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NORTH DAKOTA REAL ESTATE APPRAISER QUALIFICATIONS AND ETHICS BOARD
PO BOX 1336 - BISMARCK - NORTH DAKOTA 58502 PHONE: (701) 222-1051 I FAX: (701) 222-1051
Website: www.ndappraiserboard.org Email: jcampbell@bis.midco.net
APPENDIX V
TESTIMONY TO: Administrative Rules Committee
SUBJECT: Title 101-05 Appraisal Management Company Rules and Regulations
TESTIMONY BY: Mr. Dave Lanpher Chairman of the ND Real Estate Appraiser Qualifications and Ethics Board
DATE: December 5, 2017
1. Whether the rules resulted from statutory changes made by the Legislative Assembly.
The proposed rules are a result of N.D.C.C. 45-23.5 Appraisal Management Companies.
2. Whether the rules are related to any federal statute or regulation.
The North Dakota Appraiser Board was established in 1991 as a result of Title XI of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). FIRREA was established due to
the savings and loan financial meltdown of the 1980's. Title XI of FIRREA addressed the need and
process for regulation of real estate appraisers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in 2010.
Section 1473 of Dodd Frank added Section 1124 to Title XI of FIRREA, requiring the Federal Financial
Institution Regulatory Agencies (OCC, Board, FDIC, DCUA, Bureau, and FHFA) to jointly issue rules for
State registration and supervision of appraisal management companies (AMCs).
The Agencies issued proposed AMC Rules on April 9, 2014 and published the final rule on June
9, 2015. The effective date of the final rule was August 10, 2015, with a compliance date of 12 months
from the effective date.
Provisions of the AMC final rule implemented:
1) the minimum requirements to be applied by participating States in the registration and
supervision of appraisal management companies (AMCs).
2) the minimum requirements in the Dodd-Frank Act for AMCs that are subsidiaries owned and
controlled by an insured depository institution and regulated by a Federal financial institutions
regulatory agency (Federally regulated AMCs). Federally regulated AMCs do not need to
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register with a State, but are subject to the same minimum requirements as State-regulated
AM Cs.
3) requirements for States to report to the Appraisal Subcommittee (ASC) of the Federal
Financial Institutions Examination Council (FFIEC) information required by the ASC to
administer the new national registry of AMCs (AMC National Registry).
"Pursuant to section 1124(f), beginning 36 months from the effective date of this final rule, an
AMC that meets the statutory size threshold may not provide services for a Federally related transaction
in a State unless the AMC is registered with the State or is subject to oversight by a Federal financial
institutions regulatory agency. This provision effectively allows each State up to three years to establish
registration and supervision systems that meet the requirements of the final rule ........ " The Appraisal
Subcommittee could extend the deadline another 12 months if the State has made substantial progress in
establishing a program for the registration and supervision of appraisal management companies.
The Final Rule to implement the collection and transmission of AMC national registry fees to the
Appraisal Subcommittee was not published in the Federal Registry until September 25, 2017, with an
effective date of November 24, 2017. The Appraisal Subcommittee will open the AMC National Registry
to States no later than June 4, 2018.
3. A description of the rulemaking procedure followed in adopting the rules, e.g., the type of public
notice given and the extent of public hearings held on the rules.
Staff researched and collected information from federal agencies, state agencies, and other state
appraiser regulatory agencies to assist in the drafting of Rules and Regulations relating to the registration
and supervision of Appraisal Management Companies (AMC's). In addition, the Board looked to
Appraisal Management Companies (large and small), as well as AMC trade associations for input. Legal
Counsel of the Office of Attorney General was consulted to assure that the North Dakota
guidelines/procedures for drafting rules and regulations were followed. These consultations, along with
numerous Appraiser Board meetings, facilitated in the final draft of the proposed AMC rules and
regulations, prior to the public hearing.
Notice of the public hearing was published in June 2017, in all North Dakota official county
newspapers, as required.
The public hearing was held on July 14, 2017. No oral comments were received at this hearing.
The public comment period for written comments was open through July 28, 2017. Written comments
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were received and discussed at subsequent meetings of the Board. With the assistance of Legal Counsel
the Rules were finalized and the Board adopted the Proposed Appraisal Management Company Rules
and Regulations on October 4, 2017. The rules were forwarded to the Attorney General's office for
review for legality and approved as such; and subsequently filed with the Legislative Counsel for
publication.
4. Whether any person has presented a written or oral concern, objection, or complaint for agency
consideration with regard to these rules.
