses

$0

$0

$0

Other Persons

$0

$0

$0

Total Fiscal Benefits:

$0

$0

$0

Net Fiscal Benefits:

($1,572,500)

($24,480)

($24,480)

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described above. Inestimable impacts for Non-Small Businesses are described below.

 

Appendix 2: Regulatory Impact to Non-Small Businesses

There are an estimated 34 large businesses in the AMC industry (NAICS 531320) operating in Utah. These businesses account for an estimated 25% of the total number of AMCs.

 

The Executive Director of the Commerce Department, Francine A. Giani, has reviewed and approved this fiscal analysis.

 

 

R162. Commerce, Real Estate.

R162-2e. Appraisal Management Company Administrative Rules.

R162-2e-102. Definitions.

(1) "Affiliation" means a business association:

(a) between:

(i) two individuals registered, licensed, or certified under Section 61-2g[61-2b]; or

(ii) an individual registered, licensed, or certified under Section 61-2g[61-2b] and:

(A) an appraisal entity; or

(B) a government agency;

(b) for the purpose of providing an appraisal service; and

(c) regardless of whether an employment relationship exists between the parties.

(2) The acronym "AMC" stands for appraisal management company.

(3) [As used in Subsection R162-2e-201(3)(c)(ii), ]"Business[business] day" means a day other than:

(a) a Saturday;

(b) a Sunday; or

(c) a state or federal holiday.[; or

(d) any other day when the division is closed for business.]

(4) "Client" is defined in Section 61-2e-102(10).

(5) "Competency statement" means a statement provided by the AMC to the appraiser that, at a minimum, requires the appraiser to attest that the appraiser:

(a) is competent according to USPAP standards;

(b) recognizes and agrees to comply with:

(i) laws and regulations that apply to the appraiser and to the assignment;

(ii) assignment conditions; and

(iii) the scope of work outlined by the client; and

(c) has access, either independently or through an affiliation pursuant to Subsection (1), to the records necessary to complete a credible appraisal, including:

(i) multiple listing service data; and

(ii) county records.

(6)(a) "Employee" means an individual:

(i) whose manner and means of work performance are subject to the right of control of, or are controlled by, another person; and

(ii) whose compensation for federal income tax purposes is reported, or is required to be reported, on a W-2 form issued by the controlling person.

(b) "Employee" does not include an independent contractor who performs duties other than at the discretion of, and subject to the supervision and instruction of, another person.

(c) For purposes of applying Subsection R162-2e-401(1)(g), an appraiser who completes an assignment is considered to be an employee of the AMC that offers the assignment if:

(i) this subsection (a) describes the employment relationship between the appraiser and the AMC; or

(ii) pursuant to this subsection (a), the appraiser is an employee of a company:

(A) that is wholly owned by the AMC; or

(B) in which the AMC owns a controlling interest.

(7) "Select" means:

(a) for purposes of composing the AMC appraiser panel, to review and evaluate the qualifications of an appraiser who applies to be included on the AMC's appraiser panel; and

(b) for purposes of assigning an appraisal activity to an appraiser:

(i) to choose from the AMC's appraiser panel an individual appraiser or appraisal entity to complete an assignment; or

(ii) to compile, from among the appraisers included in the AMC's appraiser panel, an electronic distribution list of appraisers to whom an assignment will be offered through e-mail.

(8) The acronym "USPAP" stands for Uniform Standards of Professional Appraisal Practice.

 

R162-2e-304. Required Disclosure s and Customary and Reasonable Compensation.

(1) In addition to the disclosures required by Section 61-2e-304, an AMC shall:

(a) notify the appraiser in writing at the time an appraiser is first added to an appraiser panel:

(i) of the general criteria the AMC uses to rank an appraiser on the panel; and,

(ii) if the AMC chooses to separate appraisers into different tiers, of the general criteria the AMC uses to distinguish one tier from another;

(b) notify the affected appraisers in writing of any changes if, after the notice provided for in subsection (1)(a), the AMC changes any of the general criteria the AMC considers relative to an appraiser's ranking, tier, or classification within the panel structure;

(c)[(1)] at the time an assignment is offered, disclose to the appraiser:

(i)[(a)] the total amount that the appraiser may expect to earn from the assignment:

(A)[(i)] disclosed as a dollar amount; and

(B)[(ii)] delineating any fees or costs that will be charged by the AMC to the appraiser;

(ii)(A)[(b)(i)] the property address;

(B)[(ii)] the legal description; or

(C)[(iii)] equivalent information that would allow the appraiser to determine whether the appraiser has been involved with any service regarding the subject property within the three years preceding the date on which the assignment is offered;

(iii)[(c)] the assignment conditions and scope of work requirements in sufficient detail to allow the appraiser to determine whether the appraiser is competent to complete the assignment; and

(iv)[(d)] any known deadlines within which the assignment must be completed;

