Thursday, March 28, 2024 | The Latest Buzz for the Appraisal Industry

Carolina On My Mind

All sort of activity is swirling about at the State level. The background check issue also continues to cause anxiety and confusion so it comes as no surprise to me to see this recent bit of legislation popped up in North Carolina. Read the bill here.

In summary, North Carolina is offering some relief to appraisers in the form of a “statute of limitations”. It gives appraisers relief from civil liability from what currently seems like exposure into infinity. I think that is a good thing. Hopefully it will force some due diligence on the front end of the appraisal process.

Another part of the bill aims at protecting appraisers from having to deal with multiple background checks. I also understand the motivations to be admirable ones. But I think this aspect of the law begs some attention. The practical execution of this seems virtually impossible.

There is mass confusion by just about every stakeholder about background checking. Attention was drawn on the States for not having properly vetted the current crop of appraisers in light of the current financial crisis. Many voiced strong opinions that appraisers contributed, in part, to the financial crisis. Everyone can find examples of appraisers with a criminal background. Some of the loudest protests come from within appraisers’ own ranks. It is no fun to compete with a criminal and have them taint an entire profession.

Pressure was exerted to clean up the ranks. Lenders and AMCs are ramping up their due diligence not only for compliance but for risk management reasons. Fannie Mae is looking very closely at appraisal reports and are removing appraisers from the gene pool, albeit slowly.

So, back to North Carolina. The law reads that an AMC, that may require a background check, must accept a criminal background check that has been ordered within the last 12 months. OK. How does that work? If 130 AMCs need a background check on 3000 NC appraisers where do they actually get it? If the NC Appraisal Agency administers this it will create a burden. The costs of which must be passed on to someone.

What happens if the client has more expansive background check requirements than the State of North Carolina? It would seem that the expectation that a State perform the due diligence of the AMC and/or lender is an unrealistic one. The mission of the State is to ensure that the appraiser has met minimum license criteria and to protect the public. Lenders on the other hand must go deeper. They must protect their interests and satisfy the standards of their regulators and engage a competent, ethical appraiser for each assignment. A lender who engages a third party AMC passes these requirements on in the form of a Service Level Agreement (SLA).

While my daughter never appreciates this analogy, it does illustrate the point. She maintains a valid drivers license yet her insurance company suggests she is a high risk driver. They have data to support their conclusion. It isn’t just my rather emotional opinion. Don’t confuse the possession of an appraiser credential as due diligence to your clients on a go forward basis. I know for 20 years it has been working for you. That was then, this is now. Keep your eye out for the rule making process in North Carolina on this issue. I see it as one that will be both costly and difficult to administer. I know what won’t be acceptable to clients is a background check submitted directly by the appraiser. Look for many more of these battles to emerge as State’s rights meets Federal rules. It is going to get very complicated.

Have any comments or would you like to submit content of your own? Email comments@appraisalbuzz.com.

Brent Bowen

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