SENATE CORPORATIONS AND TRANSPORTATION COMMITTEE SUBSTITUTE FOR

SENATE BILL 279

51st legislature - STATE OF NEW MEXICO - first session, 2013

AN ACT

RELATING TO PROPERTY; AMENDING AND ENACTING SECTIONS OF THE APPRAISAL MANAGEMENT COMPANY REGISTRATION ACT; PROVIDING FOR COMPLIANCE WITH FEDERAL LAW; PROVIDING A DEFINITION OF "APPRAISAL MANAGEMENT COMPANIES"; PROVIDING FOR REGISTRATION STANDARDS, FEES AND COMPLIANCE WITH THE UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE; PROVIDING FOR AUTOMATED VALUATION MODELS; PROVIDING FOR BROKER PRICE OPINIONS; PROVIDING FOR INDEPENDENCE OF APPRAISALS; PROVIDING FOR CRIMINAL BACKGROUND CHECKS; PROVIDING PENALTIES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. Section 47-14-2 NMSA 1978 (being Laws 2009, Chapter 214, Section 2) is amended to read:

     "47-14-2. DEFINITIONS.--As used in the Appraisal Management Company Registration Act:

          A. "appraisal" means the act or process of developing an opinion of the value of real property in conformance with the uniform standards for professional appraisal practice published by the appraisal foundation;

          B. "appraisal foundation" means the appraisal foundation incorporated as an Illinois not-for-profit corporation on November 30, 1987 and to which reference is made in the Federal Financial Institutions Examination Council Act of 1978, as amended by Title 11, Real Estate Appraisal Reform Amendments;

          C. "appraisal management company" means [a corporation, partnership, sole proprietorship, subsidiary, limited liability company or other business entity that:

                (1) contracts with independent appraisers to perform real estate appraisal services for clients;

                (2) receives requests for real estate appraisal services from clients and, for a fee paid by the client, enters into an agreement with one or more independent appraisers to perform the real estate appraisal services contained in the request; or

                (3) otherwise serves as a third-party broker of appraisal management services between clients and appraisers]:

                (1) any external third party that oversees a network or panel of certified or licensed appraisers to:

                     (a) recruit, select and retain appraisers;

                     (b) contract with appraisers to perform appraisal assignments;

                     (c) manage the process of having an appraisal performed; or

                     (d) review and verify the work of appraisers; or

                (2) any external third party that contracts with a qualifying licensed real estate broker or associate broker as defined in Chapter 61, Article 29 NMSA 1978 to provide broker price opinions;

          D. "appraisal management services" means the process of receiving a request for the performance of real estate appraisal services from a client, and for a fee paid by the client, entering into an agreement with one or more independent appraisers to perform the real estate appraisal services contained in the request;

          E. "appraiser" means a person who provides an opinion of the market value of real property and holds a state license, registration or certified license in good standing;

          F. "appraiser panel" means a group of independent appraisers that have been selected and retained by an appraisal management company to perform real estate appraisal services for the appraisal management company;

          G. "automated valuation model" means any computerized model used by mortgage originators and secondary market issuers to determine the collateral worth of a mortgage secured by a consumer's principal dwelling;

          [G.] H. "board" means the real estate appraisers board created pursuant to the Real Estate Appraisers Act;

          I. "broker price opinion" means an opinion by a qualifying or associate broker of the price of real estate for the purpose of marketing, selling, purchasing, leasing or exchanging the real estate or any interest therein or for the purposes of providing a financial institution with a collateral assessment of any real estate in which the financial institution has an existing or potential security interest; provided that the opinion of the price shall not be referred to or construed as an appraisal or appraisal report and shall not be used as the primary basis to determine the value of real estate for the purpose of loan origination;

          [H.] J. "client" means a person or entity that contracts with, or otherwise enters into an agreement with, an appraisal management company for the performance of real estate appraisal services;

          [I.] K. "controlling person" means:

                (1) an owner, officer or director of a corporation, partnership, limited liability company or other business entity seeking to offer appraisal management services in this state;

                (2) an individual employed, appointed or authorized by an appraisal management company that has the authority to enter into a contractual relationship with clients for the performance of appraisal management services and that has the authority to enter into agreements with independent appraisers for the performance of real estate appraisal services; or

                (3) 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;

          [J.] L. "real estate appraisal services" means the practice of developing an opinion of the value of real property in conformance with the uniform standards of professional appraisal practice published by the appraisal foundation; and

          [K.] M. "uniform standards of professional appraisal practice" means the uniform standards of professional appraisal practice promulgated by the appraisal foundation and adopted by rule pursuant to the Real Estate Appraisers Act."

