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HOUSE DOCKET, NO. 1625         FILED ON: 1/17/2013

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 992

 

The Commonwealth of Massachusetts

_________________

PRESENTED BY:

Thomas M. Stanley

_______________

To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
              Court assembled:

              The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:

An Act to regulate real estate appraisal management companies.

_______________

PETITION OF:

 

Name:

District/Address:

Thomas M. Stanley

9th Middlesex

Danielle W. Gregoire

4th Middlesex

Sarah K. Peake

4th Barnstable

David Paul Linsky

5th Middlesex

Randy Hunt

5th Barnstable


HOUSE DOCKET, NO. 1625        FILED ON: 1/17/2013

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 992

By Mr. Stanley of Waltham, a petition (accompanied by bill, House, No. 992) of Thomas M. Stanley and others for legislation to regulate real estate appraisal management companies.  Financial Services. 


The Commonwealth of Massachusetts
 

_______________

In the Year Two Thousand Thirteen

_______________

 

An Act to regulate real estate appraisal management companies.
 

              Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
 

              SECTION 1. Chapter 13 of the General Laws is hereby amended by striking out section 92 and inserting in place the following section:-

              Chapter 13, Section 92 of the General Laws is hereby amended as follows:

              Section 92. There is hereby established a board of real estate appraisers which shall consist of nine members to be appointed by the governor, one of whom shall be members of the general public, in accordance with the provisions of section nine B, one of whom shall be a member of the banking industry, one of whom shall be a licensed real estate broker, one of whom shall represent an appraisal management company, and five of whom shall be real estate appraisers licensed or certified under the provisions of sections one hundred and seventy-three to one hundred and ninety-five, inclusive, of chapter one hundred and twelve. One real estate appraiser member of the board shall be a state-certified residential real estate appraiser and one real estate appraiser member shall be a state-certified general real estate appraiser. The term of each appointed member shall be three years.

              Upon expiration of their terms, members of the board shall continue to hold office until the appointment and qualification of their successors. No person shall serve as a member of the board for more than two consecutive terms. The appointing authority may remove a member for cause.

              Each member of the board shall be paid for expenses actually incurred in the performance of official duties.

              The board shall annually elect a chairperson from among its members.

              The board shall hold at least six meetings each year and may hold special meetings as required at a time and place determined by the board.

              The director of the division of registration, with approval of the board, shall appoint an executive secretary to serve the board. The division of professional licensure shall employ such other clerical and technical assistants as may be necessary to discharge the official duties of the board.

              SECTION 2. Chapter 112 of the General Laws, as appearing in the 2008 Official Edition is hereby amended by adding at the end thereof the following 14 new sections:-

              Section 236. Definitions.

              (a)        As used in sections 237 through 249, inclusive, the following words shall have the following meanings, unless the context clearly requires otherwise:

              “Applicant”, a person who applies to be registered as an appraisal management company in the Commonwealth.

              “Appraisal management company” means, in connection with valuing properties collateralizing mortgage loans or mortgages incorporated into a securitization, any external third party authorized either by a creditor of a consumer credit transaction secured by a consumer's principal dwelling or by an underwriter of or other principal in the secondary mortgage markets, that oversees a network or panel of more than 15 certified or licensed appraisers in a State or 25 or more nationally, excluding those appraisers who do not provide appraisal services for Covered Transactions, within a given year--

                                `(A) to recruit, select, and retain appraisers;

                                `(B) to contract with licensed and certified appraisers to perform appraisal assignments;

                                `(C) to manage the process of having an appraisal performed, including providing administrative duties such as receiving appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and underwriters, collecting fees from creditors and underwriters for services provided, and reimbursing appraisers for services performed; or

                                `(D) to review and verify the work of appraisers.'

              “Appraisal practice”, valuation services performed by an individual acting as an appraiser, including but not limited to appraisal, appraisal review, or appraisal consulting.

