AN ACT PROVIDING FOR THE REGULATION OF APPRAISAL MANAGEMENT COMPANIES
Whereas, The deferred operation of this act would tend to defeat its purpose, which is to regulate forthwith appraisal management companies, therefore it is hereby declared to be an emergency law, necessary for the immediate preservation of the public convenience.
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, as appearing in the 2018 Official Edition, and inserting in place thereof the following section:-
Section 92. (a) There shall be a board of real estate appraisers which shall consist of 9 members to be appointed by the governor, 1 of whom shall be a licensed real estate broker, 1 of whom shall be a member of the general public pursuant to section 9B, 1 of whom shall be a member of the banking industry, 1 of whom shall represent an appraisal management company and 5 of whom shall be real estate appraisers who are licensed or certified pursuant to sections 173 to 195, inclusive, of chapter 112.
(b) The term of each member shall be 3 years. Upon expiration of each term, an appointed member of the board shall continue to hold office until the appointment and qualification of that member’s successor. A member may be reappointed but no person shall serve as a member of the board for more than 2 consecutive terms. The governor may remove a member for cause.
(c) Each member of the board shall be paid for expenses actually incurred in the performance of their official duties.
(d) The board shall annually elect a chairperson from among its members.
(e) The board shall hold not less than 6 meetings each year and may hold special meetings as the board deems necessary at a time and place to be determined by the board.
SECTION 2. Chapter 112 of the General Laws is hereby amended by adding the following 14 sections:-
Section 276. As used in sections 276 to 289, 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” or “real estate appraisal”, a written analysis, opinion or conclusion prepared by a real estate appraiser relating to the nature, quality, value or utility of specified interests in, or aspects of, identified real estate. An appraisal may be classified as a valuation or an analysis, or both. A valuation is an estimate of the value of real estate or real property. An analysis is a study of real estate or real property other than estimating value.
“Appraisal assignment”, an engagement for which an appraiser is employed or retained to act, or would be perceived by a third party or the public as acting, as a disinterested third party in rendering an unbiased analysis, opinion or conclusion relating to the nature, quality, value or utility of specified interests in, or aspects of, identified real estate.
“Appraisal management company”, an entity that: (i) provides appraisal management services to creditors or to secondary mortgage market participants, including affiliates; (ii) provides such services in connection with valuing a consumer’s principal dwelling as security for a consumer credit transaction or incorporating such transactions into securitizations; and (iii) within a given 12-month period, oversees an appraiser panel of not less than 16 certified or licensed appraisers in the commonwealth or not less than 25 certified or licensed appraisers in 2 or more states; provided, however, that an appraisal management company shall not include a department or division of an entity that provides appraisal management services only to that entity.
“Appraisal management services”, any of the following: (i) recruiting, selecting and retaining appraisers; (ii) contracting with certified or licensed appraisers to perform appraisal assignments; (iii) managing the process of having an appraisal performed, including providing administrative services such as receiving appraisal orders and appraisal reports, submitting completed appraisal reports to creditors and secondary market participants, collecting fees from creditors and secondary market participants for services provided and paying appraisers for services performed; or (iv) reviewing and verifying 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 report”, a written report of an appraisal.
“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; provided, however, that “appraisal review” shall not include: (i) a general examination for grammatical, typographical or similar errors; or (ii) a general examination for completeness, including regulatory or client requirements as specified in an agreement that does not communicate an opinion of value.
“Appraisal services”, 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 including, but not limited to, multiple listing services, tax assessment records and public land records, developing and rendering an opinion of value and preparing and submitting the appraisal report.
“Appraiser” or “real estate appraiser”, a person who develops and communicates real estate appraisals and who holds a current, valid certificate as a state-certified general real estate appraiser, state-certified residential real estate appraiser or state-licensed real estate appraiser pursuant to section 178; provided, however, that an appraiser who contracts with another certified or licensed appraiser to perform or assist in the performance of an appraisal assignment shall not be classified as an employee under section 148B of chapter 149.
