November 30, 2012

Mr. Jim Park

Executive Director Appraisal Subcommittee H Street NW., Suite 760 Washington, DC 20005

Re: Proposed ASC Policy Statements

Dear Mr. Park:

On behalf of the 23,000 designated, candidates and affiliate members of th e Appraisal Institute, we thank you for the opportunity to comment on the draft Policy Statements of the Appraisal Subcommittee.

Generally, we are puzzled that the ASC has chosen not to undertake the formal rulemaking process where Congress spec ifically granted authorization, including complex and extremely important areas of enforcement, reciprocity and temporary practice. We believe that these issues would benefit from the formal advisory

committees to be established by the ASC when u ndertaking a formal rulemaking . Further, we believe that the

ultimate outcome would benefit from a thorough vetting of the issues. We urge the ASC to adopt Policy Statements in the areas not authorized by Dodd

- Frank, and to com mence formal rulemakings in the areas of enforcement, temporary practice and reciprocity.

W e also are concerned about the selective basis for which Title XI is being interpreted and enforced by the ASC through its Policy Statements. On the one hand, the ASC apparently believes that it does not have the authority to require states to undertake certain policies, while on the other hand , the ASC has embraced the broadest interpretation possible, attempting to require states to establ ish certain policies where there is no authorization or

authorizations were intended to address different issues

. State appraisal boards, users of appraisal services, and

pro fessional appraisers deserve more than selective interpretation of Title XI apprai sal requirements. We urge the ASC to revise the Policy Statements to be consistent with the Title XI and Dodd

- Frank authorizations and to refrain from “activist” policy making.

We have specific comments for each Policy State ment, which are foun d below , as follows :

Policy Statement 1

 Statutes, Regulations, Policies and Procedures Governing State Programs

We long have been concerned about the way in which the ASC has interpreted Section 1122(d) of Title XI related
to pr ofessional appraisal designations. This provision prohibits a federally regulated financial institution from excluding an appraiser from consideration for an assignment solely by virtue of a membership or lack of membership in a particular organization. Th is is a miscellaneous provision from Title XI that is directed to the federal financial institutions regulatory agencies, Fannie Mae and Freddie Mac

, related to appraiser hiring policies, not policies related to the operations of state ap praisal regulatory agencies . While the ASC is authorized under Section 1103 to monitor the requirements established by the Federal financial institutions regulatory agencies

, with respect to appraisal standards and certi fication requirements, we see no dir ect authorization for the

ASC to apply this provision to state appraiser regulatory agency operations. This is not to say that we s upport an unequal playing field at any level ; rather we do not believe that this provision is authorized by Congress. As in other areas of the draft Policy Statement where it apparently does not feel it has sufficient authorization, we urge the ASC to not include this interpretation in the final Policy Statements.

Further, from a public policy standpoint, we urge the ASC to reconsider the draft policy prohibiting states from specifying education providers in consent agreements that require additional education. To this point, we believe

that s tate appraiser regulatory agencies deserve and/or need the flexibility to be able to mandate that appraisersProposed Policy Statements

November 30, 2012



### 2 who are being sanctioned by the agency take specific courses or other educational programs that the agency knows will rectify the issue that resulted in the appraiser being sanctioned in the first place. It is not sufficient for an agency to only be allowed to require an appraiser to “ take a course in green valuation

. ” Rather, the agencies should be permitted to mandate that an appraiser take a course that the agency knows will result in th e appraiser receiving training in the problem area.

Policy Statement 1 also encourages s tates to consider Appraisal Standards Board Advisory Opinions, Frequently Asked Questions, and other written guidance issued by the ASB regarding the interpretation a nd application of

USPAP. The USPAP AOs and FAQs are voluntary guidance documents

– they are not part of USPAP. As such, they should not to be used as the basis for enforcement action. We urge the ASC to include a clarifying statement

to this effect in the final Policy Statement. We also believe that it would be useful for the ASC to clarify that any materials developed by the Appraisal Standards Board also are voluntary guidance and are NOT to be used by any state appraiser regulatory agency as the ba sis for an enforcement action.

Policy Statement 2

 Temporary Practice

Language currently found in Policy Statement 5 (Temporary Practice)

, relat ed to employees of financial institutions who perform “technical reviews” that do not result in the development of an opinion of value

, was not

carrie d over to the draft Policy Statement 2. According to the Policy Statement, “ The ASC believes that text is outdated and unnecessary.”

