To: Attorneys whose practice
uses real estate appraisals
Issue: Your comments are
due on Federal Reserve Board Interim
Rules on Appraiser Independence by Friday, December 17, 2010
affects your practice!
It's reading and comment time in
the Real Estate Appraisal Law world. Government-related entities have released several
documents of great interest to lawyers whose practice involves valuation of
real property. These include the Federal Reserve Board's Interim Final Rule on Appraiser Independence-the subject of this
(I plan to discuss in future blawgs: FannieMae and FreddieMac's revised guidelines on that same issue, FHA's updated
FAQS including valuation issues, and
the Appraisal Standards Board's proposed
requirements that will affect your ability to obtain your client's appraiser's draft report.)
Even if you have been practicing
real estate, or family, or banking law for decades, you need be aware of the
changes in Real Estate Appraisal Law that could make major changes in your
practice. Over the next weeks, I'm going to share some thoughts on how these
requests for comments could not only affect your practice, as well as your bank
account, but perhaps subject you, or your clients, to liability for regulatory
What you need to know is that the
appraisal industry is undergoing more changes than a contract among family
members. If your practice uses real estate appraisals, you need to understand
those industry changes to win your next probate case that revolves around the
value of the decedent's real property. Or, the next property settlement in a
matrimonial action. Or, whether you, the lawyer, have any liability when a Broker
Price Opinion (BPO) is used in the financing of real property.
You also need to make sure that
you are not going to be tracked down by the Appraisal Independence Police if
you review your client's appraisal report and tell the appraiser that it ...., shall
we say, is off the mark. Guess who's covered under Dodd-Frank's Appraiser
Independence Rules? Umm....how about "attorneys."
So, let's start looking at the documents we need to
review. There is more than one, but let's start at the top of the Washington
financial regulatory hierarchy. In particular, one requesting comments with a
relatively close deadline.
It's 137 pages so don't count on a quick review on
the Chicago "El," the DC Metro, the Lindenwald Line to Philly or on the train
to Manhattan. MAYBE, on "The 10" somewhere near LA.
What's Up with the Federal Reserve Board's Interim Final Rule on Appraiser
The Federal Reserve Board of Governors issued Interim Final Rules on October 18, 2010
in response to the requirement under Dodd-Frank Wall Street Reform and Consumer Protection Act
(the "Dodd-Frank Act") and Title XIV of that Act, the Mortgage Reform
and Anti-Predatory Lending Act of 2010 (MRAPLA). See 111 P.L. 203, Sec. 147(g)(2). The Rule states:
TILA Section 129E(g)(2) [as amended by Dodd-Frank], however,
requires the Board to issue interim final regulations to implement the
appraisal independence requirements within 90 days of enactment of the
Dodd-Frank Act. As discussed below, the Board finds there is good cause for issuing
an interim final rule without opportunity for advance notice and comment. 12 CFR Part 226, Regulation Z; Docket No. R-1394, RIN AD-7100-56, Truth
in Lending, Interim final rule; request for public comment
yes. Surprising - no. The publication
of the Interim Final Regulations is the first regulatory step in the
implementation of MRAPLA. While the dust up about "Robo-signer" hasn't touched
on the use of valuations in the Obama Administration's mortgage modification
program, we'll talk in a few weeks about the multiple class actions regarding
For now, know that the Fed's press release1
has a link to the Interim Final Rule2.
Mark your calendar to indicate that comments are due 60 days after publication,
which is Friday, December 17, 2010.
Now, that I may have actually gotten the attention of
those who have to worry about paying the bills, allow me to address those who
will actually write the comments. (In my firm, like many of you in small and
medium size firms, both of those lawyers would be me.)
I suggest you start with the Fed's
press release because it clicks off the issues addressed in the Interim Final
* Prohibits coercion ....(of)
* Prohibits appraisers and
appraisal management companies ..... from having financial or other interests in
the properties or the credit transactions;
* Prohibits creditors from
extending credit .... if they know beforehand of .... appraiser coercion or
conflicts of interest, (but with exceptions);
* Requires that creditors
or settlement service providers (with) information (on) appraiser misconduct
file (complaints with state appraisal regulators); and
* Requires the payment of
reasonable and customary compensation to appraisers who are not employees of
the creditors or of the appraisal management companies hired by the creditors.
If you are so riveted to your
review of these rules that your significant other needs to remind you that "you
have to get up for work tomorrow morning," you may want to check in on what
real estate appraisal industry lobbyists are saying. The Appraisal Institute
publishes Appraiser News on Line
with Washington insider info from AI's VP for Governmental Affairs Bill Garber
and the National Association of Realtors publishes Appraisal Insight4
featuring DC veteran Jerry Nagy of NAR. The AI and NAR teams were up on the
Hill more often than your Member of Congress while MRAPLA was being formed.
That's not a slight against the MOCs but a tribute to those organizations and
their MVLs - Most Valuable Lobbyists. Garber & Nagy each created
star-studded Appraisal Summits for their respective organizations since the
Act's passage in July.
If you want to learn the
outside-of-the-beltway, in the trenches, practicing real estate appraiser's
view, click into Joan Trice's Appraisal
Read the posts in the appraiser's forum and her interviews with appraisal
industry movers & shakers for some real world thoughts on the Fed's Interim
Do you write comments that really
get down into the details? You could attend "Who's Who of Real Estate Appraisal
Finance and Law" at Valuation 20106
in Las Vegas from November 9th -10th.
Whether or not you make it to
Vegas, plan on tuning in here for my Blawgs from that confab. I'll be
interviewing Ms. Trice, and others in the know on changes in the appraisal
industry, and particularly on their thoughts regarding the Interim Final Regs.
We'll do in a special Blawg,
right before Thanksgiving weekend, dedicated to the Federal Reserve Board's
Interim Final Rule on Appraiser Independence. I will welcome your comments,
thoughts, suggestions, ideas. That gives
you time to fine-tune your comments for submission to the Fed by December 12th.
We'll recap the first-hand scoop from the Vegas interviews and sessions and
relate your comments to those industry insider views.
Perhaps our attorney colleagues at the Fed will
adopt your spin on all that.