“Appraiser panel”, a network, list or roster of licensed or certified appraisers approved by an appraisal management company who perform appraisals as independent contractors for appraisal management companies; provided, however, that such licensed or certified appraisers shall include: (i) appraisers accepted by the appraisal management company for consideration for future appraisal assignments in covered transactions or for secondary mortgage market participants in connection with covered transactions; and (ii) appraisers engaged by an appraisal management company to perform at least 1 appraisal in a covered transaction or for a secondary mortgage market participant in connection with a covered transaction; and provided further, that an appraiser shall be considered an independent contractor if the appraiser is treated as an independent contractor by the appraisal management company for federal income tax purposes.
“Board”, the board of real estate appraisers established in section 92 of chapter 13.
“Controlling person”, a person who is: (i) an officer or director of an appraisal management company or an individual who holds an ownership interest of not less than 10 per cent in an appraisal management company; (ii) employed, appointed or authorized by an appraisal management company who has authority to enter into a contractual relationship with clients to perform appraisal services and who has the authority to enter into agreements with independent appraisers for the completion of appraisals; or (iii) authorized to direct or cause the direction of the management, policies or procedures of an appraisal management company.
“Covered transaction”, an extension of consumer credit that is or will be secured by the consumer’s principal dwelling.
“Dwelling”, a residential structure that contains 1 to 4 units, whether or not that structure is attached to real property; provided, however, that “dwelling” shall include a condominium unit, a cooperative unit, a mobile home and trailer if it is used as a residence.
“Employee in charge”, a designated employee of an appraisal management company who holds a valid license as an appraiser and who has the responsibilities and obligations to the board as set forth in section 281.
“Person”, a natural person or an organization, including a sole proprietorship, partnership, limited liability company, limited partnership, corporation, association or other group engaged in joint business activities, however organized.
“Real estate”, an identified parcel or tract of land, including any improvements.
“Real property”, the defined interests, benefits and rights inherent in the ownership of real estate.
“Registrant”, a real estate appraisal management company registered pursuant to sections 276 to 289, inclusive.
“Uniform Standards of Professional Appraisal Practice”, the appraisal standards promulgated by the Appraisal Standards Board of the Appraisal Foundation.
“Valuation services”, services pertaining to all aspects of property value.
Section 277. (a) No person shall directly or indirectly: (i) engage or attempt to engage in business as an appraisal management company; or (ii) engage in or attempt to perform appraisal management services or to advertise or hold the individual or entity out as engaging in or conducting business as an appraisal management company without first being registered by the board under sections 276 to 289, inclusive, regardless of the person’s use of the term “appraisal management company”, “mortgage technology company” or any other name.
(b) Sections 276 to 289, inclusive, shall not apply to:
(i) an agency of the federal government or any state or municipal government;
(ii) an appraisal management company that is owned and controlled by an insured depository institution as defined in 12 U.S.C. 1813 and regulated by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System or the Federal Deposit Insurance Corporation; or
(iii) a licensed real estate broker or salesperson performing activities in accordance with subsection B of section 174; provided, however, that this exemption shall not apply to a real estate broker who receives compensation of any kind in connection with the referral or placement of an appraisal assignment.
(c) An appraiser shall not perform appraisal services for real property located in the commonwealth for an appraisal management company that is not registered under sections 276 to 289, inclusive, unless exempt from licensing under subsection (b). An appraiser who relies upon the written assurance of an appraisal management company regarding its registration status shall not be subject to disciplinary action by the board.
Section 278. The board may adopt rules and regulations that are reasonable and necessary to: (i) implement, administer and enforce sections 276 to 289, inclusive; and (ii) comply with any federal rules or regulations promulgated pursuant to Title XI of the Financial Reform, Recovery and Enforcement Act of 1989, 12 U.S.C. 3331 et seq. The board shall adopt rules and regulations in accordance with federal regulations promulgated pursuant to said Title XI of the federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989 for the purpose of determining whether an appraiser shall be deemed to be part of an appraisal management company’s appraiser panel within a 12-month period.