              “Appraisal review”, the act or process of developing and communicating an opinion about the quality of another appraiser’s work that was performed as part of an appraisal assignment related to the appraiser’s data collection, analysis, opinions, conclusions, opinion of value, or compliance with the Uniform Standards of Professional Appraisal Practice. The term does not include: (i) a general examination for grammatical, typographical or similar errors, or (ii) a general examination for completeness including regulatory and/or client requirements as specified in an agreement process that does not communicate an opinion of value.

              “Appraisal services'' means the services required to perform an appraisal, including defining the scope of work, inspecting the property, reviewing necessary and appropriate public and private data sources (for example, multiple listing services, tax assessment records and public land records), developing and rendering an opinion of value, and preparing and submitting the appraisal report.

              “Board”, the Massachusetts Board of Registration of Real Estate Appraisers under Section 92 of Chapter 13.

              “Controlling person”,  means one or more of the following: (1) an officer or director of an appraisal management company, or an individual who holds a 10 percent or greater ownership interest in an appraisal management company; (2) an individual employed, appointed, or authorized by an appraisal management company that has the authority to enter into a contractual relationship with clients for the performance of appraisal services and that has the authority to enter into agreements with independent appraisers for the completion of appraisals; or (3) an individual who possesses the power to direct or cause the direction of the management or policies of an appraisal management company.

              “Covered transaction'' means an extension of consumer credit that is or will be secured by the consumer's principal dwelling.

              “Dwelling” means a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as the consumer’s principal residence.

              “Employee”, an individual who has an employment relationship with a person acknowledged by both the individual and the person, and who is treated as an employee for purposes of compliance with federal income tax laws.             

              “Employee in Charge” or “(EIC)”, a designated employee of the appraisal management company, who is a state certified appraiser in at least one state, with the responsibilities and obligations to the board as set forth in section 241.

              “Fee Appraiser means: (A) a natural person who is a state-licensed or state-certified appraiser and receives a fee for performing an appraisal, but who is not an employee of the person engaging the appraiser; or (B) an organization that, in the ordinary course of business, employs state-licensed or state-certified appraisers to perform appraisals, receives a fee for performing the appraisals and is not subject to Section 1124 of the federal Financial Institutions Reform, Recovery and Enforcement Act of 1989. A fee appraiser, as defined in (A) above, shall be exempt from the provisions of Massachusetts General Law Chapter 149, Section 148B. ”

              “Person”, an individual, sole proprietorship, partnership, limited liability company, limited partnership, corporation, association, or other group engaged in joint business activities, however organized.

              “Registrant”, a real estate appraisal management company registered under this Act.

              “Valuation Services”, services pertaining to all aspects of property value

              (b) The definitions contained in section 173 of Chapter 112 also apply.

              Section 237. Registration required of real estate appraisal management companies; exceptions.

              (a) It shall be unlawful for a person, as defined herein, to directly or indirectly engage or attempt to engage in business as an appraisal management company, to directly or indirectly engage or attempt to perform appraisal management services or to advertise or hold itself out as engaging in or conducting business as an appraisal management company without first being registered by the Board under the provisions of this Act, regardless of the person’s use of the term “appraisal management company”, “mortgage technology company”, or any other name.

              (b) The provisions of this Act shall not apply to:

              (1) Any agency of the federal government or any State or municipal government;

              (2) An appraisal management company that is a subsidiary owned and controlled by a financial institution regulated by a Federal financial institution regulatory agency provided the appraisal management company is in compliance with Section 1124 of the Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989 and any rules promulgated pursuant to the authority granted in said Section 1124;

              (3) Any licensed real estate broker performing activities in accordance with Section 174B. of Chapter 112 of the General Laws. However, an exempt person does not include a real estate broker who receives compensation of any kind in connection with the referral or placement of an appraisal assignment.                           

