AMC oversight bill signed into law in Illinois
Illinois became the 29th state to enact a law that provides for comprehensive oversight of appraisal management companies. Gov. Pat Quinn signed Senate Bill 1539 into law Aug. 26, and it took effect immediately.
Under the new law, AMCs are required to register with the Illinois Department of Financial and Professional Regulation, which would have significant authority to “ascertain the qualifications and fitness of applicants for registration and pass upon the qualifications of applicants for registration” and allow AMCs to be disciplined for “professional incompetence” and “gross malpractice.”
In addition, the Illinois law requires that AMCs be “in compliance with the appraisal independence standards established under Section 129E of the federal Truth in Lending Act, including the requirement that fee appraisers be compensated at a customary and reasonable rate …” The state Department of Financial and Professional Regulation would formulate rules pertaining to customary and reasonable rates of compensation for fee appraisers “to the extent permitted by federal law or regulation.”
The law will also require that “when an appraisal obtained through an appraisal management company is used for loan purposes, the borrower or loan applicant shall be provided with a written disclosure of the total compensation to the appraiser or appraisal firm within the certification of the appraisal report and it shall not be redacted or otherwise obscured.”
Lastly, the new law will require the state agency to “conduct a survey of fees for appraisal services for single-family residences, two-family residences, three-family residences, and four-family residences. The fee survey shall exclude assignments ordered by known appraisal management companies and complex assignments.” The survey would be completed within 12 months.
State regulators have not yet adopted implementing regulations, but once they’re in place, AMCs that were operating within Illinois as of Aug. 26 would have 180 days to apply for registration. AMCs could continue to operate during the registration process.
AMCs that are subsidiaries of federally regulated institutions are not exempted from registration and oversight. A federal rule would have to be issued to exempt these entities, but to date, no such rule has been issued. However, the Dodd-Frank Act does exempt these entities from state registration, although no agency rule has been adopted on this topic.
To view a copy of the new Illinois law, go to: www.ilga.gov/legislation/publicacts/97/PDF/097-0602.pdf .