Written comments were received from: REVAA; Real Estate Valuation Advocacy Association (a trade
association representing a number of AMC's); the Appraisal Subcommittee of the Federal Financial
Institutions, and Surety and Fidelity Association of America.
REVAA commented: "Overall, REVAA is supportive of the proposed AMC rules." However various
recommendations were submitted, and are as follows:
101-05-01-02. Registration application requirements.
101-05-01-02.1.g. Insert verbiage: "unless such license or certificate was not declined, revoked or
suspended, for a substantive cause and has been reinstated by the state or states in which the individual
was licensed or certified, substantive cause to be determine by the board."
Revise 101-05-01-02.1.h. to read: "Certification that the appraisal management company is not owned
in whole or in part, directly or indirectly, by an individual who has had an appraiser license or certificate
denied, revoked or suspended subject to a disciplinary proceeding in any state."
101-05-01-04. Surety Bond.
Revise 101-05-01-04.1c. to read:"Amounts owed to the board for national registry fees, initial registration
and annual renewal fees, late filing fees, and change of information fees."
Revise 101-05-01-04.3. to read: "The surety bond required by this section shall be continuously on file
with the board in the amount of twenty-five thousand dollars and is for the exclusive purpose of payment
of the obligations listed in paragraph 1 of this section. Upon termination or cancellation of the bond or
reduction of the bond amount to less than twenty-five thousand dollars, a registered appraisal
management company shall, alternatively:
a. File a replacement bond within the time period established by the board by rule; or
b. Surrender the company's registration to the board and cease operating as an appraisal
management company."
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101-05-01-07. Notice of change of designated office. To align with §101-05-01-15.6. Revise "five-day
notice" to read "fifteen-day notice".
101-05-01-09. Denial of registration.
Remove the following redundant verbiage: "If an application for registration is denied, the board will
notify the applicant of the denial and specify the basis for the denial."
101-05-01-10. Registration renewal.
Revise 101-05-01-10.1 to reduce the renewal application timeframe from 90 days to a 60-day timeframe.
To clarify requirements, revise 101-05-01-10.3, 101-05-01-10.4 and 101-05-01-10.5:
"101-05-01-10.3. Failure to renew a registration prior to expiration will result in the loss of
authority to operate as an appraisal management company in North Dakota until a request for
reinstatement has been approved by the board. A late filing fee will be assessed for each month, or
portion thereof, that elapses between expiration and reinstatement. Late filing fees and any national
registry fee assessed by the board must be paid prior to reinstatement in addition to the annual renewal
fees."
"101-05-01-10.4. A registered appraisal management company may renew an expired
registration at any time prior to three."
"101-05-01-10-5. Payment of annual renewal or late filing fees; does not excuse a registrant from
disciplinary or criminal penalties for operating in violation of North Dakota Century Code 43-23.5"
101-05-01-12. Filing Fees. Revise 101-05-01-12.2 to allow the Board to collect information and National
Registry Fees from AMC's:
"101-05-01-12.2 Unless prohibited by state or federal law, the board may collect the following
fees, as well as any information the state is required to collect and submit to the appraisal subcommittee,
from each appraisal management company that is exempt from registration under North Dakota Century
Code chapter 43-23.5."
101-05-01-15. Responsibilities and duties.
Revise 101-05-01-15.4 to provide clarification: "Have a system in place to verify that any
employee or independent contractor the appraisal management company utilizes to perform an appraisal
review on a completed appraisal on property located in North Dakota, be licensed or certified with the
same qualifications required of the appraisal and in good standing in North Dakota."
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Revise 101-05-01-15.4 to provide clarification: "Disclose its registration number within its
engagement document with each utilized appraiser."
101-05-01-16: Retention of records.
Revise 101-05-01-16.1.e. to provide clarification: "Records related to the review of the
requested appraisal, if applicable, including the original review report, any and all correspondence sent to
and received from the utilized reviewing appraiser, and each subsequent revised review report."
Remove101~5~1~62
Revise 101-05-0.1-16.3 verbiage for consistency with USPAP and other states:
101-05-0.1-16.3. "Records must be retained for a minimum of five years, or at least two years after the
final disposition of any investigation, litigation, or state or federal review, involving the appraisal
management company that materially relies upon such records, whichever period expires last. Records
may be retained as a photocopy or electronic copy type of media."
The Appraisal Subcommittee submitted the following comments:
101-05-01-05. Roster of appraisal management companies. The Rules, as proposed, do not
give the Board the authority or require the Board to report investigations or disciplinary actions to the
Appraisal Subcommittee as required in Sections 1109 and 34.213 of the Final Rule.