     SECTION 2. Section 47-14-3 NMSA 1978 (being Laws 2009, Chapter 214, Section 3, as amended) is amended to read:

     "47-14-3. REGISTRATION REQUIRED.--

          A. It is unlawful for a person, corporation, partnership, sole proprietorship, subsidiary, limited liability company or any other business entity to, directly or indirectly, engage or attempt to engage in business as an appraisal management company, to, directly or indirectly, engage or attempt to perform appraisal management services or to advertise or hold itself out as engaging in or conducting business as an appraisal management company without first obtaining a certificate of registration issued by the board under the provisions of the Appraisal Management Company Registration Act, regardless of the entity's use of the term "appraisal management company", "mortgage technology company" or any other name.

          B. A person, corporation, partnership, sole proprietorship, subsidiary, limited liability company or any other business entity seeking the registration required by Subsection A of this section shall:

                (1) register with the appraisal subcommittee or the board and be subject to supervision by the board;

                (2) verify that only licensed or certified appraisers are used for federally related transactions;

                (3) require that appraisals comply with the uniform standards of professional appraisal practice; and

                (4) require that appraisals are conducted independently and free from inappropriate influence and coercion pursuant to the appraisal independence standards established pursuant to the federal Truth in Lending Act.

          [B.] C. The registration required by Subsection A of this section shall include:

                (1) the name of the entity seeking registration;

                (2) the business address of the entity seeking registration;

                (3) telephone contact information of the entity seeking registration;

                (4) if the entity seeking registration 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;

                (5) 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;

                (6) the name, address and contact information for a controlling person;

                (7) a certification that the entity seeking registration has a system and process in place to verify that [a person being added to the] an appraiser is selected and retained for the network or the appraiser panel of the appraisal management company holds a license or certification in good standing in this state pursuant to the Real Estate Appraisers Act;

                (8) a certification that the entity seeking registration has a system in place to review, on a periodic basis, the work of all independent 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;

                (9) a certification that the entity maintains a detailed record of each service request that it receives and of the independent appraiser that performs the real estate appraisal services for the appraisal management company;

                (10) an irrevocable consent to service of process;

                (11) a bond or other equivalent means of security as required by the Appraisal Management Company Registration Act; and

                (12) any other information required by the board.

          D. The requirements of Subsection B of this section shall apply to an appraisal management company that is a subsidiary owned and controlled by a financial institution regulated by a federal financial institution regulatory agency."

     SECTION 3. Section 47-14-6 NMSA 1978 (being Laws 2009, Chapter 214, Section 6) is amended to read:

     "47-14-6. EXPIRATION OF LICENSE.--A registration granted by the board pursuant to the Appraisal Management Company Registration Act shall [be valid for one year from the date on which it is issued] expire on September 30 of each year."

     SECTION 4. Section 47-14-8 NMSA 1978 (being Laws 2009, Chapter 214, Section 8) is amended to read:

     "47-14-8. FEE.--

          A. The board shall establish the fee for appraisal management company registration by rule to cover the cost of the administration of the Appraisal Management Company Registration Act, but in no case shall the fee be more than two thousand dollars ($2,000).

          B. Registration fees shall be credited to the appraiser fund pursuant to Section 61-30-18 NMSA 1978.

          C. An appraisal management company that either has registered with the board or operates as a subsidiary of a federally regulated financial institution shall pay to the board an annual registry as determined by the appraisal subcommittee."

     SECTION 5. Section 47-14-9 NMSA 1978 (being Laws 2009, Chapter 214, Section 9) is amended to read:

     "47-14-9. OWNER REQUIREMENTS.--

          A. An appraisal management company applying for registration may not be owned by a person or have any principal of the company who has had a license or certificate to act as an appraiser refused, denied, canceled or revoked in this state or in any other state.

          B. Each person that owns, is an officer of or has a financial interest in an appraisal management company in this state shall:

                (1) be of good moral character, as determined by the board; and

                (2) submit to a background investigation, as determined by the board. [and

                (3) certify to the board that the person has never had a license to act as an appraiser refused, denied, canceled or revoked in this state or in any other state]

          C. An appraisal management company shall not be registered by the board or included on the national registry if the company, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, canceled, surrendered in lieu of revocation or revoked in any state and not subsequently granted or reinstated. A person that owns more than ten percent of an appraisal management company shall be of good moral character, as determined by the board, and shall submit to a background investigation carried out by the board."

     SECTION 6. Section 47-14-17 NMSA 1978 (being Laws 2009, Chapter 214, Section 17) is amended to read:

     "47-14-17. APPRAISER INDEPENDENCE--PROHIBITIONS.--

          A. Appraisals shall be conducted independently and free from inappropriate influence and coercion pursuant to the appraisal independence standards established pursuant to the federal Truth in Lending Act. 