              (c) A fee appraiser may not perform appraisal services for real property located in Massachusetts for an appraisal management company that is not registered under this Act unless exempt from licensing as provided for in this section

              Section 238. Rule making authority.

              (a) The Board shall have the authority to adopt rules consistent with the provisions of this Act and the General Laws of the Commonwealth that are reasonable and necessary to implement, administer, and enforce the provisions of this Act.

              Section 239. Qualifications for registration; duties of registrants.

              (a) Any person desiring to be registered as an appraisal management company in the Commonwealth shall make written application to the Board on forms prescribed by the Board setting forth the applicant's qualifications for registration. The application shall be accompanied by the applicable fee under Section 243 of Chapter 112 of the General Laws, and any other information the Board deems necessary pursuant to rules adopted by the Board. Upon receipt of a properly completed application and fee and upon a determination by the Board that the applicant is of good moral character, the Board shall issue to the applicant a certificate of registration authorizing the applicant to act as a real estate appraisal management company in the Commonwealth.

              (b) An application for registration under this Act must include the following certifications from the applicant:

              (1) A certification that the applicant has a system and process in place to verify that a person being added to the appraiser panel of the appraisal management company for appraisal assignments on real property located in Massachusetts  holds a license or certification in good standing in the Commonwealth issued pursuant to this Chapter; and

              (2) A certification that the applicant maintains a detailed record of each service request that it receives and the fee appraiser that performs the residential real estate appraisal services for the appraisal management company.

              (c)(i) A person who, directly or indirectly owns more than 10 percent of an applicant for registration, or (ii) any officer, controlling person, employee in charge or managing principal of an applicant for registration, who has had a license or certificate to act as an appraiser or to engage in any activity related to the transfer of real property refused, denied, canceled or revoked in this state or in any other state, whether on a temporary or permanent basis or, who is not of good moral character as determined by the Board, shall not be eligible for registration under this Act.

              (d) Each applicant for registration under this Act shall submit the name and address of the applicant's registered agent located in the Commonwealth.

              (e) Any registrant having a good faith belief that a real estate appraiser licensed in the Commonwealth has violated applicable law or the Uniform Standards of Professional Appraisal Practice (USPAP) or engaged in unethical conduct shall promptly file a complaint with the Board.             

              Section 240. Controlling person.

              Each appraisal management company applying to the board for registration in this state shall designate one controlling person that will be the main contact for all communication between the board and the appraisal management company. The controlling person may also be designated the employee in charge.

              Section 241. Employee in charge.

              In order to serve as the employee in charge for a registered AMC, a designee shall, in addition to continually holding a valid license issued by a state appraiser licensing authority as a state certified appraiser:

              (a) not have had a license to practice as an appraiser or to engage in any activity related to the transfer of real property refused, denied, canceled or revoked in this state or in any other state;

              (b) be of good moral character;

              (c) submit to a state background investigation; and

              (d) shall be responsible for:

              (1) management of the process of selecting  appraisers for the performance of real estate appraisal services;

              (2) management of the process of conducting appraisal reviews. Any employee of an appraisal management company or any contractor working on behalf of such company who has any involvement in the performance of an appraisal review of completed appraisals of real property located in Massachusetts shall be licensed or certified in the Commonwealth and in good standing pursuant to the provisions of this Chapter.             

              (3) maintaining required documentation as part of the board file.

              Section 242. Vacancy in controlling person or employee in charge.

              The appraisal management company shall file a form with the Board indicating the appraisal management company's designation of controlling person and employee in charge and the individual's acceptance of the responsibility. An appraisal management company shall notify the Board of any change in the appraisal management company's controlling person or employee in charge and shall have 30 days from the date a vacancy occurs in either position to designate a temporary or permanent replacement and, in the event a temporary designation is made, 90 days to appoint a permanent replacement. Any appraisal management company that does not comply with this section shall have the appraisal management company's registration suspended pursuant to Section 246 of Chapter 112 of the General Laws until the appraisal management company complies with this section. An individual operating an appraisal management company as a sole proprietorship shall be a certified general or certified residential appraiser and shall be considered the managing principal for purposes of this Act unless another managing principal is designated.

