SF 3043

as introduced - 86th Legislature (2009 - 2010) Posted on 03/04/2010 03:14pm

A bill for an act
relating to commerce; providing for the licensing and regulation of appraisal
management companies; proposing coding for new law as Minnesota Statutes,
chapter 82C.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [82C.01] TITLE.
new text end

new text begin This chapter shall be known as the Minnesota Appraisal Management Company
Licensing and Regulation Act.
new text end

Sec. 2.

new text begin [82C.02] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Terms. new text end

new text begin As used in this chapter, the terms in this section have the
meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin Appraisal. new text end

new text begin In conformance with the Uniform Standards of Professional
Appraisal Practice (USPAP), "appraisal" is defined as: (noun) the act or process of
developing an opinion of value; an opinion of value; (adjective) of or pertaining to
appraising and related functions such as appraisal practice or appraisal services. For
purposes of this chapter, all appraisals or assignments that are referred to involve one to
four unit single-family properties.
new text end

new text begin Subd. 3. new text end

new text begin Appraisal assignment. new text end

new text begin "Appraisal assignment" means an engagement
for which an appraiser is employed or retained to act, or would be perceived by third
parties or the public as acting, as a disinterested third party in giving an unbiased analysis,
opinion, or conclusion relating to the nature, quality, value, or utility of named interests in,
or aspects of, identified real estate.
new text end

new text begin Subd. 4. new text end

new text begin Appraisal management company. new text end

new text begin "Appraisal management company"
means a corporation, partnership, sole proprietorship, subsidiary, unit, or other business
entity that:
new text end

new text begin (1) administers networks of independent contract or employee appraisers to perform
residential real estate appraisal assignments for clients;
new text end

new text begin (2) receives requests for residential 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
new text end

new text begin (3) otherwise serves as a third-party broker of appraisal management services
between clients and appraisers.
new text end

new text begin Subd. 5. new text end

new text begin Appraisal management services. new text end

new text begin "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.
new text end

new text begin Subd. 6. new text end

new text begin Appraiser. new text end

new text begin "Appraiser" means a person who is expected to perform
valuation services competently and in a manner that is independent, impartial, and
objective and who is licensed under chapter 82B.
new text end

new text begin Subd. 7. new text end

new text begin Appraisal fee schedule. new text end

new text begin "Appraisal fee schedule" means a list of the
various real estate appraisal services requested by an appraisal management company in
this state from independent appraisers and the amount that the appraisal management
company is willing to pay to an independent appraiser for the performance of each of
the listed real estate appraisal assignments.
new text end

new text begin Subd. 8. new text end

new text begin Appraiser panel. new text end

new text begin "Appraiser panel" means a group of independent
appraisers that have been selected by an appraisal management company to perform
residential real estate appraisal assignments for the appraisal management company.
new text end

new text begin Subd. 9. new text end

new text begin Assignment. new text end

new text begin "Assignment" means a valuation service provided as a
consequence of an agreement between an appraiser and a client.
new text end

new text begin Subd. 10. new text end

new text begin Client. new text end

new text begin "Client" means a party or parties who engage an independent
appraiser by employment or contract in a specific assignment. For this chapter, the
appraisal management company is the party engaging the independent appraiser and is
therefore the appraiser's client.
new text end

new text begin Subd. 11. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means the commissioner of commerce.
new text end

new text begin Subd. 12. new text end

new text begin Controlling person. new text end

new text begin "Controlling person" means:
new text end

new text begin (1) a member of senior management, owner, officer, director, and other person or
business entity seeking to offer appraisal management services in this state;
new text end

new text begin (2) an individual employed, appointed, or authorized by an appraisal management
company that has the authority to enter into:
new text end

new text begin (i) a contractual relationship with clients for the performance of appraisal
management services; and
new text end

new text begin (ii) agreements with employed and independent appraisers for the performance of
one to four unit single-family property appraisal assignments; or
new text end

new text begin (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.
new text end

new text begin Subd. 13. new text end

new text begin Employee. new text end

new text begin "Employee" means an individual who is treated as an
employee for purposes of compliance with federal income tax laws.
new text end

new text begin Subd. 14. new text end

new text begin Intended user. new text end

new text begin "Intended user" means the client or other party identified
by name or type, as users of the appraisal, appraisal review, or appraisal consulting report
by the appraiser of communication with the client at the time of the assignment.
new text end

new text begin Subd. 15. new text end

new text begin USPAP. new text end

new text begin "USPAP" means the Uniform Standards of Professional
Appraisal Practice as established by the Appraisal Foundation. State and federal regulatory
authorities enforce the content of the current or applicable edition of USPAP.
new text end