101-05-01-15.2. Responsibilities and duties. The Rules, as proposed, do not require the
utilized appraiser who performs appraisals in this State be independent of the transaction.
43-23.5-01. Definitions.5.Appraiser panel. Does not define "independent contractor".
Surety and Fidelity Association of America recommended the Board include a provision that affirms
the surety's right to investigate a claim and the scope of its liability for a judgment, particularly in the case
of a default judgment.
Board member considered all written comments/recommendations:
Based on comments received from the Appraisal Subcommittee, the Board revised:
101-05-01-05 to include " ... The roster shall include investigations initiated and disciplinary actions taken."
and
101-05-01-15.2 to include " .. be independent of the transaction .. "
However, defining "independent contractor" in 43-23.5-01 will have to be addressed in Statute at
the next legislative session.
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Board members were in agreement with a majority of the recommendations submitted by REV AA
and incorporated these as part the proposed rules.
Board members were also in agreement with the Surety and Fidelity Association of America
recommendation and looked to Legal Counsel to draft the appropriate language to be included as part of
the proposed rules.
With the assistance of Legal Counsel additional changes were made to:
101-05-01-02. 1g. The Board added verbiage "substantive cause to be determined by the board'.
and
101-0-01-15. 4. Verbiage was added to help clarify that the appraiser reviewing the appraisal
must be certified in ND and be as qualified as the appraiser who completed the appraisal.
5. The approximate cost of giving public notice and holding any hearing on the rules and the
approximate cost (not including staff time) of developing and adopting the rules.
Legal Fees: $2000.00
Public Notice: $2052.84
6. An explanation of the subject matter of the rules and reasons for adopting those rules.
The final rule does not compel a State to establish an AMC registration and supervision program.
However, the North Dakota Appraiser Board elected to establish a program. The fundamental purpose
behind the Board's decision to supervise and regulate appraisal management companies (AMCs) is
essentially the same as that of licensure and certification of real estate appraisers. It is to protect the
public.
101-05-01-02 Registration application requirements. Details the information required as part
the application.
101-05-01-03 Term of registration. Establishes September 30 as the registration expiration
date.
101-05-01-04. Surety Bond. Requires a surety bond as a guaranty that the AMC will carry out
their performance and payment obligations according to their agreements.
101-05-01-05. Roster of appraisal management companies. Requires the Board to maintain a
roster of registered appraisal management companies. This section also provides the Board the authority
to transmit this roster to the Appraisal Subcommittee, as well as a roster of any disciplinary actions taken
against an appraisal management company.
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101-05-01-06. Notice of change of address.
101-05-01-07. Notice of change of designated officer.
101-05-01-08. Notice of change of controlling person.
Sections 101-05-01-06 through 08 require each registered appraisal management company to provide
the Board written notice of changes in address, designated officer or controlling person.
101-05-01-09. Denial of registration. Should an appraisal management company by denied
registration in ND, the Board is required to notify the appraisal management company in writing of the
denial and the reasons for the this denial.
101-05-01-10. Registration renewal. Addresses the annual renewal process required to
maintain a North Dakota registration.
101-05-01-11. Federal appraiser registry. Gives the Board the authority to collect and transmit
the ASC annual registry fees from State registered AMCs.
101-05-01-12. Filing fees.
101-05-01-13. Refund of fees.
101-05-01-14. Payment of fees.
Sections 101-05-01-12 through 101-05-01-14 outline the application fees, national registry fees
and the possible consequences should the Board receive a notice of nonsufficient funds.
Mr. Tim Zak, Director, Strategic Initiates Industry and Government Relations Valuation Solutions
Group, Corelogic provided the Board with a recap of AMC application fees. Board Staff also received a
more recent recap completed by Ms. Brandy March, Executive Office of the Iowa Real Estate Appraiser
Examination Board. A compilation of these figures is recapped below and continues on to the following
page. Based on these figures, State AMC registration fees appear to vary widely across the nation,
ranging from $350 (MO) to $4000 (CO), with an average fee of $1464 for initial application fees.
