BILL REQ. #: H-4446.1
| State of Washington | 61st Legislature | 2010 Regular Session |
Read first time 01/21/10. Referred to Committee on Commerce & Labor.
AN ACT Relating to the licensing of appraisal management companies; adding a new chapter to Title 18 RCW; and prescribing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1
NEW SECTION. Sec. 2
NEW SECTION. Sec. 3
(1) "Appraisal" means the practice of developing an opinion of
value of real property in conformance with uniform standards of
professional appraisal practice as developed by the appraisal
foundation or by statute, or any other definition utilized within state
or federal government regulations.
(2) "Appraisal management company" means an entity that directly or
indirectly performs appraisal management services, regardless of the
use of the term appraisal management company, mortgage technology
provider, lender processing services, lender services, loan processor,
mortgage services, real estate closing services provider, settlement
services provider, or vendor management company, or any other term.
(3) "Appraisal management services" means to, directly or
indirectly, perform any or all of the following functions on behalf of
a lender, financial institution, mortgage broker, loan originator, or
any other person:
(a) Administer an appraiser panel;
(b) Recruit, qualify, verify licensing or certification, and
negotiate fees and service level expectations with persons who are part
of an appraiser panel;
(c) Receive an order for an appraisal from one person, or entity,
and deliver the order for the appraisal to an appraiser that is part of
an appraiser panel for completion;
(d) Track and determine the status of appraisal orders;
(e) Conduct quality control of a completed appraisal prior to the
delivery of the appraisal to the person that ordered the appraisal; and
(f) Provide a completed appraisal performed by an appraiser to one
or more persons that have ordered an appraisal.
(4) "Appraiser" means a person who holds a license or certification
to complete an appraisal in the state where the real property that is
the subject of the appraisal is located.
(5) "Appraiser fee schedule" means a list of the various appraisal
products requested by an appraisal management company in this state
from appraisers and the fees that the appraisal management company is
willing to pay an appraiser for the performance of the appraisals.
(6) "Appraiser panel" means a network of licensed or certified
appraisers who are independent contractors of an appraisal management
company that have:
(a) Independently applied to or responded to an invitation,
request, or solicitation from an appraisal management company, in any
form, to perform appraisals for persons, or entities, that have ordered
appraisals through the appraisal management company, or to perform
appraisals for the appraisal management company directly, on a periodic
basis, as assigned by the appraisal management company; and
(b) Been selected, and approved, by an appraisal management company
to perform appraisals for a person, or entity, that has ordered an
appraisal through the appraisal management company, or to perform
appraisals for the appraisal management company directly, on a periodic
basis, as assigned by the appraisal management company.
(7) "Controlling person" means:
(a) An owner, officer, or director of a corporation, partnership,
or other business entity seeking to offer appraisal management services
in this state;
(b) An individual employed, appointed, or authorized by an
appraisal management company that has the authority to enter into a
contractual relationship with other persons for the performance of
appraisal management services and has the authority to enter into
agreements with appraisers for the performance of appraisals;
(c) An individual who possesses, directly or indirectly, the power
to direct or cause the direction of the management or policies of an
appraisal management company;
(d) Any person who controls, directly or indirectly through one or
more intermediaries, alone or in concert with others, or a ten percent
or greater interest in a partnership, company, association, or
corporation; or
(e) Any person who controls a limited liability company or is the
owner of a sole proprietorship.
(8) "Department" means the department of licensing.
(9) "Director" means the director of the department of licensing.
NEW SECTION. Sec. 4
(1) To adopt rules in accordance with chapter 34.05 RCW necessary
to implement this chapter and chapter 18.235 RCW;
(2)(a) To receive and approve or deny applications for licensure as
an appraisal management company under this chapter;
(b) To establish appropriate administrative procedures for the
processing of the applications;
(c) To issue licenses to qualified companies pursuant to the
provisions of this chapter; and
(d) To maintain a roster of the names and addresses of companies
licensed under this chapter;
(3) To employ professional, clerical, and technical assistance as
may be necessary to properly administer the work of the director;
(4) To establish forms necessary to administer this chapter;
(5) To oversee the performance of any background checks;
(6) To initiate and oversee investigations and any audits;
(7) To establish grounds for disciplinary actions;
(8) To establish by rule, fees necessary to administer this
chapter; and
(9) To do all other things necessary to carry out the provisions of
this chapter and minimally meet the requirements of federal and other
guidelines regarding appraisal management companies.
NEW SECTION. Sec. 5
NEW SECTION. Sec. 6
(2) The appropriate fees must accompany all applications for
original licensure and renewal registration.
