Blew a deal - LO is ticked

[Rice Brewer]

Loan transactions under $250,000 are not federally related.

Oh yes they are - or can be. It is just that an loan under $250,000 does not require an appraisal. If a federally charted bank decides to require one it is a federally related transaction.

 

[Rice Brewer]

Where is the federal regulation that deals with this issue?

Numerous states rights vs. federal mandate cases come to mind. State regulations/laws can make federal regulations/law more restrictive but can't make them less restrictive.

I bet the ASB would love to know that CA regulations appear to exempt oral appraisal reports from USPAP and further imply that unless the loan is federally related, USPAP doesn't apply.

 

[Ruben Ramon]

Oh yes they are - or can be. It is just that an loan under $250,000 does not require an appraisal. If a federally charted bank decides to require one it is a federally related transaction.

I disagree, the individual bank may require one, but if it falls under the $250,000 limit, then it is federally regulated, but not federally related.

Here is a quote from Gary P. Taylor, in testimony in front of Congress:

Finally, when implementing FIRREA, the five federal financial institution regulators failed to take the
licensing and certification requirement seriously. Through regulation the law was effectively modified to
exempt a significant percentage of transactions in the residential mortgage market from being appraised
by licensed and certified appraisers. As originally contemplated, all federally regulated transactions
greater than $15,000 would require an appraisal by a licensed and certified appraiser, but with a
regulatory sleight of hand the de minimis threshold was created and now the mortgage amount must
exceed $250,000 before an appraisal by a licensed or certified appraiser is required. As a result,
a significant portion of the real estate valuation work throughout the country takes place in the form of
“evaluations,” automated valuation models (AVMs), “broker price opinions” (BPOs), or through
“competitive market analysis” (CMA) reports. In many cases, evaluations are done by staff of institutions
that have a vested interest in a real estate transaction. This negates the benefit of having an independent
third party involved in the real estate transaction, while omission of a licensed or certified appraisal
requirement for properties under $250,000 creates a disruptive gap in the enforcement of appraisal
standards.

If an individual federally chartered bank requires an appraisal, it does not mean its a federally related transaction. It has to be above $250,000.

But my point is, if its not a federally related transaction, then under California law, its not an appraisal. That covers a LOT.

 

[Rice Brewer]

Ruben,

I kind of see where you are coming form. However, to be honest, I would hate to have to have that point as my defense should it be necessary. I bet I would lose.

To your point, by saying that appraisals are limited to written reports for federally related transactions is a HUGE loophole in CA. I am very surprised that the ASB hasn't shut that down.

 

[CANative]

I don't think the Government Code I referenced is stating that an opinion of value from an appraiser is not an appraisal unless written for an FRT. And that's not the point I was trying to make. The section I referenced is prefaced by the statement "For purposes of this section..." and the section is concerned with enforcement of the state laws concerning federally related appraisal activities.

All I've been trying to say is that it is futile to argue against "comp checks" and the like by trying to say it's illegal.

 

[Ruben Ramon]

It just seems like they made the defination more complicated just to make it more complicated, and as a result, screwed it up.

 

[Rice Brewer]

I don't think the Government Code I referenced is stating that an opinion of value from an appraiser is not an appraisal unless written for an FRT. And that's not the point I was trying to make. The section I referenced is prefaced by the statement "For purposes of this section..." and the section is concerned with enforcement of the state laws concerning federally related appraisal activities.

All I've been trying to say is that it is futile to argue against "comp checks" and the like by trying to say it's illegal.

Greg,

I have read the pertinent section of the CA code and I can not find where it says anything about only applying to federally related transactions. To the contrary, I see where the relevant section of the Code is titled "11300. This part may be cited as the Real Estate Appraisers' Licensing and Certification Law."

As to "comp checks" being inherently illegal, I agree, they are not. What is illegal is for us to do them, to not have a USPAP compliant work file on THAT assignment and then accept the resulting order based on the results of that very limited appraisal (i.e., comp check).

In the end, that is what we are really being asked to do - guarantee a value and that, in and of itself, is illegal.

The real problem is in the "intent" of the comp check.

 

[CANative]

This is always an interesting discussion. It seems like what OREA and the CA government code are saying is that if it isn't an FRT then it is not applicable to OREA's mission.

On the one hand you have this from the code...

11321. Authorization to use title, designation and abbreviation; authorization to
perform and sign certified real estate appraisal reports
(a) No person other than a state licensed real estate appraiser may assume or use
that title or any title, designation, or abbreviation likely to create the impression of state
licensure as a real estate appraiser in this state.
(b) No person other than a licensee may sign an appraisal. A trainee licensed
pursuant to Section 11327 may sign an appraisal if it is also signed by a licensee.
(c) No person other than a licensee holding a current valid license at the residential
level issued under this part to perform, make, or approve and sign an appraisal may use
the abbreviation SLREA in his or her real property appraisal business.
(d) No person other than a licensee holding a current valid license at a certified
level issued under this part to perform, make, or approve and sign an appraisal may use
the term "state certified real estate appraiser" or the abbreviation SCREA in his or her
real property appraisal business.

On the other hand, from the FAQ's we find this...

Question: How can I gain acceptable experience as an unlicensed appraiser?
Answer: Acceptable experience may be accumulated as an unlicensed appraiser in any of the following ways:

By providing "significant professional assistance" to another appraiser and having the duties you performed identified in the report. If at least 75% of the professional appraisal work is performed by the unlicensed person and the appraisal conforms to the Uniform Standards of Professional Appraisal Practice (USPAP), this experience would qualify under Category 10 (Assistance in the Preparation of Appraisals) for up to a maximum of 400 hours of credit;
By performing the entire appraisal process under the direct supervision of a California licensed appraiser. The final conclusion to value is made by and the appraisal is signed by the licensed appraiser, with you and the duties you performed identified in the report. If the unlicensed person performs all appraisal methods customarily used for a particular property type and the appraisal conforms to USPAP, this experience would qualify under Category 1 (Fee and Staff Appraisal) with an unlimited number of hours; and
By the unlicensed person completing appraisals him or herself in non-federally related transactions. In California, any appraisal completed for a federally related transaction requires a licensed appraiser. However, work performed for attorneys, private individuals, etc., are generally not federally related transactions and can be performed by anyone. If the appraisal conforms to USPAP, this experience would qualify under Category 1 (Fee and Staff Appraisal) with an unlimited number of hours.

 

[Rice Brewer]

What a convoluted pile a mish-mash...

Who in CA enforces USPAP if it is not related to a FRT????

 

[CANative]

OREA is responsible for enforcement. If an appraiser is required to comply with USPAP or holds their work out as complying with USPAP and it doesn't they are subject to enforcement action whether or not the assignment is federally related.

I'm starting to get in over my head here. I wish Hatch or some other smart person would post.