Sec. 3.

new text begin [82C.03] LICENSING.
new text end

new text begin Subdivision 1. new text end

new text begin Requirement. new text end

new text begin It is unlawful for a person, corporation, partnership,
sole proprietorship, subsidiary, unit, or 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 license issued by the commissioner under the provisions
of this chapter, regardless of the entity's use of the term "appraisal management company,"
"mortgage technology company," or other name.
new text end

new text begin Subd. 2. new text end

new text begin Owner requirements. new text end

new text begin (a) An appraisal management company applying
to the commissioner for a license in this state may not be more than ten percent owned
by a person or entity that has been the subject of an order of certificate, registration or
license suspension, revocation, or denial; cease and desist order; injunctive order; or
order barring involvement in an industry or profession issued by this or another state or
federal regulatory agency.
new text end

new text begin (b) A person that owns more than ten percent of an appraisal management company
in this state shall:
new text end

new text begin (1) be of good moral character, as determined by the commissioner;
new text end

new text begin (2) submit to a background investigation, as determined by the commissioner; and
new text end

new text begin (3) certify to the commissioner that the person has never been the subject of an order
of certificate, registration or license suspension, revocation, or denial; cease and desist
order; injunctive order; or order barring involvement in an industry or profession issued
by this or another state or federal regulatory agency.
new text end

new text begin Subd. 3. new text end

new text begin Controlling person requirements. new text end

new text begin (a) An appraisal management company
applying to the commissioner for a license in this state shall designate a controlling person
that will be the main contact for all communication between the commissioner and the
appraisal management company.
new text end

new text begin (b) In order to serve as a controlling person of an appraisal management company,
a person must:
new text end

new text begin (1) certify to the commissioner that the person has never been the subject of an order
of certificate, registration or license suspension, revocation, or denial; cease and desist
order; injunctive order; or order barring involvement in an industry or profession issued
by this or another state or federal regulatory agency;
new text end

new text begin (2) be of good moral character, as determined by the commissioner; and
new text end

new text begin (3) submit to a background investigation, as determined by the commissioner.
new text end

new text begin Subd. 4. new text end

new text begin Application for license. new text end

new text begin Application for an appraisal management
company license must be submitted on a form prescribed by the commissioner.
new text end

new text begin Subd. 5. new text end

new text begin Minimum information. new text end

new text begin The application must, at a minimum, include
the following information:
new text end

new text begin (1) the name of the entity seeking registration;
new text end

new text begin (2) the business address or addresses of the entity seeking registration;
new text end

new text begin (3) telephone contact and e-mail information of the entity seeking registration;
new text end

new text begin (4) 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;
new text end

new text begin (5) the name, address, and contact information for an individual or corporation,
partnership, limited liability company, association, or other business entity that owns ten
percent or more of the appraisal management company;
new text end

new text begin (6) the name, address, and contact information for a controlling person;
new text end

new text begin (7) a certification that the entity has a system and process in place to verify that a
person being added to the employment or appraiser panel of the appraisal management
company holds a license in good standing in this state pursuant to chapter 82B if a license
is required to perform appraisals pursuant to section 82C.12;
new text end

new text begin (8) a certification that the entity has a system in place to review the work of all
employed and 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 assignments are being conducted in accordance with USPAP and chapter 82B,
pursuant to this chapter;
new text end

new text begin (9) a certification that the entity maintains a detailed record of each service request
that it receives and the independent appraiser that performs the residential real estate
appraisal services for the appraisal management company, pursuant to section 82C.14;
new text end

new text begin (10) an irrevocable Uniform Consent to Service of Process, pursuant to section
82C.07; and
new text end

new text begin (11) other information required by the commissioner.
new text end

new text begin Subd. 6. new text end

new text begin Effective date of license. new text end

new text begin An initial license issued under this chapter is
valid for a period not to exceed one year.
new text end

Sec. 4.

new text begin [82C.04] TERM OF LICENSE.
new text end

new text begin The license for an appraisal management company issued under this chapter expires
on August 31 of each year.
new text end

Sec. 5.

