Compliance is a high-profile issue facing all aspects of a real estate transaction today more so than any time in recent history. The scrutiny being placed on the loan process, documentation, approval, valuation of the asset and how the consumer is treated during the process is at the forefront and has caused some dramatic, and sometimes painful, changes in every industry-related professional’s day-to-day operations. Working within specified guidelines to adhere to industry regulations is essential for effective business practices and meeting the demands of regulators, lenders, and consumers.
January 1, 2014 brings a new version of USPAP and there are a few changes everyone should be aware of that are going into effect very soon.
The Appraisal Foundation’s 2013 Summary of Actions Related to Proposed Changes to USAP (dated February 2, 2013) outlines the changes adopted to be included in the 2014-2015 version of USPAP that goes in effect January 1, 2014. They are:
- Revisions to the DEFINITIONS of “Assignment Results” and “Scope of Work”
- Revisions to the PREAMBLE
- Revisions to the Conduct section of the ETHICS RULE
- Revisions to the COMPETENCY RULE
- Revisions to Reporting Requirements, including the type and number of Report Options
- Revisions to Standards Rule 3-5
- Retirement of STANDARDS 4 and 5
- Revisions to Advisory Opinion 11, Conduct of the Appraisal Report Options of Standards Rules 12-2 and 8-2 and Advisory Opinion 12, Use of the Appraisal report Options of Standards Rules 2-02 and 8-2.
Some of the other changes are relatively minor, like the revision to the Competency Rule, which explicitly states that appraisers must perform assignments competently and are essentially clarifications of requirements that were already assumed. Others, like the changes to the written report options for real and personal property appraisers, will require some getting used to by appraisers and will even change some of the terminology used in appraisals.
Standards 4 and 5, which addressed real property appraisal consulting, were retired from USPAP for 2014-2015. (A Decision was made that the points in these two Standards are now covered adequately in other Rules and Standards).
This is intended as a brief overview of the revisions to USPAP for 2014-2015 and is by no means meant to represent a comprehensive list of the changes. Appraisers should be taking a USPAP update course as soon as possible. Fannie Mae may be revising their forms soon which refer to the residential report form being a “Summary” appraisal report. Clients handling commercial loans may want to consider updating their policies if the language reflects “Self-Contained”, “Summary” and/or “Restricted Use ”appraisals, as that language will be outdated as of January 1, 2014.
Stay tuned. Next time we will make some observations about how this may impact you on a daily basis!
Valuation Management Group is a national, full service appraisal management company that manages the appraisal process for community banks, mortgage bankers and credit unions. We take the process from ordinary to extraordinary.