          [A.] B. It is unlawful for any employee, director, officer or agent of an appraisal management company registered pursuant to the Appraisal Management Company Registration Act to influence or attempt to influence the development, reporting or review of an appraisal through coercion, extortion, collusion, compensation, instruction, inducement, intimidation, bribery or in any other manner, including:

                (1) withholding or threatening to withhold timely payment for an appraisal;

                (2) withholding or threatening to withhold future business for an independent appraiser or demoting or terminating, or threatening to demote or terminate, an independent appraiser;

                (3) expressly or impliedly promising future business, promotions or increased compensation for an independent appraiser;

                (4) conditioning the request for an appraisal service 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 independent appraiser;

                (5) requesting that an independent appraiser provide an estimated, predetermined or desired valuation in an appraisal report or provide estimated values of comparable sales at any time prior to the independent appraiser's completion of an appraisal service;

                (6) providing to an independent 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 may be provided;

                (7) providing to an independent appraiser, or any entity or person related to the appraiser, stock or other financial or non-financial benefits;

                (8) allowing the removal of an independent appraiser from an appraiser panel, without prior written notice to such appraiser;

                (9) 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 pre- or post-funding appraisal review or quality control process; or

                (10) engaging in any other act or practice that impairs or attempts to impair an appraiser's independence, objectivity or impartiality.

          [B.] C. Nothing in Subsection [A] B of this section shall be construed as prohibiting the appraisal management company from requesting that an independent appraiser:

                (1) provide additional information about the basis for a valuation; or

                (2) correct objective factual errors in an appraisal report.

          D. In an effort to preclude discrimination, criteria shall be established by the appraisal management company and may include education achieved, experience, sample appraisals and references from prior clients. Membership in a nationally recognized professional appraisal organization may be a criterion considered, though lack of membership shall not be the sole bar against consideration for an assignment under these criteria."

     SECTION 7. Section 47-14-21 NMSA 1978 (being Laws 2009, Chapter 214, Section 21) is amended to read:

     "47-14-21. ENFORCEMENT.--

          A. The board may censure an appraisal management company, conditionally or unconditionally suspend or revoke any registration issued under the Appraisal Management Company Registration Act, levy fines or impose civil penalties not to exceed twenty-five thousand dollars ($25,000) per violation if, in the opinion of the board, an appraisal management company is attempting to perform, has performed or has attempted to perform any of the following acts:

                [A.] (1) committing any act in violation of the Appraisal Management Company Registration Act;

                [B.] (2) violating any rule or regulation adopted by the board in the interest of the public and consistent with the provisions of the Appraisal Management Company Registration Act;

                [C.] (3) procuring a registration, license or certification by fraud, misrepresentation or deceit; or

                [D.] (4) violating the Real Estate Appraisers Act or the federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

          B. The board may deny an application for registration for failure to comply with the minimum requirements and criteria as set forth by the Appraisal Management Company Registration Act.

          C. Board action relating to the issuance, suspension or revocation of any registration, license or certificate shall be governed by the provisions of the Uniform Licensing Act; provided that the time limitations set forth in the Uniform Licensing Act shall not apply to the processing of administrative complaints filed with the board, which shall be governed by federal statute, regulation or policy."

     SECTION 8. A new section of the Appraisal Management Company Registration Act is enacted to read:

     "[NEW MATERIAL] AUTOMATED VALUATION MODELS USED TO ESTIMATE COLLATERAL VALUE FOR MORTGAGE LENDING PURPOSES.--

          A. Automated valuation models shall adhere to quality control standards designed to:

                (1) ensure a high level of confidence in the estimates produced by automated valuation models;

                (2) protect against the manipulation of data;

                (3) seek to avoid conflicts of interest;

                (4) require random sample testing and reviews; and

                (5) account for any other such factor that the board determines to be appropriate.

          B. The board, in consultation with the staff of the appraisal subcommittee and the appraisal standards board of the appraisal foundation, shall promulgate rules to implement the quality control standards required under this section."

     SECTION 9. A new section of the Appraisal Management Company Registration Act is enacted to read:

     "[NEW MATERIAL] CRIMINAL BACKGROUND CHECKS.--

          A. The board may adopt rules that provide for criminal background checks for all licensees to include:

                (1) requiring criminal history background checks of applicants for licensure pursuant to the Appraisal Management Company Registration Act;

                (2) requiring applicants for licensure to be fingerprinted;

                (3) providing for an applicant who has been denied licensure to inspect or challenge the validity of the background check record;

                (4) establishing a fingerprint and background check fee not to exceed the current rate as determined by the department of public safety to be paid by the applicant; and

                (5) providing for submission of an applicant's fingerprint cards to the federal bureau of investigation to conduct a national criminal history background check and to the department of public safety to conduct a state criminal history check.

          B. Arrest record information received from the department of public safety and the federal bureau of investigation shall be privileged and shall not be disclosed to persons not directly involved in the decision affecting the applicant.

          C. Electronic live fingerprint scans may be used when conducting criminal history background checks."

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