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Compliance Blog 5.31.2016
Notes from Regulatory Road – May Edition

This month I’ve spent time with others working towards making informed decisions in the best interest of our industry. Here’s what I’ve been up to:

Meetings with Senate and House Members and Staff

On April 19-20th, I was on Capitol Hill with members of the Real Estate Valuation Advocacy Association (REVAA) meeting with Senate and House staffers, including members of the House Financial Services Committee. REVAA members met with:

  • Rep. John C. Carney (D-Delaware)
    • Elizabeth Connolly – Legislative Assistant
  • Corey Frayer and Mitria Wilson – Minority Professional Staff members for House Financial Services Committee
  • Clinton Jones – Majority Professional Staff member for House Financial Services Committee
  • Rep. Michael Capuano (D-Massachusetts 7th district)
    • Gira Bose – Legislative Council
  • Sen. Elizabeth Warren (D-Massachusetts)
    • Bharat Ramamurti – Senior Council for Banking and Economic Policy
  • Sen. Chris Coons (D-Delaware)
    • Eric Wall – Legislative Correspondent
  • Sen. Jerry Moran (R-Kansas)
    • William Ruder – Deputy Legislative Director

Topics discussed included: possible review of the existing Appraisal Regulatory System; the future of TRID; and State Appraisal Boards trying to legislate business practices which could have an impact on cost to consumers.

The meetings were all very productive, with REVAA offering to be available as a resource for any and all valuation related issues.

Appraisal Subcommittee

On Wednesday, May 11th, I attended the Appraisal Subcommittee (ASC) Meeting in Washington DC.

ASC received approval to publish proposed rules around Federal AMC fees to be collected by the state. The proposed rule was published in the Federal Registry on May 20th – click here to review.

The proposed rule will have a 60-day comment period. Depending on comments, the ASC hopes to have a final rule published by November 2016. States have until August 2018 to have a process in place to comply.

The fee will be $25 per appraiser that has completed an appraisal assignment for “Covered Transaction” in a calendar year. (Definitions of: Appraisal management company (AMC); appraisal management services; appraisal panel; consumer credit; covered transaction; dwelling; Federally regulated AMC are incorporated from the AMC Rule by reference.)

42(b)(2) “Covered transaction”

TILA Section 129E applies to “a consumer credit transaction secured by the principal dwelling of the consumer.” 15 U.S.C. 1639e. This interim rule refers to such a transaction as a “covered transaction,” for simplicity. For purposes of § 226.42, the existing provisions of Regulation Z and accompanying commentary apply in determining what constitutes a principal dwelling. See comment 42(b)(1)-1. Regulation Z provides that, for the purposes of the consumer’s right to rescind certain loans secured by the consumer’s principal dwelling, a consumer may have only one principal dwelling at a time. See, e.g., § 226.2(a)(19), 226.2(a)(24), comment 2(a)(24)-3.

Common Ground with the American Bankers Association

After the ASC meeting we had separate meeting with Rod J. Alba, Vice President, Mortgage Finance & Senior Regulatory Counsel of the American Bankers Association (ABA).

REVAA has been working with a number of ABA state affiliates to ensure that state issues relevant to AMCs, lenders, appraisers and consumers are addressed in a manner that makes sense to all parties involved.

The ABA said that Appraisal/AMC issues have been on the back burner for them, but based on the impact these unresolved matters could have on issuing mortgages they are getting more involved. REVAA was invited to participate in regular calls with other state ABAs to continue to share relevant information.

The definition of Federally Regulated Transaction

From May 12-14th, I attended and participated in The Appraisal Foundation Board of Trustees meeting. As Chairman of The Industry Advisory Council I had to give a report to the Executive Oversight Committee, as well as the entire board.

The biggest topic of conversation was around the definition of Federally Regulated Transaction (FRT). With so much of Dodd/Frank and State Appraisal Board activities, including appraiser and AMC licensing, focused on FRTs, the Appraisal Board has formally requested a better definition from the ASC and joint agencies.

The challenge is that when FRT was initially defined in FIRREA there were no exceptions, and the intent was that it would cover 100% of all mortgage related transactions. Over the past 25 years since FIRREA was implemented there have been 12 exemptions, such as GSE (Fannie/Freddie), FHA and others. The FDIC commented at the recent AARO Conference that because of all the exemptions now only about 12% of the mortgages today qualify as an FRT.

We can review how this is problematic with a number of unintended consequences in next month’s Notes from the Regulatory Road.

Jeff Dickstein, Pro Teck’s Chief Compliance Officer, is responsible for Pro Teck’s adherence with all state, federal and industry regulations. He’s active with a number of industry boards, and is currently Chairman of The Appraisal Foundation’s Industry Advisory Council.

Jeff has been in the mortgage industry for thirty-five years, with more than twenty five years’ experience as an appraiser (he is a Certified Residential Appraiser in 15 states). With Notes from the Regulatory Road, Jeff will provide timely commentary on what is happening in the industry.

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