Currently, Policy Statement 5 says that, for federally related transactions, states generally can not require

reviewers who do not develop an opinion of value to be credentialed in the state where the property is located, unless the review is conducted in the state where the property is located. However, the rewrite of the ASC Policy

Statements removes this statement fro m Policy Statement 5. The new Policy Statements are silent on the issue of credentialing appraisal reviewers. It is likely that the omission of this clarification from the Policy Statements will result in numerous states moving to require that all rev iewers of appraisals of subject properties that are located in their state must obtain an appraiser credential from their agency.

As the ASC is aware, this policy change to not prohibit states from requiring licensure for technical reviews will,
among ot her things, have a dramatic impact on many financial institutions that have spent considerable time and money investing in an appraisal review infrastructure based, in part, on the current Policy Statement. We find it

unfortunate that the ASC has failed to offer any justification for this significant policy change in the draft Policy Statement, and we believe that such a failure will cause many institutions unnecessary harm from an organization al planning standpoint. Further, we suspect that many empl oyees of financial institutions will agree

that the policy was “ outdated ” or “ unnecessary ,” as the ASC has claimed.

It appears as if the ASC does not believe that it has the authority to adopt a policy such as is currently found in

St atement 5 under its statutory authority contained in Title XI

. At a minimum, the ASC should provide justification for this significant policy change.

Beyond this concern , w e support the proposal to define excessive fees and policies for obtaining a temp orary practice permit. In particular, we support the $250 temporary fee cap and the six

- month validation period for temporary practice permit holders. We urge retention of these provisions in the final Policy Statement 2.

Additionally, we request th at the ASC include an additional limitation related to states requiring applicants of temporary practice permits to submit copies of engagement letters or copies of completed appraisals . We are aware that some state appraiser regulatory agencies have enacted such requirements for applicants for temporary practice permits. Identification of the physical address of the assignment may be appropriate, but requiring identification of the client and the submission of a full copy of a completed appraisal is excessive and may present complications with confidentiality for the appraiser and his/her client. This is particularly true if such information is available via Freedom of Information Act requests.

We have heard of instances where copies of informat ion submitted as part of an application for a temporary practice permit, specifically the client name and property address, has been provided to other, in

- state appraisers

, who then contact the client and attempt to inappropriately compete with the out

- of

- state appraiser. As such, weProposed Policy Statements

November 30, 2012



### 3 strongly encourage the ASC to prohibit state appraiser regulatory agencies from requiring that appraisers submit this information as part of an application for a temporary practice permit.

Policy Statement 3

 National Registry

We have a general concern with the way that state appraiser regulatory agencies are required to provide

information on disciplinary actions to the National Registry

. Currently, once an appraiser has been charged with

a violation, their name is “tagged” on the National Registry. We believe that the original intent of immediate public notification was that the lender community had to be protected from unethical or incompetent appraisers. However, members who are invol ved in reviewing disciplinary actions against appraisers are sometimes finding that many charges are un substantiated, minor violations, or even without merit

. These charges sometimes have the effect of ruining an appraiser‟s career

.

For example, recently, a minor violation, such as not completing a state‟s continuing education on time (a charge

lat er found to be false), was enough for an appraiser to be barred from appraising for several clients until the state

agree d that the educat ion had been completed on time (but reported incorrectly). Th is process took several

months. We believe that state appraiser regulatory agencies should be prohibited from reporting appraiser

standard or ethical violations until the accused has exhaus ted any appeals that might be available after having been convicted by the appropriate agency, and we further urge inclusion of such a policy in the final Policy

Statement 3.

Beyond this, we note that the programs administered by the ASC under Policy St atement 3 are largely outdated

and outmoded. We note that the ASC is utilizing an “extranet” system that appears to be widely out of the date

, from a technological stand point

, and antiquated for the purpose of sharing information among agencies. F urther, systems such as the National Mortgage Licensing System (NMLS) are paving the way for the future of professional oversight and regulation with real

- time data

- sharing among state agencies. Such systems are far

more user

- friendly for state regulatory officials and more effective at information

- sharing across state lines. We see systems such as the NMLS as the way of the future

.

Policy Statement 4

 Application Process

The draft Policy Statement 4 maintains prohibitions of the use of affidavits for qualifying education, but extends the prohibition to upgrade applications. Barring documented abuse of the use of affidavits in upgrade applications,

we see no reason not to accept affidavits

, so long as states have a validation process in place. As such, we support upgrade applications being treated similarly to renewal applications and encourage the ASC to accept such a process for upgrades in the final Policy Statement.

Further, we believe that states should be allowed to accept signed certifications by appraisers seeking to upgrade or renew, in addition to formal affidavits. The affidavit process adds unnecessary red tape to the process of upgrading or renewing by appraisers, as state appraiser regulatory agencies already may revoke a credential for falsifying information.