new text begin [82C.05] LICENSE RENEWAL.
new text end

new text begin Subdivision 1. new text end

new text begin Term. new text end

new text begin A license is renewable on August 31 of each year.
new text end

new text begin Subd. 2. new text end

new text begin Timely renewal. new text end

new text begin (a) Application for timely renewal of a license is
considered timely filed if received by the commissioner before the date of the license
expiration.
new text end

new text begin (b) An application for renewal is considered properly filed if made upon a form
prescribed by the commissioner, accompanied by fees prescribed by this chapter, and
containing information the commissioner requires.
new text end

new text begin (c) A licensee failing to make timely application for renewal of the license is
unlicensed until the renewal license has been issued by the commissioner and is received
by the licensee.
new text end

new text begin Subd. 3. new text end

new text begin Contents of renewal application. new text end

new text begin Application for the renewal of an
existing license must contain the information specified in section 82C.03; however, only
the requested information having changed from the most recent prior application need
be submitted.
new text end

new text begin Subd. 4. new text end

new text begin Cancellation. new text end

new text begin A licensee ceasing an activity or activities regulated by this
chapter and desiring to no longer be licensed shall inform the commissioner in writing
and, at the same time, surrender the license and all other symbols or indicia of licensure.
new text end

Sec. 6.

new text begin [82C.06] EXEMPTIONS.
new text end

new text begin This chapter does not apply to:
new text end

new text begin (1) a corporation, partnership, sole proprietorship, subsidiary, unit, or other business
entity that exclusively employs persons on an employer and employee basis for the
performance of residential real estate appraisal assignments in the normal course of its
business and the entity is responsible for ensuring that the residential real estate appraisal
assignments being performed by its employees are being performed in accordance with
USPAP;
new text end

new text begin (2) an individual, corporation, partnership, sole proprietorship, subsidiary, unit, or
other business entity who in the normal course of business enters into an agreement,
whether written or otherwise, with another independent contractor appraiser for the
performance of residential real estate appraisal assignments that the hiring or contracting
appraiser cannot complete for any reason, including but not limited to competency, work
load, schedule, or geographic location; and
new text end

new text begin (3) an individual, corporation, partnership, sole proprietorship, subsidiary, unit, or
other business entity who in the normal course of business enters into an agreement,
whether written or otherwise, with another independent contractor appraiser for the
performance of residential real estate appraisal assignments and upon the completion of
the appraisal, the report of the appraiser performing the residential real estate appraisal
assignment is cosigned by the appraiser who is subcontracted with the independent
appraiser for the performance of the residential real estate appraisal assignment.
new text end

Sec. 7.

new text begin [82C.07] CONSENT TO SERVICE OF PROCESS.
new text end

new text begin An entity applying for a license as an appraisal management company in this state
shall complete an irrevocable Uniform Consent to Service of Process as prescribed by
the commissioner.
new text end

Sec. 8.

new text begin [82C.08] LICENSING FEES.
new text end

new text begin Subdivision 1. new text end

new text begin Establishment and retention. new text end

new text begin The commissioner shall establish the
fee to be paid by an appraisal management company seeking licensing under this chapter.
The fees must be retained by the commissioner for the sole purpose of administering this
licensing and regulation program.
new text end

new text begin Subd. 2. new text end

new text begin Amounts. new text end

new text begin (a) The application for initial licensure must be accompanied
by a fee of $5,000.
new text end

new text begin (b) The application for renewal of the license must be received before the one-year
expiration period with the renewal fee of $2,500.
new text end

new text begin Subd. 3. new text end

new text begin Forfeiture. new text end

new text begin All fees are nonrefundable except that an overpayment of a fee
must be refunded upon proper application.
new text end

Sec. 9.

new text begin [82C.09] INVESTIGATIONS AND SUBPOENAS.
new text end

new text begin The commissioner has under this chapter the same powers with respect to section
45.027, including the authority to impose a civil penalty not to exceed $10,000 per
violation.
new text end

Sec. 10.

new text begin [82C.10] EMPLOYEE REQUIREMENTS.
new text end

new text begin (a) An employee of the appraisal management company, or a person working on
behalf of the appraisal management company, must be appropriately trained and familiar
with the appraisal process.
new text end

new text begin (b) An employee of the appraisal management company that has the responsibility to
review the work of employed and independent appraisers where the subject properties are
located within the state, and which include the reviewer's opinion of value or concurrence
with the original appraiser's value, must be licensed according to chapter 82B and perform
the review assignments in compliance with USPAP and chapter 82B.
new text end

Sec. 11.

new text begin [82C.11] LIMITATIONS.
new text end

new text begin An appraisal management company licensed in this state pursuant to this chapter
may not enter into contracts or agreements with an employee or independent appraiser
for the performance of residential real estate appraisal assignments unless that person is
licensed in good standing pursuant to chapter 82B.
new text end

Sec. 12.

