Real Estate Law

Write on! Let your voice be heard on new appraiser rules that affect your law practice!

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

Conclusion: This 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 blawg.

(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 violations.

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? 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 Independence?

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

Unusual - 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 that connection.

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 Rules.

* Prohibits coercion ....(of) appraisers;

* 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 Headlines3, 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 Buzz5. 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 Regs.

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.