Policy Statement 5

– Reciprocity

Generally speaking, we support consistent reciprocity policies that promote commerce and reduce unnecessary red tape on practicing appraisers. At the same time, we acknowledge that the complexities of promoting such a system in the “ federal” system found in the United States. Still, the ASC has vast authority in this area, both in

terms o f writing policy statement s and also in potential formal rulemaking, which was granted to the agency under

the Dodd

- Frank Act. Reciprocity is one area for which we believe formal rulemaking in support of consistent reciprocity requirements to sup port commerce is warranted. We do not believe that the ASC has accurately interpreted the spirit of the Dodd

- Frank Act

, as it relates to reciprocity.

In Policy Statement 5, the revised policy proposes that State s must only have a reciprocity policy in place for issuing a reciprocal credential to an appraiser from another State

. A State may have a more lenient or more open

door policy; however, a State cannot impose additional requirements on applicants for reciprocal credentials than are impose d on their own licensees. By merely requiring that states have a policy in place, states could simplyProposed Policy Statements

November 30, 2012



### 4 say that it is their position that no state has credentialing requirements that meet or exceed theirs and

, as such, they are not going to grant a recipro cal credential to an appraiser from any state. This type of a policy would meet the ASC requirements, but certainly would not be in the spirit of the Dodd

- Frank Act. Our interpretation of the

Dodd

- Frank Act requirement is that a state MUST gran t a reciprocal credential to an appraiser who holds a credential in good standing

, conferred by a state that has been found to be in compliance with the AQB requirements. Unfortunately, ASC policy still will permit states to deny the issuance of a re ciprocal credential based upon the receiving state having superior credentialing requirements than the sending state.

In addition, States would not be required to grant a reciprocal credential to an appraiser credentialed in another

State with a current ASC Finding of „„Poor.‟‟ Here, we believe that the ASC should reconsider allowances for states that have been graded “Not satisfactory,” as findings such as “State does not meet all Title XI mandates,” “Deficiencies present a significant risk,” and “ Substa ntial risk of Program failure ” do not appear to warrant acceptance by other states

.

Further, w e have concerns with the following statement found in one of the illustrations :

STATE A would evaluate STATE Z’s credentialing requirements as they currently e xist to determine whether they meet or exceed STATE A’s current requirements for credentialing.

This appears to require each state to evaluate every other state to determine whether or not the other state‟s requirements meet or exceed th e receiving stat e ‟ s requirements. Some states likely are not capable of making such a judgment, or may look to the ASC for guidance in this area. As such, we support the ASC helping states make such determinations upon written request. Further, we can envision scenar ios where some states may enact protectionist requirements simply to say that another state ‟ s requirements don‟t meet or exceed their own requirements, thus

, allowing them to deny reciprocity to appraisers from that state. We do not believe that is

consi stent with the goal of promoting the “ reasonably free movement of credentialed appraisers across State

lines.”

Policy Statement 6

– Education

In relation to “ Course Approval, ” the draft Policy Statement states that States should ensure that educational

p roviders are afforded equal treatment . A footnote states that:

Consent agreements requiring additional education may not specify a particular course provider, thereby discriminating against other providers on the State’s approved course listing offerin g the same course

.

In our view, there is no nexus between Course Approval and education

- related consent agreements with individual appraisers who are subject to disciplinary action by the state agencies. As such, this footnote has no place in a n ASC Policy Statement related to course approval. We urge that this reference and provision be struck from the final Policy Statement.

Similar to the ASC‟s current policy related to technical reviews, we do not believe that the ASC has the legal authority to prohibit states from imposing a specific education requirement for disciplinary purposes. Title XI allows states to enact requirements that exceed Title XI requirements . Such a requirement would be an example

of a state e xceeding minimum requirements in the area of remedial education

.

Should the ASC ignore this request

, and implement a policy that prohibits states from imposing requirements that appraisers satisfy specific educational requirements , we believe that the Po licy Statement should include an exception in cases where there is only one course provider in the state that offers a course in the subject matter

that is in need of redress.

