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AN ACT relating to real estate appraisal management companies

By Donald Sanders,2014-04-02 19:16
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AN ACT relating to real estate appraisal management companies

UNOFFICIAL COPY AS OF 04/02/12 11 REG. SESS. 11 RS HB 288/EN

    AN ACT relating to real estate appraisal management companies. Be it enacted by the General Assembly of the Commonwealth of Kentucky:

    ;SECTION 1. A NEW SECTION OF KRS CHAPTER 324A IS CREATED TO READ AS FOLLOWS:

    As used in Sections 1 to 8 of this Act, unless the context otherwise requires:

    (1) "Appraisal management company" means a person who performs the actions

    necessary to administer a network of state-licensed appraisers to fulfill requests

    for appraisal management services on behalf of a client, including but not

    limited to the following actions:

    (a) Recruiting appraisers;

    (b) Contracting with appraisers to perform appraisal services;

    (c) Collecting fees from clients;

    (d) Negotiating fees with appraisers or reimbursing appraisers for appraisal

    services;

    (e) Receiving appraisal orders and appraisal reports;

    (f) Submitting appraisal reports received from appraisers to the company's

    clients;

    (g) Reviewing or verifying appraisal reports; or

    (h) Managing the process of having an appraisal performed, including

    providing related administrative and clerical duties;

    (2) "Appraisal management services" means conducting business by telephone, by

    electronic means, by mail, or in person, directly or indirectly for compensation or

    other pecuniary gain or in the expectation of compensation or other pecuniary

    gain to:

    (a) Solicit, accept, or offer to accept a request for appraisal services; or

    (b) Employ or contract with a licensed or certified appraiser to perform

    appraisal services;

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    (3) "Appraisal services" means the practice of developing an opinion of the value of

    real estate in conformity with the minimum USPAP standards;

    (4) "Appraiser" means an individual licensed by the board who, for a fee or other

    consideration, develops and communicates a real estate appraisal or otherwise

    gives an opinion of the value of real estate or any interest in real estate in

    conformity with the minimum USPAP standards;

    (5) "Appraiser panel" means a group of independent appraisers who have been

    selected by an appraisal management company to perform appraisal services for

    the appraisal management company;

    (6) "Board" means the Kentucky Real Estate Appraisers Board established by KRS

    324A.015;

    (7) "Client" means a person that contracts with or otherwise enters into an

    agreement with an appraisal management company for the performance of

    appraisal services;

    (8) "Controlling person" means an individual employed, appointed, or authorized by

    an appraisal management company to contract with clients or independent

    appraisers for the performance of appraisal services;

    (9) "Managing principal" has the same meaning as "controlling person";

    (10) "Registrant" means an appraisal management company or person that is

    registered or seeking registration under Section 2 of this Act; and

    (11) "USPAP" means the Uniform Standards of Professional Appraisal Practice.

    ;SECTION 2. A NEW SECTION OF KRS CHAPTER 324A IS CREATED TO

    READ AS FOLLOWS:

    (1) A person shall not act or offer to act as an appraisal management company or

    perform appraisal management services within the Commonwealth unless

    registered by the board.

    (2) To be registered by the board, a person shall make written application to the

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    board, submit to a criminal history check as provided in subsection (3) of this section, pay a fee established by the board, and post a surety bond as provided in Section 3 of this Act. The written application shall include the following information:

    (a) The name, street address, and telephone contact information of the person

    seeking registration;

    (b) 1. If the registrant is a domestic organization, the designation of an

    agent for service of process; or

    2. If the registrant is a foreign organization, documentation that the

    foreign organization is authorized to transact business in the

    Commonwealth and has appointed an agent for service of process by

    submitting a copy of:

    a. The registrant's filing with the Secretary of State appointing an

    agent for service of process; and

    b. A certificate of authority issued by the Secretary of State.

     A foreign organization's failure to comply with this paragraph

    may result in rejection of the application;

    (c) The name, residential street address, and contact information of any person

    who owns ten percent (10%) or more of the appraisal management

    company for which registration is being requested;

    (d) The name, residential street address, and contact information of a

    controlling person or managing principal;

    (e) A certification that the registrant:

    1. Has a system and process in place to verify that any person being

    added to the appraiser panel of the appraisal management company,

    or who may be used by the appraisal management company to

    otherwise perform appraisals, holds a license in good standing in this

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    state under this chapter;

    2. Has a system and process in place to review the work of all appraisers

    that are performing appraisal services for the appraisal management

    company on a periodic basis to ensure that the appraisal services are

    being conducted in accordance with the minimum USPAP standards;

    and

    3. Maintains a detailed record of each request for appraisal services that

    it receives and the appraiser that performs the appraisal services for

    the appraisal management company;

