2017 -- H 5620

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LC001745

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2017

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A N   A C T

RELATING TO BUSINESSES AND PROFESSIONS - REAL ESTATE APPRAISAL

MANAGEMENT COMPANIES

     

     Introduced By: Representatives O`Grady, Keable, Casey, and Marshall

     Date Introduced: March 01, 2017

     Referred To: House Corporations

     (Dept. of Business Regulations)

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 5 of the General Laws entitled "BUSINESSES AND PROFESSIONS"

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is hereby amended by adding thereto the following chapter:

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CHAPTER 20.9

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REAL ESTATE APPRAISAL MANAGEMENT COMPANIES

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     5-20.9-1. Legislative purpose.

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     This legislation provides the department with the statutory authority to develop and

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implement registration requirements for appraisal management companies (AMCs) in connection

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with valuing properties collateralizing mortgage loans or mortgages incorporated into a

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securitization or any external third party authorized either by a creditor of a consumer credit

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transaction secured by a consumer's principal dwelling or by an underwriter of or other principal

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in the secondary mortgage markets operating in this state as required by the "Dodd-Frank Wall

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Street Reform Act (12 U.S.C. §5301 et seq.)."

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     5-20.9-2. Definitions.

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     As used in this chapter, the following terms shall have the following meanings:

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     (1) "Appraisal" means an analysis, opinion, or conclusion relating to the nature, quality,

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value or utility of specified interest in, or aspects of, identified real estate. An appraisal may be

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classified by subject matter into either a valuation or an analysis, defined as:

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     (i) "Valuation" means an estimate of the value of real estate or real property.

 

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     (ii) "Analysis" means a study of real estate or real property other than estimating value.

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     (2)(i) "Appraisal management company (AMC)" means, in connection with valuing

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properties collateralizing mortgage loans or mortgages incorporated into a securitization, any

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external third party authorized either by a creditor of a consumer credit transaction secured by a

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consumer's principal dwelling, or by an underwriter of or other principal in the secondary

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mortgage markets, that oversees a network or panel of more than fifteen (15) certified or licensed

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appraisers in Rhode Island or twenty-five (25) or more nationally, excluding those appraisers who

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do not provide appraisal services for covered transactions, within a given year to:

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     (A) Recruit, select, and retain appraisers;

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     (B) Contract with licensed and certified appraisers to perform appraisal assignments;

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     (C) Manage the process of having an appraisal performed, including providing

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administrative duties such as receiving appraisal orders and appraisal reports, submitting

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completed appraisal reports to creditors and underwriters, collecting fees from creditors and

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underwriters for services provided, and reimbursing appraisers for services performed; or

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     (D) Review and verify the work of appraisers.

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     (ii) An "appraisal management company" does not include any entity that employs real

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estate appraisers as employees for the performance of real estate appraisal services in a manner

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consistent with federal regulations promulgated in accordance with §1473 of the Dodd-Frank

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Wall Street Reform Act (12 U.S.C. §5301 et seq.).

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     (3) "Appraiser panel" means a group of independent fee appraisers that have been

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selected by an appraisal management company to perform residential real estate appraisal

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services for the appraisal management company.

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     (4) "Board" means the real estate appraisers board established pursuant to the provisions

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of chapter 20.7 of title 5.

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     (5) "Client" means any person or entity that contracts with, or otherwise enters into an

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agreement with an appraisal management company for the management of residential real estate

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appraisal services.

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     (6) "Controlling person" means:

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     (i) An owner, officer or director of a corporation, partnership or other business entity

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seeking to offer appraisal management services in this state; or

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     (ii) An individual employed, appointed, or authorized by an appraisal management

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company that has the authority to enter into a contractual relationship with clients for the

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performance of appraisal management services and has the authority to enter into agreements

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with independent appraisers for the performance of residential real estate appraisal services; or

 

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     (iii) An individual who possesses, directly or indirectly, the power to direct or cause the

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direction of the management or policies of an appraisal management company.

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     (7) "Department" means the department of business regulation.

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     (8) "Director" means the director of the department of business regulation.

