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PA Bulletin, Doc. No. 20-1488




[ 49 PA. CODE CH. 36 ]

Appraisal Management Companies; Federally Mandated Revisions

[50 Pa.B. 5992]
[Saturday, October 31, 2020]

 The State Board of Certified Real Estate Appraisers (Board) hereby amends § 36.401 (relating to definitions) to read as set forth in Annex A.

Effective Date

 This final-omitted rulemaking will be effective upon publication in the Pennsylvania Bulletin.

Statutory Authority

 Section 4(a) of the Appraisal Management Company Registration Act (act) (63 P.S. § 457.24(a)) authorizes the Board to implement, administer and enforce the act, including the power to adopt rules and regulations consistent with the act.

Omission of Proposed Rulemaking

 Under section 204(3) of the Commonwealth Documents Law (CDL) (45 P.S. § 1204(3)), the Board is authorized to omit the procedures for proposed rulemaking in section 201 and 202 of the CDL (45 P.S. §§ 1201 and 1202) if the Board finds that the specified procedures are impracticable, unnecessary or contrary to the public interest. The Board has determined that publication of proposed rulemaking is unnecessary under the circumstances because this final-omitted rulemaking is merely amending definitions to comply with applicable Federal law.

Background and Need for the Amendments

 Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) (Pub.L. No. 101-73, 103 Stat. 183) (12 U.S.C.A. §§ 3331—3356) requires the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration Board, the Bureau of Consumer Financial Protection and Federal Housing Finance Agency (hereinafter collectively referred to as ''Federal agencies'') to establish minimum requirements to be applied by states in the registration and supervision of appraisal management companies (AMC) at 12 U.S.C.A. § 3353 regarding appraisal management company minimum requirements. Under this authority, these Federal agencies jointly adopted regulations establishing the minimum requirements for appraisal management companies at 12 CFR 34.210—34.216, 12 CFR 225.190—225.196, 12 CFR 323.8—323.14 and 12 CFR 1222.20—1222.26. The Federal agencies defined ''appraiser panel'' to include ''a network, list or roster of licensed or certified appraisers approved by an AMC to perform appraisals as independent contractors for the AMC.'' See, 12 CFR 225.191(f), 12 CFR 323.9(e), 12 CFR 1222.21(e) and 12 CFR 34.211(e) (emphasis added).

 When the Board originally promulgated its regulations implementing the act, the intent was to promulgate a definition of appraiser panel that comported with the Federal requirements. Upon further review, however, the Board has determined that it erroneously did not include ''licensed'' appraisers in the definition of appraiser panel. While the Real Estate Appraisers Certification Act (63 P.S. §§ 457.1—457.19) does not authorize a licensure category of ''licensed appraisers'' in this Commonwealth, the Board must include licensed appraisers in determining the composition of appraisal panels to comply with the Federal laws and regulations. For that reason, the Board is amending the definition of ''appraiser panel'' to include both licensed and certified real estate appraisers.

 Federal law also sets forth registration limitations for owners of AMCs. Under FIRREA at 12 U.S.C.A. § 3353(d) regarding registration limitations, ''[a]n appraisal management company shall not be registered by a State or included on the national registry if such company, in whole or in part, directly or indirectly, is owned by any person who has had an appraiser license or certificate refused, denied, cancelled, surrendered in lieu of revocation, or revoked in any State. Additionally, each person that owns more than 10 percent of an appraisal management company shall be of good moral character, as determined by the State appraiser certifying and licensing agency, and shall submit to a background investigation carried out by the State appraiser certifying and licensing agency.'' While the act incorporates the Federal limitations regarding good moral character and appraiser discipline for owners, it did not provide a definition of owner within the act.

 Therefore, the Board included a definition of the term ''owner'' in its regulations at § 36.401 as ''[a] person that owns 10% or more of an appraisal management company.'' In defining the term ''owner,'' the Board relied upon guidance available at the time from the Appraisal Subcommittee of the Federal Financial Institutions Examination Council (ASC), the Federal agency responsible for the oversight of the Board. Since the Board promulgated its regulations, the ASC has advised the Board that the definition in the Board's existing regulations is inconsistent with Federal law because the 10% threshold is not applicable to the ownership limitation prohibiting an owner from having specific types of discipline against an appraiser license. Thus, the Board must amend the definition of owner because, except under certain limited circumstances, Federal law prohibits an AMC from being registered if any owner, and not just owners who own 10% or more of an AMC, has had an appraiser license or certificate refused, denied, canceled, surrendered instead of revocation or revoked in any state.

Description of the Amendments

 The Board amends the definitions of ''appraiser panel'' and ''owner'' in § 36.401. The Board includes licensed appraisers in the definition of ''appraiser panel.'' The Board modifies the definition of ''owner'' to accurately reflect the Federal limitations for owners by removing the 10% threshold and amends the definition as follows: ''A person that owns, in whole or in part directly or indirectly, an appraisal management company.'' The ASC reviewed the Board's regulations and Annex A and supports the Board's amendments.

