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Oregon Bulletin

March 1, 2011

 

Department of Consumer and Business Services,
Division of Finance and Corporate Securities
Chapter 441

Rule Caption: Establishes a general process to conduct audits of appraisal management companies.

Adm. Order No.: FCS 1-2011

Filed with Sec. of State: 1-20-2011

Certified to be Effective: 1-20-11

Notice Publication Date: 11-1-2010

Rules Adopted: 441-674-0510, 441-674-0520

Rules Amended: 441-674-0005

Subject: These permanent rules implement the audit requirements of 2010 House Bill 3624 (the Act), which regulates the activities of appraisal management companies. The Act, passed and signed into law on March 23, 2010, requires appraisal management companies doing business in Oregon to register with the Department of Consumer and Business Services (DCBS) by January 1, 2011. The Act requires DCBS to adopt administrative rules establishing a process to audit registered appraisal management companies. These rules establish the general process for audits conducted under the Act. These rules also correct a citation to rules adopted by the Oregon Appraiser Certification and Licensure Board.

Rules Coordinator: Shelley Greiner—(503) 947-7484

441-674-0005

Definitions

In addition to the definitions in 2010 Or Laws ch 87, § 1, the following definitions apply unless the context clearly requires otherwise:

(1) “Appraisal report” has the same meaning as the term is defined in OAR 161-002-0000.

(2) “Assignment” means:

(a) An agreement between an appraiser and a client to perform a valuation service; and

(b) The valuation service that is provided as a consequence of such an agreement.

(3) “Audit” means a formal or official examination and verification of the accounts, correspondence, memoranda, papers, books and other records of an appraisal management company for compliance with 2010 Or Laws ch 87, §§ 1 to 8.

(4) “Board” means the Appraiser Certification and Licensure Board established under ORS 674.305.

(5) “Competency” or “competent” refers to the Competency Rule as contained in the Uniform Standards of Professional Appraisal Practice, 2010-2011 Edition, approved and adopted by the Appraisal Standards Board of the Appraisal Foundation, dated April 27, 1987, as amended on January 1, 2010 and adopted by the board by reference under OAR 161-025-0060.

(6) “Director” means the Director of the Department of Consumer and Business Services.

(7) “Individual” means a natural person.

(8)(a) A “person with an interest in a real estate transaction” includes, but is not limited to, a mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, or a consumer.

(b) A “person with an interest in a real estate transaction” does not include an appraiser.

(9) “Quality control examination” means the examination of an appraisal report for compliance and completeness, including examination for grammatical or typographical errors.

(10) “Real property” has the same meaning as the term is defined in OAR 161-002-0000(31).

(11)(a) “Reviews real estate appraisal activity” means, for purposes of section 2, chapter 87, 2010 Or Laws, the act or process of developing or communicating an opinion about the quality of another appraiser’s work that was performed as part of an appraisal, appraisal review, or appraisal consulting assignment.

(b) “Reviews real estate appraisal activity” does not include a quality control examination.

(12) “System” means an organized or established procedure or method.

Stat. Auth.: 2010 OL Ch. 87, § 1

Stat. Implemented: 2010 OL Ch. 87, § 1-2 & 7

Hist.: FCS 10-2010(Temp), f. & cert. ef. 9-1-10 thru 12-31-10; FCS 13-2010, f. 12-30-10, cert. ef. 1-1-11; FCS 1-2011, f. & cert. ef. 1-20-11

441-674-0510

Audits Required

(1) An audit of an appraisal management company registered to provide appraisal management services in Oregon shall be conducted no later than two years following registration as an appraisal management company, or two years following a date established by the director.

(2) In the case of a subsidiary or affiliate of a financial institution engaging in business as an appraisal management company without obtaining a registration to provide appraisal management services in Oregon, the director may conduct an audit of the appraisal management company in a joint or alternating manner with the appropriate federal banking agency or the Bureau of Consumer Financial Protection as permitted or required by applicable law.

(3) The director may audit an appraisal management company at any reasonable time or times and may require the production of such records at the office of the director as often as is reasonably necessary.

(4) An appraisal management company that refuses to submit to an audit shall be considered to have failed the audit.