Mississippi 1000 1000
Missouri 350 350 Alabama 3500 2000 Montana 3200 Arizona 2500 1250 Nebraska 2999 Arkansas 500 Nevada 500 California 1600 800
Colorado 4000 808 New Hampshire 900 800 Connecticut 1000 1000 New Mexico 1000 550
Delaware 1000 North Carolina 3500 2000
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Florlda 450 150 NORTH DAKOTA 2500 2000
Georgia 500 500 Oklahoma 1000 1000
Idaho 1500 1500 Oregon 2500 1500
Illinois 2500 2000 Pennsylvania 1000 Indiana 500 South Dakota 1000 750
Iowa 750 Tennessee 2000 1000
Kansas 1500 900 Texas 3300 1650
Kentucky 2000 2000 Utah 350 175
Louisiana 1500 1500 Vermont 500 Maryland 2500 2250 Virginia 490 150
Michigan 2000 1000 Washington 2400 1200
Minnesota 2500 2000 West Virginia 2500 1200
Wyoming 1800
101-05-01-15. Responsibilities and duties. This section requires all registered AMC's to:
1) have a system in place to verify that each appraiser utilized is licensed or certified and in good
standing in ND; is independent to the transaction and competent in the location and geographic area of
the assignment;
2) have a system in place to review work product for compliance with the Uniform Standards of
Professional Appraisal Practice and as well as system to report any violations of ND law, rules and
USPAP violations to the Board);
3) have system in place to verify that the appraiser reviewing the appraisal is certified in ND and
is as qualified as the appraiser who completed the appraisal;
4) maintain a registered agent for service of process and a designated officer responsible for
compliance with ND law and rules;
5) disclose to the client the fee paid to the appraiser separate from the appraisal management
fees or charges;
6) disclose the AMC registration number in various documents.
101-05-01-16. Retention of records. This section outlines the minimum records that an AMC must
retain for each service request:
1) per the utilized appraiser: letter of engagement, appraisal report, revised appraisal report,
addenda, and all correspondence related to the assignment;
2) per the reviewing appraiser: letter of engagement, records related to the review and all
correspondence related to the review, as well as any subsequent review, if required;
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3) per the client: all documents supplied to the client, as well as all correspondence to and from
the client; and
4) fees paid to the appraiser and fees received from the client.
101-05-01-17. Inspection and copying. Requires the AMC to make records pertinent to an
investigation/complaint available to the Board.
101-05-01-18. Complaints and Investigations. Gives the Board the authority to investigate an AMC
upon a written and signed complaint or referral, or upon its own motion.
7. Whether a regulatory analysis was required by North Dakota Century Code (NDCC Section 28-32-8
and whether that regulatory analysis was issued.
No regulatory analysis was requested or required as the proposed rules are not expected to have
an impact on the regulated community in excess of $50,000, and neither the Governor nor any member of
the Legislative Assembly requested a regulatory analysis.
8. Whether a regulatory analysis or economic impact statement of impact on small entities was
required by NDCC Section 28-32-08.1 and whether that regulatory analysis or impact statement
was issued.
No small entity economic impact statement was required because the agency is exempt from the
requirement to prepare one.
No small entity regulatory analysis was required because the agency is exempt from the
requirement to prepare one.
9. Whether these rules have a fiscal effect on state revenues and expenditures, including any effect
on funds controlled by your agency.
The North Dakota Appraiser Board is supported entirely from special funds through licensure and
other fees specified in state statute. The Board does not receive an appropriation from the general fund.
The proposed amendments charge an initial fee for an appraisal management company of
$2,500 and the national registry fee with an annual renewal fee of $2,000 and the national registry fee.
Federal law may require the Board to charge and forward the national registry fee to the federal
government under a proposed regulation. An appraisal management company would be required to pay
these national fees without regard to state action, and it is hoped that this proposed regulation may
reduce the regulatory burden on licensees. Licensed appraisal management companies also are
required to be bonded.
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At this time, the Board does not know whether any appraisal management companies will choose
to do business in North Dakota. Fees must be set to offset costs of operating the Board under N.D.C.C.
§ 43-23.5-19(1 ), and these fees are comparable to neighboring states.
Assuming 15 licenses, the Board expects that there will be an increase in Board revenue of
approximately $37,500 in the next biennium and $30,000 in the following biennium. Note that the national
registry fee would be passed on to the federal government and is not revenue for the state.
The Board anticipates that the proposed rule changes will increase expenditures for initial
licensure review and will result in an increase of regulatory complaints from the public. However, there is
no experience yet to draw upon in estimating these costs.
10. Whether a constitutional takings assessment was prepared as required by NDCC Sec. 28-32-09.
No takings assessment was prepared because the rules do not limit the use of real property.
11. If these rules were adopted as emergency (interim final) rules under
NDCC Section 28-32-03, provide the statutory grounds from that section for
declaring the rules to be an emergency and the facts that support that
declaration and provide a copy of the Governor's approval of the emergency
status of the rules. If these rules were adopted as emergency (interim
final) rules, what steps were taken to make the rules known to persons who
can reasonably be expected to have a substantial interest in the rules?
These rules were not adopted as emergency rules. Therefore, no approval of emergency status
was required.
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