Section 279. (a) A person desiring to be registered as an appraisal management company 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 as determined annually by the secretary of administration and finance pursuant to section 3B of chapter 7 and any other information the board deems necessary pursuant to rules and regulations adopted by the board. Upon receipt of a completed application and the applicable fee, the board shall make a determination as to whether each person who owns more than 10 per cent of an applicant appraisal management company is of good moral character. The board shall then issue to the qualified applicant a certificate of registration authorizing the applicant to act as a real estate appraisal management company.
(b) An application for registration shall include:
(i) 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 the commonwealth holds an appraiser license or certification in good standing pursuant to this chapter;
(ii) a certification that the applicant has a system in place to review the work of all real estate appraisers that are performing real estate appraisal services for the appraisal management company on a periodic basis to confirm that the real estate appraisal services are being conducted in accordance with the Uniform Standards of Professional Appraisal Practice; and
(iii) a certification that the applicant maintains a detailed record of each request for appraisal services that it receives, the name of the appraiser that performs the appraisal services for the appraisal management company and a complete digital copy of every version of each appraisal report completed by the appraiser.
(c) A person who directly or indirectly owns more than 10 per cent of an entity applying for registration or an officer, controlling person, employee in charge or managing principal of an entity applying for registration shall, at a minimum, furnish to the board information concerning the person’s identity, including fingerprints, for submission to the Federal Bureau of Investigation and to any government agency or entity authorized to receive such information for a state, national and international criminal history background check. A person who directly or indirectly owns more than 10 per cent of an entity applying for registration or any officer, controlling person, employee in charge or managing principal of an entity applying for registration shall be of good moral character as determined by the board. An appraisal management company that is owned, in whole or in part, directly or indirectly, by a person 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, surrendered in lieu of revocation or revoked in the commonwealth or in any other state, whether on a temporary or permanent basis, shall not be eligible for registration.
(d) Each applicant for registration shall submit the name and address of the applicant’s registered agent located in the commonwealth.
(e) A registrant’s controlling person or employee in charge who has a good faith belief that a real estate appraiser licensed in the commonwealth has violated applicable law or materially violated the Uniform Standards of Professional Appraisal Practice or engaged in unethical conduct shall, not more than 45 days after identifying the violation or unethical conduct, file a complaint with the board.
Section 280. An appraisal management company applying to the board for registration shall designate 1 controlling person who shall 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 281. In order to serve as the employee in charge for a registered appraisal management company, a designee, in addition to holding a valid license as an appraiser, shall:
(i) 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, surrendered in lieu of revocation or revoked in the commonwealth or in any other state;
(ii) be of good moral character;
(iii) submit to a background investigation; and
(iv) be responsible for:
(A) the management of the process of selecting appraisers for the performance of real estate appraisal services;
(B) the management of the process of conducting appraisal reviews; provided, however, that an employee of an appraisal management company or a 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 the commonwealth shall be licensed or certified in the commonwealth and in good standing pursuant to sections 276 to 289, inclusive; and
(C) maintaining the documentation required by sections 276 to 289, inclusive.
Section 282. An appraisal management company shall file a form, signed by the designated controlling person or employee in charge, with the board indicating the appraisal management company’s designation of the controlling person and employee in charge and the individual’s acceptance of the responsibility. The board shall establish a process, including appropriate timing, for administering any change in the designated controlling person or employee in charge. An appraisal management company that fails to comply with this section shall have its registration suspended pursuant to section 286 until it complies with this section. An individual operating an appraisal management company as a sole proprietorship shall be a state-certified general real estate appraiser or state-certified residential real estate appraiser and shall be considered the controlling person for purposes of sections 276 to 289, inclusive, unless another controlling person is designated.
Section 283. The following fees shall be determined annually by the secretary of administration and finance under section 3B of chapter 7 and shall be collected by the board: (i) an application fee; (ii) an initial registration fee; (iii) an annual renewal fee; (iv) a change in controlling person or employee in charge fee; and (v) a late renewal fee.