(3) Each applicant shall file and maintain a surety bond, approved
by the director, executed by the applicant as obligor and by a surety
company authorized to do a surety business in this state as surety,
whose liability as the surety may not exceed in the aggregate the penal
sum of the bond. The penal sum of the bond must be a minimum of thirty
thousand dollars and based on the annual dollar amount of loans
originated. The bond must run to the state of Washington as obligee
for the use and benefit of the state and of any person or persons who
may have a cause of action against the obligor under this chapter. The
bond must be conditioned that the obligor as licensee will faithfully
conform to and abide by this chapter and all the rules adopted under
this chapter. The bond will pay to the state and any person or persons
having a cause of action against the obligor all moneys that may become
due and owing to the state and those persons under and by virtue of
this chapter. In lieu of a surety bond, if the applicant is a
Washington business corporation, the applicant may maintain unimpaired
capital, surplus, and long-term subordinated debt in an amount that at
any time its outstanding promissory notes or other evidences of debt,
other than long-term subordinated debt, in an aggregate sum do not
exceed three times the aggregate amount of its unimpaired capital,
surplus, and long-term subordinated debt. The director may define
qualifying "long-term subordinated debt" for purposes of this section.
The amount of the bond required must be consistent with the provisions
found in WAC 208-620-320.
NEW SECTION. Sec. 7
NEW SECTION. Sec. 8
(2) Each licensed appraisal management company shall place its
unique license number on any engagement document issued, including but
not limited to requests for bids, requests for appraiser availability,
fax orders, e-mail orders, and letters.
(3) An appraisal management company licensed in this state shall
disclose the license number provided to it by the department on all
print and electronic advertising, including any electronic advertising
or communication via the internet.
(4) All appraisal management company license numbers are required
to be included on all appraisals ordered by the appraiser management
company.
NEW SECTION. Sec. 9
(2) The license required by subsection (1) of this section must, at
a minimum, include the following information:
(a) Name of the entity seeking licensure;
(b) Business address of the entity seeking licensure;
(c) Phone contact information of the entity seeking licensure;
(d) If the entity is not a corporation that is domiciled in this
state, the name and contact information for the company's agent for
service of process in this state;
(e) The name, address, and contact information for any individual
or any corporation, partnership, or other business entity that owns ten
percent or more of the appraisal management company;
(f) The name, address, and contact information for a controlling
person;
(g) A certification that the entity has a system and process in
place to verify that a person being added to the appraiser panel of the
appraisal management company holds a license or certification in good
standing in this state pursuant to chapter 18.140 RCW, if a license or
certification is required to perform appraisals, pursuant to section 14
of this act;
(h) A certification that the entity has a system in place to review
the work of all appraisers that are performing real estate appraisal
services for the appraisal management company on a periodic basis to
ensure that the real estate appraisal services are being conducted in
accordance with uniform standards of professional appraisal practice,
pursuant to section 15 of this act;
(i) A certification that the entity maintains a detailed record of
each service request that it receives and the appraiser that performs
the real estate appraisal services for the appraisal management
company, pursuant to section 14 of this act;
(j) A certification that the entity maintains a complete copy of
the completed appraisal report performed as a part of any request, for
a minimum period of five years, seven years if the property or the
appraisal becomes involved in any litigation, pursuant to uniform
standards of professional appraisal practice provisions, and that the
appraisals must be provided to the department upon demand;
(k) An irrevocable uniform consent to service of process, pursuant
to section 7 of this act; and
(l) Any other information required by the department.
NEW SECTION. Sec. 10
(a) A person who has had a license or certificate to act as an
appraiser refused, denied, canceled, or revoked in any state; or
(b) An entity that is more than ten percent owned by any person who
has had a license or certificate to act as an appraiser refused,
denied, canceled, or revoked in any state.
(2)(a) Each person that owns more than ten percent of an appraisal
management company in this state shall:
(i) Be of good moral character, as determined by the department;
and
(ii) Submit to a background investigation, as determined by the
department.
(b) Each appraisal management company applying for a license in
this state shall certify to the department that it has reviewed each
and every individual or entity that owns more than ten percent of the
appraisal management company and that no entity that owns more than ten
percent of the appraisal management company is more than ten percent
owned by any person that has had a license or certificate to act as an
appraiser refused, denied, canceled, or revoked.
NEW SECTION. Sec. 11
(b) Should the controlling person change, the appraisal management
company must notify the director within fourteen days and provide the
name and contact information of the new controlling person.