new text begin [82C.12] PRE-ENGAGEMENT CERTIFICATION.
new text end

new text begin An appraisal management company must certify to the commissioner on an annual
basis on a form prescribed by the commissioner that the appraisal management company
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 in good standing in this state
pursuant to chapter 82B.
new text end

Sec. 13.

new text begin [82C.13] ADHERENCE TO STANDARDS.
new text end

new text begin An appraisal management company must have a system in place to review the
work of all employed and independent appraisers that are performing real estate appraisal
assignments for the appraisal management company on at least an annual basis to ensure
that the real estate appraisal services are being conducted in accordance with USPAP
and chapter 82B.
new text end

Sec. 14.

new text begin [82C.14] RECORD KEEPING.
new text end

new text begin An appraisal management company must maintain a detailed record of each
service request that it receives and the independent appraiser that performs the appraisal
assignment for the appraisal management company.
new text end

new text begin Records must be kept for a period of at least five years after the appraisal assignment
request is sent to the independent appraiser or completion of the appraisal report,
whichever period expires last.
new text end

Sec. 15.

new text begin [82C.15] APPRAISER FEE SCHEDULE.
new text end

new text begin An appraisal management company must disclose to the commissioner, upon
request, the fee schedules for employed and independent appraisers, and the fee schedules
for the appraisal management company.
new text end

Sec. 16.

new text begin [82C.16] APPRAISER INDEPENDENCE; PROHIBITIONS.
new text end

new text begin (a) It is unlawful for an employee, director, officer, or agent of an appraisal
management company licensed in this state pursuant to this chapter 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 but not limited to:
new text end

new text begin (1) withholding or threatening to withhold timely payment for an appraisal;
new text end

new text begin (2) withholding or threatening to withhold future business or assignments for an
employed or independent appraiser, or demoting or terminating or threatening to demote
or terminate an employed or independent appraiser;
new text end

new text begin (3) expressly or impliedly promising future business, assignments, promotions, or
increased compensation for an employed or independent appraiser;
new text end

new text begin (4) conditioning the request for an appraisal assignment on 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 employed or independent
appraiser;
new text end

new text begin (5) requesting that an employed or independent appraiser provide an estimated,
predetermined, or desired valuation in an appraisal report, or provide estimated values or
comparable sales at any time before the completion of an appraisal assignment;
new text end

new text begin (6) providing to an employed or 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
must be provided;
new text end

new text begin (7) providing to an employed or independent appraiser, or an entity or person related
to the appraiser, stock or other financial or nonfinancial benefits;
new text end

new text begin (8) allowing the removal of an employed or independent appraiser from a list of
qualified appraisers used by an entity, without prior written notice to the appraiser, which
notice must include documented evidence of the appraiser's violation of USPAP, chapter
82B, substandard performance, or otherwise improper or unprofessional behavior;
new text end

new text begin (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
the basis is clearly and appropriately noted in the loan file, or unless the appraisal or
automated valuation model is done pursuant to a bona fide prefunding or postfunding
appraisal review or quality control process;
new text end

new text begin (10) requesting or requiring an employed or independent appraiser to provide the
appraisal management company or any of its employees, or any of its clients, with the
appraiser's digital signature;
new text end

new text begin (11) altering, amending, or changing an appraisal report submitted by an appraiser,
by among other things, removing or applying a signature, adding or deleting information
from the appraisal report;
new text end

new text begin (12) requiring the appraiser to collect the fee from a borrower, homeowner, or
other person;
new text end

new text begin (13) requiring an appraiser to sign any sort of indemnification agreement that would
require the appraiser to defend and hold harmless the company, a software provider that
the company requires an appraiser to use, or a company the company does business with,
from liability, damage, losses, or claims;
new text end

new text begin (14) using appraisers selected or referred by any employee of a loan production or
sales staff, lender, broker, or real estate agent;
new text end

new text begin (15) disclosing the employed or independent appraiser's name and contact
information in regards to an assignment before the delivery of the appraisal report; or
new text end

new text begin (16) other act or practice that impairs or attempts to impair an appraiser's
independence, objectivity, or impartiality.
new text end

new text begin (b) Nothing in paragraph (a) prohibits the appraisal management company from
requesting that an independent appraiser:
new text end

new text begin (1) consider additional appropriate property information;
new text end

new text begin (2) provide further detail, substantiation, or explanation for the appraiser's value
conclusion; or
new text end

new text begin (3) correct objective factual errors in an appraisal report.
new text end

Sec. 17.