Fiscal Impact and Paperwork Requirements

 This final-omitted rulemaking has a minimal fiscal impact on the regulated community. AMCs will incur minimal costs relating to registration, paperwork, recordkeeping and reporting. All owners, even owners who own less than 10%, must be identified in applications and must submit to a criminal history information report as required by the Board's regulations in § 36.404(a)(6) (relating to content of application). The cost of the criminal history information report is minimal ($22 in Pennsylvania). The Board estimates that it receives approximately seven AMC initial applications and five change of ownership applications each year. For initial applications, even if the Board assumes that three of the seven AMCs have owners who own less than 10%, the economic impact is only $66 per year. For change of owner applications, if the Board assumes two of the five applications have owners who own less than 10%, the economic impact is $44 per year. Thus, the total annual economic impact is estimated at approximately $110 per year.

 The costs to the Board include those associated with processing applications of AMCs with owners who own less than 10%. However, since the Board modified its applications in the fall of 2018 to include all owners, the Board has not experienced an increase in the number of criminal history information report reviews. To the extent that additional costs are incurred, it will be borne by the applicants through payment of the criminal history information report. Costs of enforcing the regulations are borne by the licensees/registrants through payment of biennial renewal fees and application fees, so there is no adverse fiscal impact to the Board.

 This final-omitted rulemaking will not have a fiscal impact and will not create additional paperwork to the general public or the Commonwealth's political subdivisions.

Sunset Date

 The Board continuously monitors the effectiveness of the regulations. Therefore, no sunset date has been assigned.

Regulatory Review

 Under section 5.1(c) of the Regulatory Review Act (71 P.S. § 745.5a(c)), on September 3, 2020, the Board submitted a copy of the final-omitted rulemaking and a copy of a Regulatory Analysis Form to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the Senate Consumer Protection and Professional Licensure Committee (SPC/PLC) and the House Professional Licensure Committee (HPLC). On the same date, the Board submitted a copy of the regulation to the Office of Attorney General under the Commonwealth Attorneys Act (71 P.S. §§ 732-101—732-506).

 Under section 5.1(j.2) of the Regulatory Review Act, on October 14, 2020, the final-omitted rulemaking was deemed approved by the SPC/PLC and the HPLC. Under section 5.1(e) of the Regulatory Review Act, IRRC met on October 15, 2020, and approved the final-omitted rulemaking.

Additional Information

 Further information may be obtained by contacting Heidy Weirich, Board Administrator, State Board of Certified Real Estate Appraisers, 2601 North Third Street, P.O. Box 2649, Harrisburg, PA 17105-2649. Reference regulation No. 16A-7023 (Appraisal Management Companies), when requesting information.


 The Board finds that:

 (1) Public notice of the Board's intention to amend the Board's regulations under the procedures in sections 201 and 202 of the CDL has been omitted under section 204 of the CDL because publication of proposed rulemaking and public comment is unnecessary in that the rulemaking merely amends definitions to comply with Federal law and regulations.

 (2) The amendment of the Board's regulations in the manner provided in this order is necessary and appropriate for the administration of the Appraisal Management Company Registration Act (63 P.S. §§ 451.21—457.31).


 The Board, acting under its authorizing statute, orders that:

 (a) The regulations of the Board at 49 Pa. Code Chapter 36 are amended by amending § 36.401 to read as set forth in Annex A.

 (b) The Board shall submit this final-omitted regulation to the Office of Attorney General and the Office of General Counsel for approval as required by law.

 (c) The Board shall submit this final-omitted regulation to the Independent Regulatory Review Commission, the SPC/PLC and the HPLC as required by law.

 (d) The Board shall certify this final-omitted regulation and deposit it with the Legislative Reference Bureau as required by law.

 (e) This final-omitted rulemaking shall take effect upon publication in the Pennsylvania Bulletin.


 (Editor's Note: See 50 Pa.B. 6096 (October 31, 2020) for IRRC's approval order.)

Fiscal Note: 16A-7023. No fiscal impact; (8) recommends adoption.

Annex A







§ 36.401. Definitions.

 The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise:

*  *  *  *  *

Appraiser panel—A network or panel of certified or licensed appraisers who are independent contractors to an appraisal management company. Appraisers on an appraisal management company appraisal panel include all of the following:

 (i) Appraisers engaged by the appraisal management company.

 (ii) Appraisers accepted by the appraisal management company for consideration in future appraisal assignments.

*  *  *  *  *

Owner—A person that owns, in whole or in part, directly or indirectly, an appraisal management company.

*  *  *  *  *

[Pa.B. Doc. No. 20-1488. Filed for public inspection October 30, 2020, 9:00 a.m.]

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