(2) The controlling person designated pursuant to subsection (1) of
this section shall:
(a) Hold a license or certificate to act as an appraiser in at
least one state;
(b) Have never had a license or certificate to act as an appraiser
surrendered in lieu of disciplinary action, refused, denied, canceled,
or revoked in any state;
(c) Be of good moral character, as determined by the department;
and
(d) Submit to any background investigation, as determined by the
department.
NEW SECTION. Sec. 12
(a) Any person who has ever had a license or certificate to act as
an appraiser in this state, or in any other state, surrendered in lieu
of disciplinary action, refused, denied, canceled, or revoked;
(b) Any person who is currently suspended, debarred, under a
limited denial of participation, or otherwise restricted under 24
C.F.R. 25, 2 C.F.R. 180 as implemented by part 2424, or under similar
provisions of any other federal agency;
(c) Any person who is under indictment for, or has been convicted
of, an offense that reflects adversely upon the applicant's integrity,
competence or fitness to meet the responsibilities of an approved
mortgagee;
(d) Any person who is subject to unresolved findings contained in
a department of housing and urban development or other governmental
audit, investigation, or review;
(e) Any person who is engaged in business practices that do not
conform to generally accepted practices of prudent mortgagees or that
demonstrate irresponsibility;
(f) Any person who has been convicted of, or who has pled guilty or
nolo contendre to, a felony related to participation in the real estate
or mortgage loan industry:
(i) During the seven-year period preceding the date of the
application for licensing and registration; or
(ii) At any time preceding the date of application, if the felony
involved an act of fraud, dishonesty, or a breach of trust, or money
laundering;
(g) Any person who is in violation of provisions of the S.A.F.E.
mortgage licensing act of 2008, 12 U.S.C. 5101 et seq., or any
applicable provision of state law; or
(h) Any person who is in violation of any other requirement as
established by the director.
(2) An appraisal management company that applies to the department
for a license to do business in this state may not:
(a) Enter into any independent contractor arrangement, whether in
verbal, written, or other form, with any person who has ever had a
license or certificate to act as an appraiser in this state, or in any
other state, surrendered in lieu of disciplinary action, refused,
denied, canceled, or revoked; and
(b) Enter into any contract, agreement, or other business
relationship, whether in verbal, written, or other form, with any
entity that employs, has entered into an independent contractor
arrangement, or has entered into any contract, agreement, or other
business relationship, whether in verbal, written, or any other form,
with any person who has ever had a license or certificate to act as an
appraiser in this state or in any other state, ever had a license or
certificate to act as an appraiser in this state, surrendered in lieu
of disciplinary action, refused, denied, canceled, or revoked.
(3) Any employee of the appraisal management company, or any
contractor working in any capacity on behalf of the appraisal
management company, that has any involvement in the ordering of
appraisal services, actual performance of appraisal services, or review
and analysis of completed appraisals must be a state licensed or state
certified appraiser in the state in which the property is located, and
shall have geographic and product competence according to uniform
standards of professional appraisal practice. Employees completing
appraisal reviews shall have a minimum of five years' appraisal
experience.
NEW SECTION. Sec. 13
(1) A person that exclusively employs persons on an employer and
employee basis for the performance of appraisals, and the employer is
responsible for ensuring that the appraisals are performed by employees
in accordance with uniform standards of professional appraisal
practice;
(2) A department or unit within a financial institution that is
subject to direct regulation by an agency of the United States
government, or to regulation by an agency of this state, that receives
a request for the performance of an appraisal from one employee of the
financial institution, and another employee of the same financial
institution assigns the request for the appraisal to an appraiser that
is part of an appraiser panel;
(3) An appraiser that enters into an agreement, whether written or
otherwise, with another appraiser for the performance of an appraisal,
and upon completion of the appraisal, the report of the appraiser
performing the appraisal is signed by both the appraiser who completed
the appraisal and the appraiser who requested the completion of the
appraisal;
(4) A relocation management company. A "relocation management
company" means a business entity whose exclusive business services are
nonmortgage use related and include the relocation of employees as an
agent or contractor for the employer, or the employer's agent, for the
purposes of determining an "anticipated sales price," as defined by the
worldwide employee relocation council, of the residence of an employee
being relocated by the employer in the course of its business.
NEW SECTION. Sec. 14
NEW SECTION. Sec. 15
(2) Appraisal fees are to be set by open bid process, and must be
based upon the complexity of the appraisal performed. In no case may
an appraisal fee be offered or be paid by an appraisal management
company based upon the appraised value of the subject property, a range
of value of the subject property, a predetermined value estimate, or
the amount of the transaction value. An appraisal management company
requesting a bid from an appraiser to complete an appraisal in this
state shall request that the appraiser provide the amount of the fee to
be charged for the appraisal by the appraiser, and the estimated time
in which the appraisal will be completed and delivered to the appraisal
management company by the appraiser. The appraisal management company
may not set predetermined limits on fees or delivery timelines in the
appraisal order request. The appraisal management company may select
and engage an appraiser from among the bids received, may reject any or
all bids received, or may request that new bids be submitted for any
appraisal assignment.