new text begin [82C.17] ADJUDICATION OF DISPUTES BETWEEN AN APPRAISAL
MANAGEMENT COMPANY AND AN INDEPENDENT APPRAISER.
new text end

new text begin Except within the first 30 days after an independent appraiser is first added to the
appraiser panel of an appraisal management company, an appraisal management company
may not remove an appraiser from its appraiser panel, or otherwise refuse to assign
requests for real estate appraisal services to an independent appraiser, without:
new text end

new text begin (1) notifying the appraiser in writing of the reasons why the appraiser is being
removed from the appraiser panel or is not receiving appraisal requests from the appraisal
management company;
new text end

new text begin (2) if the appraiser is being removed from the panel for illegal conduct, violation of
USPAP or a violation of chapter 82B, the nature of the alleged conduct or violation; and
new text end

new text begin (3) providing an opportunity for the appraiser to respond to the notification of the
appraisal management company.
new text end

Sec. 18.

new text begin [82C.18] DENIAL, SUSPENSION, REVOCATION OF LICENSES.
new text end

new text begin Subdivision 1. new text end

new text begin Powers of commissioner. new text end

new text begin (a) The commissioner may by order
take any or all of the following actions:
new text end

new text begin (1) bar a person from employment at an appraisal management company;
new text end

new text begin (2) deny, suspend, or revoke an appraisal management company license;
new text end

new text begin (3) censure an appraisal management company license; and
new text end

new text begin (4) impose a civil penalty as provided for in section 45.027.
new text end

new text begin (b) In order to take the action in paragraph (a), the commissioner must find:
new text end

new text begin (1) that the order is in the public interest; and
new text end

new text begin (2) that an officer, director, partner, employee, agent, controlling person, or any
person occupying a similar status or performing similar functions, has:
new text end

new text begin (i) violated any provision of this chapter;
new text end

new text begin (ii) filed an application for a license that is incomplete in any material respect or
contains a statement that, in light of the circumstances under which it is made, is false or
misleading with respect to a material fact;
new text end

new text begin (iii) violated a standard of conduct or engaged in a fraudulent, coercive, deceptive,
or dishonest act or practice, whether or not the act or practice involves the appraisal
management company;
new text end

new text begin (iv) engaged in an act or practice, whether or not the act or practice involves the
business of appraisal management, appraisal assignments, or real estate mortgage related
practices that demonstrates untrustworthiness, financial irresponsibility, or incompetence;
new text end

new text begin (v) pled guilty, with or without explicitly admitting guilt, pled nolo contendere,
or been convicted of a felony, gross misdemeanor, or a misdemeanor involving moral
turpitude;
new text end

new text begin (vi) paid a civil penalty or been the subject of disciplinary action by the
commissioner, an order of suspension or revocation, cease and desist order, injunction
order, or order barring involvement in an industry or profession issued by this or any other
state or federal regulatory agency, government-sponsored enterprise, or by the Secretary
of Housing and Urban Development;
new text end

new text begin (vii) been found by a court of competent jurisdiction to have engaged in conduct
evidencing gross negligence, fraud, misrepresentation, or deceit;
new text end

new text begin (viii) refused to cooperate with an investigation or examination by the commissioner;
new text end

new text begin (ix) failed to pay any fee or assessment imposed by the commissioner; or
new text end

new text begin (x) failed to comply with state and federal tax obligations.
new text end

new text begin Subd. 2. new text end

new text begin Orders of the commissioner. new text end

new text begin To begin a proceeding under this section,
the commissioner shall issue an order requiring the subject of the proceeding to show
cause why action should not be taken against the licensee according to this section. The
order must be calculated to give reasonable notice of the time and place for the hearing
and must state the reasons for entry of the order. The commissioner may by order
summarily suspend a license pending a final determination of an order to show cause. If a
license is summarily suspended, pending final determination of an order to show cause, a
hearing on the merits must be held within 30 days of the issuance of the order of summary
suspension. All hearings must be conducted under chapter 14. After the hearing, the
commissioner shall enter an order disposing of the matter as the facts require. If the
subject of the order fails to appear at a hearing after having been duly notified of it, the
subject is considered in default, and the proceeding may be determined against the subject
of the order upon consideration of the order to show cause, the allegations of which may
be considered to be true.
new text end new text begin new text end

new text begin Subd. 3. new text end

new text begin Actions against lapsed license. new text end

new text begin If a license lapses, is surrendered,
withdrawn, terminated, or otherwise becomes ineffective, the commissioner may institute
a proceeding under this subdivision within two years after the license was last effective
and enter a revocation or suspension order as of the last date which the license was in
effect, and may impose a civil penalty as provided for in this section or section 45.027.
new text end