              Section 243. Fees and renewals.

              The following fees shall be determined annually by the commissioner of administration and finance under the provision of section three B of chapter seven and shall be collected by the board: (a) application fee; (b) initial license fee; (c) annual renewal fee; (d) change in controlling person or employee in charge; and (e) late renewal fee.

              Section 244. Surety Bond.

              In addition to the filing fee, each applicant for registration shall post with the board and maintain a surety bond in the amount of twenty thousand dollars ($20,000). The bond shall:

              (1)              Be in the form prescribed by rule of the board; and

                (2) Accrue to the state for the benefit of a claimant against the registrant to secure the faithful performance of the registrant’s obligations under this Act.

              The aggregate liability of the surety shall not exceed the principal sum of the bond. A party having a claim against the registrant may bring suit directly on the surety bond, or the board may bring suit on behalf of the party having a claim against the registrant. A deposit of cash or security may be accepted in lieu of the surety bond. A claim reducing the face amount of the bond shall be annually restored upon renewal of the registrant’s registration.

              Section 245. Prohibited acts.

              (a) No employee, director, officer, managing principal or agent of an appraisal management company or any other third party acting as joint venture partner or independent contractor shall influence or attempt to influence the development, reporting, result, or review of a real estate appraisal through coercion, extortion, collusion, compensation, inducement, intimidation, bribery, or in any other manner, including:

              (1) Withholding or threatening to withhold timely payment for a real estate appraisal report except in cases of breach of contract or substandard performance of services;

              (2) Withholding or threatening to withhold future business from a real estate appraiser or demoting or terminating or threatening to demote or terminate a real estate appraiser;

              (3) Expressly or impliedly promising future business, promotions, or increased compensation for a real estate appraiser;

              (4) Conditioning the ordering of a real estate appraisal report or the payment of a real estate appraisal fee, salary, or bonus on the opinion, conclusion, or valuation to be reached or on a preliminary estimate requested from a real estate appraiser;

              (5) Requesting that a real estate appraiser provide an estimated, predetermined, or desired valuation in a real estate appraisal report or provide estimated values or comparable sales at any time before the appraiser's completion of the appraisal report;

              (6) Providing to a real estate appraiser an anticipated, estimated, encouraged, or desired value for a subject property or a proposed or targeted amount to be loaned to the borrower; provided, however, a real estate appraiser should be provided with a copy of the sales contract for purchase transactions, if available;

              (7) Providing to a real estate appraiser, or any entity or person related to the appraiser, stock or other financial or non-financial benefits;

              (8) Allowing the removal of a real estate appraiser from a list of qualified appraisers used by any entity without prior written notice stating the reason for removal to the appraiser. The notice shall include written evidence if the appraiser is removed from the list for illegal conduct, substandard performance, or otherwise improper or unprofessional behavior or any violation of the Uniform Standards of Professional Appraisal Practice (USPAP) or State licensing standards;

              (9) Any other act or practice that impairs or attempts to impair a real estate appraiser's independence, objectivity, or impartiality; or

              (10) Requesting or requiring a real estate appraiser to collect a fee from, or be compensated by, the borrower, homeowner, real estate agent, mortgage broker or any other third party in the provision of real estate appraisal services.