(d)[(2)] at or before the time the appraiser accepts an assignment, obtain the appraiser's acknowledgment as to the AMC's competency statement;

(e)[(3)] before requiring the appraiser to submit a completed report, disclose to the appraiser:

(i)[(a)] the total fee that will be collected by the AMC for the assignment; and

(ii)[(b)] the total amount that the AMC will retain from the fee charged, disclosed as a dollar amount; and

(f)[(4)] direct the appraiser who performs the real estate appraisal activity to disclose in the body of the appraisal report:

(i)[(a)] the total compensation, stated as a dollar amount, paid to the appraiser or, if the appraiser is employed by an appraisal company, to the appraiser's employer; and

(ii)[(b)] the total compensation retained by the AMC in connection with the real estate appraisal activity, stated as a dollar amount.

(2) Within 10 business days of receiving a written request from an appraiser or any inquiry related to the business relationship between the appraiser and the AMC, an AMC shall reply to the appraiser in writing. An inquiry may address subjects including the AMC scorecard, appraiser panel status, clarification on work assignments, training, or notice of the removal of an appraiser from an AMC panel as required by Utah Code Section 61-2e-306. If the AMC has requested appraisers send such inquiries to a specific address or email address, appraisers shall direct such inquiries accordingly.

(a) If the AMC has determined to decrease the number of assignments to the appraiser the AMC's reply will explain the reason why the AMC has made this decision;

(b) if the AMC has determined to cease offering assignments to the appraiser, the the AMC's reply will explain the reason why the AMC has made this decision; and

(c) if the AMC has determined to remove the appraiser from an appraiser panel, the AMC shall provide the appraiser notice as required by Utah Code Section 61-2e-306.

(3) Any written notice or reply required by this section from an AMC to an appraiser may be communicated:

(a) by email;

(b) in a written communication to the mailing address provided by the appraiser; or

(c) by posting to a private vendor website, portal, or other digital venue to which the appraiser has access for at least 30 days following posting of the notice.

(4) For purposes of this Section, the term " general criteria" means a standard description of the factors the AMC considers when ranking or differentiating appraisers or tiers within a panel of appraisers. This does not require an AMC to disclose any algorithms, formulas, or information about proprietary processes.

(5) In replying to a request from an appraiser, an AMC is not required to reply to subsequent or multiple requests if a request unreasonably duplicates a prior request from that person.

(6) In addition to the presumptions of compliance referenced in Utah Code Subsection 61-2e-304(2)(b), an AMC is presumed to be in compliance with the Utah requirement to pay appraisers a customary and reasonable fee if the AMC compensates an appraiser for a completed appraisal at a rate consistent with the fee schedule for the state of Utah as published by the United States Department of Veterans Affairs Denver Regional Loan Center Appraisal Fee Schedule, as the fee schedule is updated from time-to-time.

 

R162-2e-306. Offering an Appraisal Assignment and Communicating With Two or More Appraisers About a Potential Assignment.

(1) If an AMC simultaneously contacts two or more independent contractor appraisers to offer an assignment of a one to four-unit residential mortgage appraisal or to gauge interest in such an assignment, the AMC shall include in the communication the information required in R162-2e-304(1)(c). To provide adequate time for a contract appraiser to determine the appraiser's competency and to communicate interest in the assignment to the AMC, the AMC may not award the assignment to a contract appraiser until the earlier of:

(a) 120 minutes following the offering of an assignment; or

(b) each contract appraiser has affirmatively responded to the offering.

(2)(a) If a one to four-unit residential mortgage appraisal assignment is simultaneously offered to two or more independent contractor appraisers on a business day, the AMC shall allow the appraisers a minimum of 120 minutes to respond to accept the assignment before offering the assignment to other appraisers.

(b) If a one to four-unit residential mortgage appraisal assignment is simultaneously offered to two or more independent contractor appraisers on a day other than a business day, the AMC shall allow the appraisers until 9:00 A.M. Mountain Time on the next business day to accept the assignment before offering the assignment to other appraisers.

(3) If an independent contractor appraiser declines to accept an assignment or does not respond by the specified deadline, the AMC may offer the assignment to other appraisers.

(4) Nothing in this Section prohibits an AMC from communicating or attempting to communicate, directly or in real time with an independent contractor appraiser, without offering an assignment, in order to determine the appraiser's availability, willingness, competency, fee requirements, and turn time for a potential assignment. In such circumstances, the AMC is not required to wait any length of time before contacting other candidates who appear to the AMC to qualify for the potential assignment.

 

KEY: administrative proceedings, appraisal management company, conduct, registration

Date of Enactment or Last Substantive Amendment: [January 28, 2015]2018

Notice of Continuation: April 17, 2015

Authorizing, and Implemented or Interpreted Law: 61-2e-102(4); 61-2e-103; 61-2e-307; 61-2e-305; 61-2e-402(1)

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