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     (9) "Independent fee appraiser" means:

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     (i) A natural person who is a state-licensed or state-certified appraiser and receives a fee

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for performing an appraisal, but who is not an employee of the person engaging the appraiser; or

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     (ii) An organization that, in the ordinary course of business, employs state-licensed or

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state-certified appraisers to perform appraisals, receives a fee for performing the appraisals and is

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not subject to §1124 of the federal "Financial Institutions Reform, Recovery and Enforcement

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Act of 1989" ("FIRREA") (12 U.S.C. §1811 et seq.).

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     (10) "Real estate appraisal services" means the practice of developing an appraisal by a

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licensed or certified appraiser in conformance with the "Uniform Standards of Professional

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Appraisal Practice" (USPAP).

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     (11) "USPAP" means the Uniform Standards for Professional Appraisal Practice

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published by the appraisal foundation.

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     5-20.9-3. Registration required for appraisal management companies.

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     (a) It shall be unlawful for any person or entity to act as a real estate appraisal

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management company, or to directly or indirectly engage in the business of real estate appraisal

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management in this state, or to advertise or hold themselves out as engaging in the business of

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real estate appraisal management in this state, without first registering with the department under

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the provisions of this chapter.

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     (b) A partnership, limited liability partnership, limited liability company, or corporation

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that acts as an appraisal management company shall register with the department and shall renew

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the registrations of its members, officers, and directors for each registration period.

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     (c) Appraisal management companies shall provide the following information upon

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registration:

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     (1) The name and contact information of the entity seeking registration;

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     (2) The name and contact information of the controlling person for the entity;

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     (3) If the entity is not a corporation domiciled in this state, the name and contact

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information for the company's agent for service of process in this state; and

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     (4) The name, address, and contact information for any individual or any corporation,

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partnership, or other business entity that owns ten percent (10%) or more of the appraisal

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management company.

 

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     (d) Contact information shall include the entity's business and mailing address, telephone

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number, facsimile number, and electronic mail (e-mail) address.

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     (e) An appraisal management company shall certify that the following is true upon its

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initial registration and upon each renewal of its registration:

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     (1) The registered entity has a system and process in place to verify that a person being

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added to the appraiser panel of the appraisal management company holds a certification or license

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in good standing in this state to perform appraisals;

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      (2) The registered entity has a system in place to periodically perform a quality

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assurance review of the work of independent fee appraisers that are performing real estate

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appraisal services on its behalf to ensure that appraisal services are being conducted in

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accordance with USPAP; and

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     (3) The registered entity maintains a detailed record of each service request that it

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receives for five (5) years.

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     (f) Any person, who directly or indirectly owns more than ten percent (10%) of an

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applicant for an AMC, or any officer, controlling person, employee in charge or managing

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principal of the applicant, shall furnish to the department authorization for a state or national

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criminal history background check. An appraisal management company that has an owner of ten

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percent (10%), directly or indirectly, or any officer, controlling person, employee in charge of or

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managing the principal, who has had a license or certificate to act as an appraiser or to engage in

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any activity related to the transfer of real property refused, denied, canceled or revoked in this

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state or in any other state, whether on a temporary or permanent basis or, who is not of good

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moral character as determined by the director, shall not be eligible for licensure.

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     5-20.9-4. Duties.

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     (a) Every applicant for registration under this chapter who is not a resident of this state

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shall submit with the application an irrevocable consent that service of process in any action

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against the applicant arising out of the applicant's activities as an appraisal management company

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may be made by delivery of the process on the director. In addition, each application for

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registration must submit the name and address of its registered agent that is located in this state.

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     (b) Each appraisal management company shall maintain for five (5) years documents,

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electronic or paper, for each appraisal assignment including acceptance of fees from borrowers or

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clients and payments to appraisers. The department may inspect these records periodically

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without prior notice and may also inspect these records whenever the department determines that

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they are pertinent to an investigation of any specific complaint against an appraisal management

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company.

 

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     (c) Each appraisal management company must notify the department in writing of any

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change of business name or address within ten (10) calendar days.

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     5-20.9-5. Exemptions.

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     This chapter shall not be applicable to:

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     (1) An agency of the federal government or any state or municipal government;

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     (2) An appraisal management company that is a subsidiary owned and controlled by a

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financial institution regulatory agency, provided the appraisal management company is in

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compliance with §1124 of the "Federal financial Institutions Reform Recovery and Enforcement

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Act of 1989" ("FFIR") (12 U.S.C. §1811 et seq.) and any rules promulgated pursuant to the

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authority granted in §1124 of the FFIR.