Section 284. In addition to the filing fee, each applicant for registration shall post with the board and maintain a surety bond in an amount to be determined by the board. The bond shall: (i) be in the form prescribed by the board; and (ii) accrue to the commonwealth for the benefit of a claimant against the registrant to secure the faithful performance of the registrant’s obligations pursuant to sections 276 to 289, inclusive.
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 an action directly on the surety bond or the board may bring an action on behalf of the party having a claim against the registrant. A deposit of cash or security may be accepted in lieu of a surety bond. If a claim is made on a bond, the registrant shall not have the registrant’s registration renewed until the bond is restored to the full amount required under this section.
Section 285. (a) No employee, director, officer, managing principal or agent of an appraisal management company or a third party acting as a joint venture partner or an independent contractor of an appraisal management company 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 other manner which may include, but shall not be limited to including:
(i) 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;
(ii) 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;
(iii) expressly or impliedly promising future business, appraisal services, promotions or increased compensation for an appraiser;
(iv) 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;
(v) requesting that an 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;
(vi) providing to an 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, that a real estate appraiser should be provided with a copy of the sales contract for purchase transactions, if available;
(vii) providing to an appraiser, or to a person or entity related to the appraiser, stock or other financial or nonfinancial benefits;
(viii) allowing the removal of an appraiser from a list of qualified appraisers used by the registrant without prior written notice stating the reason for such removal to the appraiser; provided, however, that if the appraiser is removed from the list for illegal conduct, substandard performance or otherwise improper or unprofessional behavior or for a violation of the Uniform Standards of Professional Appraisal Practice or the licensing standards of the commonwealth, the notice shall include written evidence thereof;
(ix) requesting or requiring an 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; or
(x) the performance of any other act or practice that impairs or attempts to impair an appraiser's independence, objectivity or impartiality.
(b) An employee, director, officer, managing principal or agent of an appraisal management company or a third party acting as a joint venture partner or an independent contractor of an appraisal management company shall not:
(i) alter, modify or otherwise change a completed appraisal report submitted by an appraiser without the appraiser’s written acknowledgment and consent;
(ii) alter, modify or otherwise change a completed appraisal report submitted by an appraiser; provided, however, that an appraiser shall transmit a true and exact copy to the client and any intended users;
(iii) use an appraisal report submitted by an appraiser for any other transaction;
(iv) require an appraiser to sign an indemnification agreement that would require the appraiser to defend and hold harmless the appraisal management company or any of its agents, employees or independent contractors for any liability, damages, 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 appraiser;
(v) require an appraiser to provide the company with the appraiser’s digital signature or seal;
(vi) prohibit an appraiser from recording the fee the appraiser received for the performance of an appraisal assignment within the body of the appraisal report;
(vii) require an appraiser to accept an appraisal assignment if the appraiser, in the appraiser’s independent professional judgment believes: (A) the appraiser does not have the necessary expertise for the assignment or knowledge of the geographic area; or (B) that the time frame does not allow the appraiser the ability to meet all of the appraiser’s relevant legal or professional obligations and the appraiser has communicated such belief to the appraisal management company; or
(viii) knowingly fail to compensate an appraiser at a rate that is reasonable and customary 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 prohibit an appraisal management company from requesting that an appraiser:
(i) consider additional appropriate material property information;
(ii) provide further detail, substantiation or explanation for the appraiser’s value conclusion; or
(iii) 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 an appraiser who does not accept an assignment or order in accordance with clause (vii) of subsection (b); provided, however, that nothing in this section shall require an appraisal management company to offer future appraisal assignments of a particular nature or type to an appraiser who previously indicated a lack of the necessary expertise or geographic knowledge for such assignments except where the appraiser subsequently demonstrates to the satisfaction of the appraisal management company that the appraiser has gained the required experience or geographic knowledge to competently complete the assignments.
