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Published by OREP, E&O Insurance Experts | April 10, 2013 | Vol. 275 |
Kentucky is the first state to
create a fund intended to reimburse appraisers who have suffered financial harm
by AMCs.
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Editor’s Note:
Here are details on a new "recovery" fund designed for appraisers who are owed
money by bankrupt AMCs.
AMC "Recovery Fund" for Appraisers First of Its Kind
by David Brauner, Editor
More than one appraisal management company (AMC) has
shuttered its doors owing millions of dollars to appraisers in unpaid fees- now
one state is trying to do something about it by establishing a “recovery” fund
to reimburse appraisers. Here’s how the fund works.
Kentucky is the first state to
create a fund intended to reimburse appraisers who have suffered financial harm
by AMCs. According to Larry Disney,
Executive Director of the Kentucky Real Estate Appraisers Board (KREAB), the new
recovery fund is fair to all concerned- borrower, lender, appraiser and AMC.
House
Bill 120 was signed into law by Kentucky Governor Steve Beshear last month. The
fund is underwritten by an $800 per year surcharge on each AMC registered in the
state. It has a cap of $300,000 that will be replenished if funds become
depleted.
1.
The AMC must cease to be registered in Kentucky
either voluntarily or involuntarily;
2.
The appraiser must receive a final judgment in a
court of competent jurisdiction within the Commonwealth; and
3.
If no viable alternative for full restitution is
available, as determined by the Board. According to Disney, if each of the above tests are met,
the amount paid to the appraiser shall equal the actual amount of appraisal fees
that are proven to be owed to the appraiser by the AMC, plus all
reasonable and appropriate court costs associated with determining the final
judgment.
Consumer Protection
Find the bill at WorkingRE.com; Sidebar Information (left
column).
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According to Disney, the bill requires the following conditions be met
before an appraiser can request past due payment(s):
According to Disney, KREAB believes the recovery fund will assist in
consumer protection. Kentucky loan applicants pay lenders for a real
property appraisal assignment in order to secure real property loans; lenders
pay a third party AMC for managing the appraisal process; the
Kentucky-registered AMC serves as the agent for the lender by selecting the
appraiser and negotiating other contract terms; the appraiser completes the
appraisal assignment and distributes a completed appraisal report and invoice
via the AMC requirements. Although
the appraisal fee has been paid and distributed, the appraiser is left with
attempting to collect the fee for the services performed under contract with a
third party. “Therefore, it is the opinion of KREAB that the recovery fund
provides an equitable and fair forum for due process for collecting fees that
are rightfully owed to an appraiser, paid by a borrower, submitted by a lender
to a third party,” Disney said.
What it Doesn’t Do
The recovery fund does not address instances of an AMC failing to
pay for an appraisal that is prepared competently and ethically, in compliance
with USPAP, or because of excessive turn time. Those problems are
addressed by administrative state regulations set by the Board, Disney says.
Was the bill tough to get support for passage? “I will not say harder than
any bill that passed the session, but I will say it took a lot of consistent and
constant work, talking to legislators, making them aware of the federal
requirements, the definitions, and other issues that every state agency faces or
will face,” Disney says. “I credit
our success to having a great sponsor in the House and Senate, a strong advocate
from the appraiser board members, and the Kentucky Association of Real Estate
Appraisers, plus an alliance with all stake holders that we could find that
might be impacted. We made sure these groups were aware of everything we were
doing.”
“I want to give special thanks to Marvin Dever of the
Kentucky Association of Real Estate Appraisers and Don Kelly, Executive Director
of the Real Estate Valuation Advocacy Association (REVAA), for help in getting
the bill language drafted and passed,” Disney said.
Related stories (visit WorkingRE.com):
- AMC Fails: Appraisers Stiffed Again (Current Issue)
- Success Collecting AMC Debt from Lender (Library, Volume 29)
- AMC Bad Debt - Lender Responsible? (Library, Volume 29)
- Lender paying Appraisers Stiffed by AppraisalLoft (Didn't Make It to Print)
- Wells Fargo Paying JVI Bad Debt (Didn't Make It to Print)
About the Author
David Brauner is Editor of
Working RE
magazine and Senior Broker at
OREP.org, a leading provider of E&O Insurance for appraisers,
inspectors and other real estate professionals in 49 states. He has covered the
appraisal profession for over 20 years. He can be contacted at
dbrauner@orep.org
or (888) 347-5273. Calif. Insurance Lic. #0C89873.
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