    (f) A certification from the registrant and any partner, member, manager, officer, director, managing principal, controlling person, or person occupying a similar status or performing similar functions, or person directly or indirectly controlling the registrant that:

    1. The application for registration when filed or after filing contains no

    statement that, in light of the circumstances under which it was made,

    is false or misleading with respect to a material fact;

    2. The person certifying has not violated or failed to comply with Section

    3, 4, or 5 of this Act;

    3. The person certifying and each person who owns ten percent (10%) or

    more of the registrant has not pled guilty or nolo contendere to or

    been found guilty of:

    a. A felony; or

    b. Within the past ten (10) years, a misdemeanor involving

    mortgage lending or real estate appraising, or an offense

    involving breach of trust or fraudulent or dishonest dealing;

    4. The person certifying is not permanently or temporarily enjoined by a

    court of competent jurisdiction from engaging in or continuing any

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    conduct or practice involving appraisal management services or

    operating an appraisal management company;

    5. The person certifying is not the subject of an order of the board or any

    other state's appraisal management company regulatory agency

    denying, suspending, or revoking the person's privilege to operate as

    an appraisal management company; and

    6. The person certifying has not acted as an appraisal management

    company while not properly registered by the board; and

    (g) Any other information required by the board.

    (3) The board shall require a national and state criminal background check on the person certifying under subsection (2)(f) of this section and each person who owns ten percent (10%) or more of the registrant under the following requirements:

    (a) The person certifying and each person who owns ten percent (10%) or more

    of the registrant shall provide his or her fingerprints to the Department of

    Kentucky State Police for submission to the Federal Bureau of

    Investigation after a state criminal background check is conducted;

    (b) The results of the national and state criminal background check shall be

    sent to the board; and

    (c) Any fee charged by the Department of Kentucky State Police and the

    Federal Bureau of Investigation shall be an amount no greater than the

    actual cost of processing the request and conducting the check.

    (4) The board shall issue a certificate of registration to a registrant authorizing the registrant to act or offer to act as an appraisal management company in this state upon:

    (a) Receipt of a properly completed application;

    (b) Payment of the required fee;

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    (c) Posting of the required bond; and

    (d) A determination by the board that:

    1. The registrant has not had a previous registration suspended or

    revoked; and

    2. The activities of the applicant shall be directed and conducted by

    persons who:

    a. Have not had a previous registration suspended or revoked;

    b. Have not pled guilty or nolo contendere to or been found guilty

    of a felony; or

    c. Within the past ten (10) years have not pled guilty, pled nolo

    contendere to, or been found guilty of a misdemeanor involving

    mortgage lending or real estate appraising or an offense

    involving a breach of trust or fraudulent or dishonest dealing.

    (5) (a) If the board finds that there is substantial reason to deny the application for

    registration, the board shall notify the registrant that the application has

    been denied and shall afford the registrant an opportunity for a hearing

    before the board to show cause why the registration should not be denied.

    (b) All proceedings concerning the denial of a certificate of registration shall

    be conducted in accordance with KRS Chapter 13B.

    (c) The acceptance by the board of an application for registration does not

    constitute the approval of its contents or waive the authority of the board to

    take disciplinary action under Section 7 of this Act.

    (6) (a) Registrations issued under this section shall be renewed annually.

    (b) Renewal shall occur on October 31 of each year.

    (c) If the initial registration occurs less than six (6) months before October 31,

    the renewal shall not be required until October 31 of the following year,

    and shall then be renewed on October 31 of each year thereafter.

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    (7) (a) Failure to renew a registration in a timely manner shall result in a loss of

    authority to operate.

    (b) A request to reinstate a certificate of registration shall be accompanied by

    payment of a penalty of fifty dollars ($50) for each month of delinquency,

    up to six (6) months after expiration.

    (c) After six (6) months' delinquency, a new application for registration shall

    be required.

    (8) The board shall promulgate administrative regulations to establish standards for

    the operation of appraisal management companies and for the implementation

    and enforcement of Sections 1 to 8 of this Act.

    ;SECTION 3. A NEW SECTION OF KRS CHAPTER 324A IS CREATED TO

    READ AS FOLLOWS:

    (1) The board shall promulgate administrative regulations establishing a reasonable

    filing fee to be paid by each appraisal management company seeking registration

    under Section 2 of this Act. The filing fee shall include the annual fee for

    inclusion in the national registry maintained by the Appraisal Subcommittee of

    the Federal Financial Institutions Examination Council.