Stat. Auth.: 2010 OL ch 87, § 4

Stat. Implemented: 2010 OL ch 87, § 4

Hist.: FCS 1-2011, f. & cert. ef. 1-20-11

441-674-0520

Audit Standards

An audit under OAR 441-674-0510 will examine the appraisal management company’s compliance with 2010 Or Laws ch 87, §§ 1 to 8, including, but not limited to, examination of the following:

(1) The appraisal management company’s system to verify the competency of appraisers on the business entity’s panel meeting the minimum requirements in OAR 441-674-0120.

(2) The names, license or certification numbers, and competency information required by OAR 441-674-0130 of the Oregon-licensed or certified appraisers on the applicant’s appraiser panel.

(3) The appraisal management company’s dispute resolution process as described in 2010 Or Laws ch 87, § 7 and OAR 441-674-0130, including a sampling of disputes and the resolution of those disputes chosen by the auditor.

(4) The appraisal management company’s record retention schedule, consistent with 2010 Or Laws ch 87, § 2.

(5) The appraisal management company’s business practices and transactions that may indicate:

(a) The appraisal management company attempted to influence the development, reporting or review of an appraisal or appraisal review assignment, consistent with the prohibitions established in 2010 Or Laws ch 87, § 5;

(b) The appraisal management company substantively altered in any way a completed appraisal report submitted by an appraiser, consistent with the prohibition established in 2010 Or Laws ch 87, § 5;

(c) The appraisal management company failed to make payments to an independent contractor appraiser for the completion of an appraisal or appraisal review, excluding claims for breach of contract or substandard performance; or

(d) The appraisal management company violated any other provision established in 2010 Or Laws ch 87, §§ 1 to 8.

Stat. Auth.: 2010 OL ch 87, § 4

Stat. Implemented: 2010 OL ch 87, §§ 4, 5

Hist.: FCS 1-2011, f. & cert. ef. 1-20-11

 

Rule Caption: Amend the “Accredited Investor” rule definition to conform to recent changes in federal law.

Adm. Order No.: FCS 2-2011

Filed with Sec. of State: 2-15-2011

Certified to be Effective: 2-15-11

Notice Publication Date: 1-1-2011

Rules Amended: 441-035-0010

Subject: The definition of an “accredited investor” definition under OAR 441-035-0010(5) is amended to exclude the value of a natural person investor’s primary residence from the $1 million net worth calculation. The amended definition reflects the modification of the federal “accredited investor” definition under the Dodd-Frank Act.

Rules Coordinator: Shelley Greiner—(503) 947-7484

441-035-0010

Accredited Investor

For purposes of ORS 59.035(5) accredited investor includes:

(1) Any bank as defined in Section 3(a)(2) of the Securities Act of 1933 (the “Act”), or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance company as defined in Section 2(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940; any small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of Title 1 of the Employee Retirement Income Security Act of 1974 (“ERISA”), if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors.

(2) Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.

(3) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.

(4) Any director, executive officer, or general partner of the issuer of the securities being offered or sold or any director, executive officer, or general partner of a general partner of that issuer.

(5) Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of the purchase exceeds $1,000,000, excluding the value of the natural investor’s primary residence.

(6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

(7) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase
is directed by a sophisticated person as described in 17 CFR 230.506(b)(2)(ii).

(8) Any entity in which all of the equity owners are accredited investors.

Stat. Auth.: ORS 59.285

Stats. Implemented: ORS 59.035(5)

Hist.: CC 12-1985(Temp), f. & ef. 11-25-85; CC 1-1987, f. & ef. 2-4-87; FCS 8-1988(Temp), f. & cert. ef. 4-11-88; Renumbered from 815-030-0042; FCS 14-1988, f. & ef. 10-10-88; FCS 5-1990, f. & cert. ef. 8-21-90; FCS 9-2010(Temp), f. 8-2-10, cert. ef. 8-3-10 thru 1-30-11; FCS 2-2011, f. & cert. ef. 2-15-11

Notes
1.) This online version of the OREGON BULLETIN is provided for convenience of reference and enhanced access. The official, record copy of this publication is contained in the original Administrative Orders and Rulemaking Notices filed with the Secretary of State, Archives Division. Discrepancies, if any, are satisfied in favor of the original versions. Use the OAR Revision Cumulative Index found in the Oregon Bulletin to access a numerical list of rulemaking actions after November 15, 2010.

2.) Copyright 2011 Oregon Secretary of State: Terms and Conditions of Use

Oregon Secretary of State • 136 State Capitol • Salem, OR 97310-0722
Phone: (503) 986-1523 • Fax: (503) 986-1616 • oregon.sos@state.or.us

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