              (b) No employee, director, officer, managing principal or agent of an appraisal management company or any other third party acting as joint venture partner or independent contractor shall:             

              (1)   Alter, modify, or otherwise change a completed appraisal report submitted by a fee appraiser without the appraiser's written knowledge and consent;

              (2)   Alter, modify, or otherwise change a completed appraisal report submitted by a fee  appraiser and must, in all cases, transmit a "true and exact copy" to the client and any intended users;

              (3)    Use an appraisal report submitted by a fee appraiser for any other transaction;

              (4)    Require a fee appraiser to sign any indemnification agreement that would require the fee appraiser to defend and hold harmless the appraisal management company or any of its agents, employees, or independent contractors for any liability, damage, losses, or claims arising out of the services performed by the appraisal management company or its agents, employees, or independent contractors and not the services performed by the fee appraiser;

              (5)   Require a fee appraiser to provide the company with the appraiser's digital signature or seal;

              (6) Prohibit a fee appraiser from recording the fee the fee appraiser was paid for the performance of an appraisal assignment within the body of the appraisal report;

              (7) Require a fee appraiser to accept an appraisal assignment if the fee appraiser, in the fee appraiser’s own independent professional judgment believes, (i) the fee appraiser does not have the necessary expertise for the assignment, or (ii) knowledge of the geographic area; or (iii) that the time frame does not allow the appraiser the ability to meet all of the fee appraiser’s relevant legal or professional obligations, and the fee appraiser has communicated such belief to the appraisal management company.

              (8) Knowingly fail to compensate fee appraisers at a rate that is customary and reasonable for appraisal services in the market area of the property being appraised, consistent with Section 129E of the Truth in Lending Act and regulations promulgated thereunder. 

              (c) Nothing in this section shall be construed as prohibiting an appraisal management company from requesting that a fee appraiser:

              (1) Consider additional appropriate material property information;

              (2) Provide further detail, substantiation, or explanation for the real estate appraiser's value conclusion; or

              (3) Correct errors in the real estate appraisal report.

              (d) An appraisal management company shall not refuse to assign requests or orders for appraisals or reduce the number of assignments or otherwise penalize a fee appraiser who does not accept an assignment or order in accordance with Section 245(b) 7 of this Act, except that nothing in this section shall require an appraisal management company to offer future appraisal assignments of a particular nature or type to a fee appraiser who previously indicated a lack of the necessary expertise or geographic knowledge for such assignments, except in the case where the fee appraiser subsequently demonstrates, to the satisfaction of the appraisal management company, that they have gained the required experience or geographic knowledge to competently complete the assignments.

              Section 246. Disciplinary authority.

              (a) The Board may, by order, deny, suspend, revoke, or refuse to issue or renew a registration of an appraisal management company under this Act or may restrict or limit activities of a person who owns an interest in or participates in the business of an appraisal management company if the Board determines that an applicant, registrant, or any partner, member, manager, officer, director, managing principal, or person occupying a similar status, performing similar functions, or directly or indirectly controlling the applicant or registrant has done any of the following:

              (1) Filed an application for registration that, as of its effective date or as of any date after filing, contained any statement that, in light of the circumstances under which it was made, is false or misleading with respect to any material fact;

              (2) Violated or failed to comply with any provision of this Act or any rules adopted by the Board;

              (3) Been convicted of any felony or, within the past 10 years, been convicted of any misdemeanor involving any activity related to the transfer of real property, including, but not limited to mortgage lending or real estate appraisal or any offense involving breach of trust, moral turpitude, or fraudulent or dishonest dealing;

              (4) Been permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the real estate appraisal management business;

              (5) Been the subject of an order of the Board or any other state appraiser regulatory agency denying, suspending, or revoking the person's license as a real estate appraiser;

              (6) Acted as an appraisal management company while not properly licensed by the Board;

              (7) Structured an appraisal assignment or a contract with a fee appraiser for the purpose of evading the provisions of this Act; or

              (8) Failed to pay the proper filing or renewal fee under this Act.

              (b) The Board may, by order, impose a civil penalty upon a registrant or any partner, officer, director, managing principal, or other person occupying a similar status or performing similar functions on behalf of a registrant for any violation of this Act. The civil penalty shall not exceed $10,000 for each violation of this Act.