    (2) In addition to the filing fee, each applicant for registration shall post and

    maintain a surety bond with the board. The surety bond shall:

    (a) Be established by the board through administrative regulation but shall not

    exceed five hundred thousand dollars ($500,000);

    (b) Be in the form prescribed by the board; and

    (c) Accrue to the state for the benefit of any claimant against the registrant to

    secure the faithful performance of the registrant's obligations.

     The aggregate liability of the surety bond shall not exceed the principal sum of

    the surety bond.

    (3) A party having a claim against the registrant may bring suit directly against the

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    surety bond, or the board may bring suit on behalf of the party having a claim

    against the registrant.

    (4) Consumer claims shall be given priority in recovering from the surety bond.

    (5) If a claim reduces the face amount of the bond, the bond amount shall be

    annually restored upon renewal of the registrant's registration.

    ;SECTION 4. A NEW SECTION OF KRS CHAPTER 324A IS CREATED TO

    READ AS FOLLOWS:

    (1) A registrant that is an organization shall:

    (a) Maintain a registered agent for service of process; and

    (b) Provide to the board the information required by the Secretary of State

    concerning the organization's agent for service of process. If changes are

    made to the information required by the Secretary of State, the changes

    shall be provided to the board within five (5) business days.

    (2) A registrant shall maintain, or cause to be maintained, complete records of

    requests for appraisal services referred to an appraiser licensed or certified by the

    board, including without limitation records pertaining to the acceptance of fees

    from clients and payments to appraisers. The board may inspect records, without

    prior notice, periodically, or if the board determines that the records are pertinent

    to an investigation of a complaint against a registrant.

    (3) A registrant shall designate a controlling person or managing principal

    responsible for ensuring compliance with this section.

    (4) (a) The registrant shall file a form with the board:

    1. Documenting the identity of the person designated as the controlling

    person or managing principal; and

    2. Certifying the individual's acceptance of the responsibility of a

    controlling person or managing principal.

    (b) The registrant shall submit a new form to the board within five (5) business

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    days after a change in its controlling person or managing principal.

    (c) An individual registrant who operates as a sole proprietorship is deemed the

    managing principal under this section.

    (5) A registrant shall make and keep its accounts, correspondence, memoranda, papers, books, and other records in accordance with administrative regulations promulgated by the board. All records shall be retained for five (5) years unless the board establishes a different, longer retention period for particular types of records.

    (6) The registrant shall disclose, on all invoices, purchase orders, or other documents establishing work to be performed for or compensation due from its clients, itemized actual fees paid to any third party for services performed, including appraisal services, for the client through contract with or arrangement through the registrant. The disclosure shall include:

    (a) The name of the third party performing the service, including a licensed

    appraiser performing appraisal services;

    (b) The nature of the service and itemized fees paid to the third party for

    appraisal services or any other services performed; and

    (c) Itemized fees or charges received by the registrant for appraisal

    management services.

     If the disclosure made becomes inaccurate because of changes to services requested or performed, a revised or amended disclosure shall be provided by the end of the next business day after the change to services has been performed, and the revised or amended disclosure shall be clearly marked as revised or amended and contain sufficient information for the client to identify the original disclosure referenced.

    (7) The provisions of this section do not exempt the registrant from any other reporting requirements contained within any federal or state law.

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    ;SECTION 5. A NEW SECTION OF KRS CHAPTER 324A IS CREATED TO

    READ AS FOLLOWS:

    (1) An employee, director, officer, or agent of an appraisal management company or any other third party acting as a joint venture partner with or as an independent contractor for an appraisal management company shall not improperly influence or attempt to improperly influence the development, reporting, result, or review of a real estate appraisal, including but not limited to the use of intimidation, coercion, extortion, bribery, blackmail, threat of nonpayment or withholding payment for appraisal services, or threat of exclusion from future appraisal work.

    (2) The registrant shall not:

    (a) Request, allow, or require an appraiser to collect any portion of the fee

    charged by the appraisal management company, including the appraisal fee,

    from a borrower, homeowner, or other third party;

    (b) Require an appraiser to provide the registrant with the appraiser's digital

    signature or seal;

    (c) Alter, amend, or change an appraisal report submitted by a licensed or

    certified appraiser, by the following or any other actions:

    1. Removing the appraiser's signature;

    2. Adding or removing information to or from the appraisal report; or

    3. Altering the final value opinion reported by an appraiser;

    (d) Remove an appraiser from an appraiser panel without prior written notice

    to the appraiser. An appraiser may only be removed from an appraiser

    panel with written notice for:

    1. A violation of the minimum USPAP standards or other applicable

    statutes or administrative regulations resulting in a suspension or

    revocation of the appraiser's license in Kentucky; or

    2. Other substandard or otherwise improper performance as may be

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