(3) If, prior to completing the appraisal report, issues arise that
add to the assignment complexity, the appraiser may not be prevented
from requesting a modification to the original fee.
(4) The total fee retained by the appraisal management company may,
in no case, be in excess of twenty-five percent of the amount paid to
the individual appraiser for the performance of the appraisal.
(5) All loan settlement documents that itemize borrower costs must
clearly indicate the fee paid to the appraiser and shall separately
indicate the fee paid to the appraisal management company.
(6) The department may, at its discretion, review any appraiser fee
schedule developed by an appraisal management company licensed in this
state.
(7) Appraisers may not be prohibited by the lender, appraisal
management company, or other third party, from recording or publishing
the fee the appraiser was paid for the performance of the appraisal
report or discussing said fee with the homeowner, borrower, or other
parties to the transaction.
(8) Appraisers shall clearly indicate in the appraisal report, the
name of the appraisal management company ordering the appraisal as well
as the name of the intended user of the report, including a lender.
Appraisers may not be prohibited from naming the appraisal management
company as the client, in conformance with uniform standards of
professional appraisal practice.
(9) Appraisers shall clearly indicate in the appraisal report, the
license number of the appraisal management company that engaged the
appraiser in the assignment.
(10) Appraisal management companies may not prohibit registered
appraisal trainees in the state from signing appraisal reports, as long
as the appraisal reports are also signed by the supervising appraiser
who is licensed or certified in the state.
(11) Appraisal management companies may not include a hold harmless
provision in the contract with a client or require the appraiser to
indemnify the appraisal management company against liability. The
appraisal management company and the appraiser are jointly and
severally liable to the client.
NEW SECTION. Sec. 16
(a) Notifying the appraiser in writing of the reasons why the
appraiser is being removed from the appraiser panel of the appraisal
management company, including if the appraiser is being removed from
the panel for illegal conduct, violation of uniform standards of
professional appraisal practice, or a violation of state licensing
standards, the nature of the alleged conduct or violation; and
(b) Providing an opportunity for the appraiser to respond to the
notification of the appraisal management company.
(2) An appraiser that is removed from the appraiser panel of an
appraisal management company for alleged illegal conduct, violation of
uniform standards of professional appraisal practice, or a violation of
state licensing standards, may file a complaint with the department for
a review of the decision of the appraisal management company, except
that in no case may the department make any determination regarding the
nature of the business relationship between the appraiser and the
appraisal management company which is unrelated to the actions
specified in subsection (1) of this section.
(3) If an appraiser files a complaint against an appraisal
management company pursuant to subsection (2) of this section, the
department may investigate the complaint within one hundred eighty
days.
(4) If after opportunity for hearing and review, the department
determines that an appraiser did not commit a violation of law, a
violation of uniform standards of professional appraisal practice, or
a violation of state licensing standards, the department shall order
that an appraiser be restored to the appraiser panel of the appraisal
management company that was the subject of the complaint without
prejudice.
(5) Following the adjudication of a complaint to the department by
an appraiser against an appraisal management company, an appraisal
management company may not refuse to make assignments for real estate
appraisal services to an appraiser, or reduce the number of
assignments, or otherwise penalize the appraiser, if the department has
found that the appraisal management company acted improperly in
removing the appraiser from the appraiser panel.