Policy Statement 7

– Enforcement

The Policy Statement related to Enf orcement states that “P ersons analyzing complaints for USPAP compliance must be knowledgeable about appraisal practice and USPAP. ” Given that most of the concerns that prom p ted Congress to enact additional Dodd

- Frank appraisal amendments relate to con cerns regarding enforcement by theProposed Policy Statements

November 30, 2012



### 5 ASC and state appraisal boards, we do not believe that this requirement is adequate. The ASC should mandate that such individuals analyzing complaints for USPAP compliance be certified or licensed real estate appraisers

, at a minimum, and that the conduct of any review of an appraisal be done in accordance with USPAP

. In addition, reviewers must be competent to review the complaint under review. Complaints involving Certified General Real Property Appraisers should not be reviewed by Certified Residential Real Property appraisers. Further, individuals analyzing complaints must comply with USPAP in their analysis, especially when the assignments involve a value opinion. Lastly, we believe that reviewers should be required to take continuing education for review appraisal and be required to complete and pass a 15

- hour USPAP within the USPAP update cycle.

Policy Statement 8

 Interim Sanctions

The entire direction of the Interim Sanctions Policy Statement completely miss es the mark , in our opinion

.

The intent of Section 1473(k) of the Dodd

- Frank Act is two

- fold. First, the ASC is given the authority to remove a

State licensed or certified appraiser or appraisal management company from the National Registry on an interim basis, not to exceed 90 days, pending State agency adjudication of a disciplinary action against the appraiser. Second, the ASC is given the authorit y to impose interim sanctions on the state agencies themselves that have

been found to have deficient appraiser regulatory programs. These interim sanctions are in advance of the

ultimate de

- recognition of a State agency.

These two provisions

– the abil ity to sanction an appraiser on an interim basis and the ability to sanction a state

on an interim basis

– are separate and apart from one another

.

Unfortunately, comments made by representatives of the ASC at a recent meeting of the Association of Appra iser Regulatory Officials totally and completely disregarded the authority granted to the ASC to remove an appraiser who is the subject of a state disciplinary action from the National Registry for a period not to exceed 90 days. This is an impo rtant provision and is designed to prevent bad appraisers from continuing to operate

, even though they may be the subject of a disciplinary action for a serious violation of the State appraiser regulations. In addition, the possibility of a state imposing an interim sanction against an appraiser is also intended to encourage appraisers to resolve their cases in a speedy manner. Unfortunately, the comments made by the ASC tied the removal of an appraiser from the National Registry on an interim basis to ac tions that are being taken against the

state agency for deficiencies in the appraiser regulatory program. This is n ot correct

.

As drafted, revised Policy Statement 8 does not contain any references to what steps a state appraiser agency must take to remove an appraiser who is the subject of a disciplinary action from the National Registry for the permitted 90

- day period. We strongly urge the ASC to revise Policy Statement 8 to include provisions related to

the interim sanctions that can be imposed against appraisers who are the subject of state disciplinary action.

The idea of this section of the Dodd

- Frank Act is that the interim sanctions could be imposed on a state while a more detailed investigation and “du e process” action was undertaken to impose more severe sanctions , currently

known as the “atomic bomb” or de

- certification of a state appraiser regulatory agency

. As it is currently drafted, it would be virtually impossible for the ASC to actually impose an interim sanction. Specifically, Policy Statement 8 would take a minimum of 180 days to impose an interim sanction. Then the state agency would be allowed judicial review of the ASC‟s de cision. The due process requirements that would be necess ary in order to impose an interim sanction make the whole idea of an interim sanction completely moot.

In addition, revised Policy Statement 8 does not outline what interim sanctions the ASC would have at its disposal to impose against a state appraise r regulatory agency. What are the options that the ASC has at its disposal ?

Fines ? Requirements for Board members to take additional education? Temporary or permanent replacement of the head of a state regulatory agency? Hiring of temporary sta ff to clear backlogs of applications, renewals or complaints? Policy Statement 8 is unclear concerning what options the ASC has at its disposal. Clarification is required.

The ASC has shown historical reluctance to issue sanctions against a “sovereign” s tate. Rather than issue a misguided Policy Statement that will result in further inaction, we suggest that the ASC undertake a formalProposed Policy Statements

November 30, 2012



### 6 rulemaking in this area tha t would issue monetary fines and other penalties against states that fail to comply with

Title XI mandates.

Appendix A

– Compliance Review Process

We commend the ASC for developing a detailed matrix illustrating the revised program compliance review

pro cess. One item that we believe deserves definition or elaboration is the term “Program Failure.” This term is found in the rating criteria but not within any of the Policy Statement and carries no definition. Such a definition appears essential for establ ishing some context for the rating system.

Thank you for the opportunity to comment on the proposed Policy Statements. If you have any questions or require additional information, please contact Bill Garber, Director of Government and External Relations

, at 202

- 298

- 5586 or bgarber@appraisalinstitute.org

.

Sincerely,

//c

Appraisal Institute