Section 286. (a) The board may, by order, deny, suspend, revoke or refuse to issue or renew a registration of an appraisal management company or may restrict or limit the 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 or a registrant or a 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:
(i) filed an application for registration that, as of its effective date or as of any date after filing, contains a statement that, in light of the circumstances under which it was made, is false or misleading with respect to any material fact;
(ii) violated or failed to comply with sections 276 to 289, inclusive;
(iii) been convicted of a felony or, within the past 5 years, been convicted of a misdemeanor involving an 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;
(iv) 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;
(v) 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 an appraiser;
(vi) acted as an appraisal management company while not properly registered by the board;
(vii) structured an appraisal assignment or a contract with an appraiser for the purpose of evading sections 276 to 289, inclusive; or
(viii) failed to pay the proper filing or renewal fee under sections 276 to 289; inclusive.
(b) The board may, by order, impose a civil penalty upon a registrant, or upon a partner, officer, director, managing principal, controlling person, employee in charge or other person occupying a similar status or performing similar functions on behalf of a registrant, for a violation of sections 276 to 289, inclusive. The civil penalty shall not exceed $10,000 for each violation.
(c) Upon finding that any action of a person is in violation of sections 276 to 289, inclusive, the board may, in addition to any other penalties under said sections 276 to 289, inclusive, 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 under this section shall be in addition to and not in lieu of any other penalty 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 sections 276 to 289, inclusive, shall be governed by chapter 30A.
(e) If the board has reasonable grounds to believe that an appraisal management company has violated sections 276 to 289, inclusive, or that facts exist that would be the basis for an order against an appraisal management company, the board may, either personally or by a person 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 may 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 may authorize true copies thereof to be substituted in the permanent record of the matter in which the papers, records or documents were introduced in evidence.
Section 287. Each appraisal management company shall maintain the records related to the services it provides. All records shall be preserved in accordance with the record keeping rule of the Uniform Standards of Professional Appraisal Practice unless the board, by regulation, prescribes additional requirements for particular types of records.
Section 288. The board may file an action for injunctive relief to prevent violations of sections 276 to 289, inclusive. The superior court may grant an injunction against a person who it deems to be violating said sections 276 to 289, inclusive, notwithstanding that criminal prosecution has been or may be instituted for such violation or that the person deemed to be violating said sections 276 to 289, inclusive, is the holder of a registration issued by the board.
Section 289. (a) The board may conduct investigations and examinations for the purposes of:
(i) initial registration, registration renewal, registration suspension, registration conditioning, registration revocation or termination or general or specific inquiry or investigation to determine compliance with sections 276 to 289, inclusive; provided, however, that for the purposes of any such investigation or examination, the board may access, receive and use any books, accounts, records, files, documents, information or other evidence including, but not limited to: (A) criminal, civil and administrative history, including nonconviction data as specified in the General Laws; and (B) any other material the board deems relevant to the inquiry or investigation without regard to the location, possession, control or custody of such material;
(ii) investigating violations or complaints arising under sections 276 to 289, inclusive; and
(iii) reviewing, investigating or examining any registrant, individual or person subject to sections 276 to 289, inclusive.
(b) If a criminal history record check for a person who directly or indirectly owns more than 10 per cent of an entity applying for registration or for an officer, controlling person, employee in charge or managing principal of an entity applying for registration pursuant to subsection (c) of section 279 reveals a conviction, such conviction shall not automatically bar registration if the conviction is not related to the financing or transfer of real property. The board shall consider all of the following factors regarding the conviction:
(i) the seriousness of the crime;
(ii) the date of the crime;
(iii) the age of the person at the time of the conviction;
(iv) the circumstances surrounding the commission of the crime, if available;
(v) the nexus between the criminal conduct of the person and the job duties of the position to be filled; and
(vi) the person's prison, jail, probation, parole, rehabilitation and employment records since the date the crime was committed.
SECTION 3. The terms of the members of the board of real estate appraisers in office on the effective date of this act shall immediately expire and members of the board shall be appointed pursuant to section 92 of chapter 13 of the General Laws, as appearing in section 1; provided, however, that, of the members first appointed, 3 shall serve for 3 years, 3 shall serve for 2 years and 3 shall serve for 1 year. Notwithstanding the expiration of a member’s term of office under this section, former members of the board may be reappointed.
Approved, July 31, 2019.