NEW SECTION. Sec. 17
(a) Failing to meet the minimum qualifications for registration
established by or pursuant to this chapter;
(b) Paying money other than the fees provided for by this chapter
to any employee of the director to procure state registration under
this chapter;
(c) Failing to pay appraisers no later than thirty days after the
loan closing documents or forty-five days after completion of the
appraisal service, whichever comes first, unless otherwise agreed or
unless the appraiser has been notified in writing that a bona fide
dispute exists regarding the performance or quality of the appraisal
service;
(d) Failing to pay appraisers even if the appraisal management
company is not paid by its client;
(e) Coercing, extorting, colluding, compensating, instructing,
inducing, intimidating, bribing an appraiser, or in any other manner
including, but not limited to:
(i) Withholding or threatening to withhold timely payment for an
appraisal;
(ii) Requiring the appraiser to remit a portion of the appraisal
fee back to the appraisal management company;
(iii) Withholding or threatening to withhold future business for,
or demoting or terminating or threatening to demote or terminate, an
appraiser;
(iv) Expressly or impliedly promising future business, promotions,
or increased compensation for an appraiser;
(v) Conditioning the request for an appraisal or the payment of an
appraisal fee or salary or bonus on the opinion, conclusion, or
valuation to be reached, or on a preliminary estimate or opinion
requested from an appraiser;
(vi) Requesting that an appraiser provide an estimated,
predetermined, or desired valuation in an appraisal report, or provide
estimated values or comparable sales at any time prior to the
appraiser's completion of an appraisal;
(vii) Providing to an appraiser an anticipated, estimated,
encouraged, or desired value for a subject property or a proposed or
target amount to be loaned to the borrower, except that a copy of the
sales contract for purchase transactions must be provided to the
appraiser;
(viii) Providing to an appraiser, or any entity or person related
to the appraiser, stock or other financial or nonfinancial benefits;
(ix) Allowing the removal of an appraiser from an appraiser panel,
without prior written notice to such appraiser and the reasons or basis
for removal, which notice shall include written evidence of the
appraiser's illegal or unprofessional conduct, violation of uniform
standards of professional appraisal practice or state licensing
standards, or other substantive reason for removal;
(x) Obtaining, using, or paying for a second or subsequent
appraisal or ordering an automated valuation model in connection with
a mortgage financing transaction unless there is a reasonable basis to
believe that the initial appraisal was flawed or tainted and such basis
is clearly and appropriately noted in the loan file, or unless such
appraisal or automated valuation model is done pursuant to a bona fide
prefunding or postfunding appraisal review or quality control process;
or
(xi) Any other act or practice that impairs or attempts to impair
an appraiser's independence, objectivity, or impartiality, or that
violates law or regulation including, but not limited to, uniform
standards of professional practice, the truth in lending act, or
Regulation Z;
(f) Altering, modifying, or otherwise changing a completed
appraisal report submitted by an appraiser;
(g) Copying and using the appraiser's signature for any purpose or
in any other report;
(h) Extracting, copying, or using only a portion of the appraisal
report without reference to the entire report;
(i) Prohibiting or attempting to prohibit the inclusion of the
signature on an appraisal report of a state-registered appraisal
trainee if the report is also signed by the supervisory appraiser;
(j) Prohibiting or attempting to prohibit the appraiser from
including or referencing the appraisal fee, appraisal management
company fee, the appraisal management company name or identity, or the
client's or lender's name or identity in the appraisal report;
(k) Failing to disclose to the appraiser the total fee or
compensation paid to the appraisal management company for the
assignment;
(l) Requiring an appraiser to prepare an appraisal report, engaging
an appraiser to perform an appraisal, or accepting an appraisal from an
appraiser who does not have either the geographic competence or
necessary expertise to complete the appraisal;
(m) Requiring an appraiser to prepare an appraisal report under
such a limited time frame that the appraiser, in the appraiser's own
professional judgment, believes does not afford the appraiser the
ability to meet all relevant legal and professional obligations or
provide a credible opinion of value for the property being appraised;
(n) Requiring, or attempting to require, an appraiser to modify an
appraisal report except as permitted under subsection (2)(a) or (b) of
this section;
(o) Prohibiting, or attempting to prohibit, or inhibiting
communication between the appraiser and:
(i) The lender;
(ii) A real estate licensee;
(iii) A property owner; or
(iv) Any other party or person from whom the appraiser, in the
appraiser's own professional judgment, believes information would be
relevant or pertinent in completing the appraisal;
(p) Requiring or attempting to require the appraiser to do anything
that violates or does not comply with uniform standards of professional
appraisal practice or with any allowable assignment conditions or
certifications required by the client;
(q) Prohibiting or refusing to allow, or attempting to prohibit or
refuse to allow, the transfer of an appraisal from one lender to
another lender if the lenders are allowed to transfer an appraisal
under applicable federal law;
(r) Failing to regularly cycle through on a rotating basis and
engaging appraisers who are on the approved appraiser panel of the
appraisal management company; or
(s) Violating any provision of this chapter or any lawful rule made
by the director pursuant thereto.
(2) Nothing in subsection (1) of this section may be construed as
prohibiting the appraisal management company from requesting that an
appraiser:
(a) Provide additional information about the basis for a valuation;
or
(b) Correct objective factual errors in an appraisal report.
NEW SECTION. Sec. 18
NEW SECTION. Sec. 19
NEW SECTION. Sec. 20
NEW SECTION. Sec. 21
NEW SECTION. Sec. 22
NEW SECTION. Sec. 23 Sections 1 through 22 of this act
constitute a new chapter in Title