              (c) In addition to other powers under this Act, upon finding that any action of a person is in violation of this Act, the Board may order the person to cease from the prohibited action. If the person subject to the order fails to appeal the order of the Board or the person appeals the order and the appeal is denied or dismissed and the person continues to engage in the prohibited action in violation of the Board's order, the person shall be subject to a civil penalty of not more than $25,000 for each violation of the order. The penalty provision of this section shall be in addition to and not in lieu of any other provision of law applicable to a registrant for the registrant's failure to comply with an order of the Board.

              (d) Unless otherwise provided, all actions and hearings under this Act shall be governed by Chapter 30A.

              (e) If the Board has reasonable grounds to believe that an appraisal management company has violated the provisions of this Act or that facts exist that would be the basis for an order against an appraisal management company, the Board may at any time, either personally or by a person duly designated by the Board, investigate or examine the books, accounts, records, and files of any registrant or other person relating to the complaint or matter under investigation.

              (f) The Board shall have the power to issue subpoenas requiring the attendance of persons and the production of papers and records before the Board in any hearing, investigation, inquiry, or other proceeding conducted by the Board. Upon the production of any papers, records, or documents, the Board shall have the power to authorize true copies of the papers, records, or documents to be substituted in the permanent record of the matter in which the papers, records, or documents shall have been introduced in evidence.             

              Section 247. Records.

              (a) The Board shall maintain a list of all applicants for registration under this Act that includes for each applicant the date of application, the name and primary business location of the applicant, and whether the registration was granted or refused.

              (b) The Board shall maintain a current roster showing the names and places of business of all registered appraisal management companies that lists the appraisal management companies' respective officers and directors. The rosters shall: (i) be kept on file in the office of the Board; (ii) contain information regarding all orders or other action taken against the company, its officers, and other persons; and (iii) be open to public inspection.

              (c) Every registered appraisal management company shall maintain the records related to services provided by the appraisal management company as prescribed in rules adopted by the Board. All records shall be preserved for five years unless the Board, by rule, prescribes otherwise for particular types of records.

              (d) If the information contained in any document filed with the Board is or becomes inaccurate or incomplete in any material respect, the appraisal management company shall promptly file a correcting amendment to the information contained in the document.

              Section 248. Penalty; injunctive relief.

                            The Board may appear in its own name in superior court in actions for injunctive relief to prevent any person from violating the provisions of this Act or rules adopted by the Board. The superior court shall have the power to grant these injunctions whether criminal prosecution has been or may be instituted as a result of the violations or whether the person is the holder of a registration issued by the Board under this Act.

              Section 249. Background Checks

              (a) The Board shall have the authority to conduct investigations and examinations for:

              (1) purposes of initial registration, registration renewal, registration suspension, registration conditioning, registration revocation or termination, or general or specific inquiry or investigation to determine compliance with this chapter, the Board shall have the authority to access, receive and use any books, accounts, records, files, documents, information or evidence including, but not limited to: (i) criminal, civil and administrative history information, including non-conviction data as specified in applicable provisions of the General Laws; and (ii) any other documents, information or evidence the Board deems relevant to the inquiry or investigation regardless of the location, possession, control or custody of such documents, information or evidence; and

              (2) the purposes of investigating violations or complaints arising under this chapter, or for the purposes of examination, the Board may review, investigate, or examine any licensee, individual or person subject to this chapter, in order to carry out the purposes of this chapter.

                            (b) If an applicant, registrant or managing principal’s criminal history record check reveals one or more convictions, the conviction shall not automatically bar registration, provided the conviction is not related to the transfer of real property. The Board shall consider all of the following factors regarding the conviction:

              (1) The level of seriousness of the crime;

              (2) The date of the crime;

              (3) The age of the person at the time of the conviction;

              (4) The circumstances surrounding the commission of the crime, if known;

              (5) The nexus between the criminal conduct of the person and the job duties of the position to be filled; and

              (6) The person's prison, jail, probation, parole, rehabilitation, and employment records since the date the crime was committed.

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