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     (3) Any domestic corporation, partnership, sole proprietorship, subsidiary, unit, or other

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domestic business entity that exclusively employs persons in employer-employee relationships to

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perform residential real estate appraisal services in accordance with USPAP in the normal course

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of its business; or

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     (4) Any individual, corporation, partnership, sole proprietorship, subsidiary, unit, or other

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business entity who in the normal course of business enters into an agreement, whether written or

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otherwise, with an independent fee appraiser for the performance of residential real estate

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appraisal services shall, upon the completion of the appraisal, co-sign the report with the

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independent fee appraiser with whom it subcontracted for the performance of the residential real

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estate appraisal service.

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     5-20.9-6. Fees and registration renewals.

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     (a) The fees for initial registration, renewal and late renewals shall be determined by the

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director and established by regulation.

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     (b) Every appraisal management company that desires to renew a registration for the next

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term shall apply for the renewal of the registration upon a form furnished by the director and

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containing information that is required by this chapter. Renewal of a registration is subject to the

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same provisions as the initial registration.

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     5-20.9-7. Expiration of registration.

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     A registration granted by the department pursuant to this chapter shall be valid for two

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(2) years from the date on which it is issued.

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     5-20.9-8. Owner requirements.

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     (a) An appraisal management company applying for a registration in this state may not be

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owned or controlled by a person if such person has had a license or certification to act as an

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appraiser denied or revoked in this state or in any other state, or who is not of good moral

 

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character as determined by the director.

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     (b) Every owner or controlling person of an appraisal management company in this state

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shall certify to the department that such person has never had a license to act as an appraiser

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denied, suspended or revoked in this state or in any other state.

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     5-20.9-9. Controlling person and review appraiser employees.

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     (a) Every appraisal management company applying to the department for a registration in

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this state shall designate one controlling person that will be the principal contact for all

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communication between the department and the appraisal management company.

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     (b) Any employee of the appraisal management company that has the responsibility to

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review the work of independent fee appraisers must have a current USPAP certification.

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     5-20.9-10. Limitations.

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     An appraisal management company registered in this state pursuant to this chapter may

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not enter into contracts or agreements with an independent fee appraiser for the performance of

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residential real estate appraisal services unless that person is licensed or certified and in good

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standing pursuant to the chapter 20.7 of title 5.

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     5-20.9-11. Appraiser independence.

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     (a) It shall be unlawful for any employee, director, officer, or agent of an appraisal

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management company registered in this state to influence or attempt to influence the

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development, reporting, or review of an appraisal through coercion, extortion, collusion,

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compensation, instruction, inducement, intimidation, bribery or in any other manner. Examples of

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unlawful influence include, but are not limited to:

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     (1) Withholding or threatening to withhold timely payment for an appraisal except in

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cases of breach of contract or substandard performance of services;

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     (2) Withholding or threatening to withhold future business for an independent appraiser,

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or demoting or terminating or threatening to demote or terminate an independent appraiser;

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     (3) Expressly or impliedly promising future business, promotions, or increased

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compensation for an independent appraiser;

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     (4) Conditioning the request for an appraisal service or the payment of an appraisal fee or

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salary or bonus on the opinion, conclusion, valuation to be reached, or on a preliminary estimate

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or opinion requested from an independent appraiser;

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     (5) Requesting that an independent appraiser provide an estimated, predetermined, or

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desired valuation in an appraisal report, or provide estimated values or comparable sales at any

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time prior to the independent appraiser's completion of an appraisal service;

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     (6) Providing to an independent appraiser an anticipated, estimated, encouraged, or

 

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desired value for a subject property or a proposed or target amount to be loaned to the borrower,

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except that a copy of the sale contract for purchase transactions may be provided;

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     (7) Providing to an independent appraiser, or any entity or person related to the appraiser,

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stock or other financial or non-financial benefits;

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     (8) Removing an appraiser from a list of qualified appraisers, or adding an appraiser to an

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exclusionary list of disapproved appraisers, in connection with the influencing or attempting to

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influence an appraisal. This prohibition does not preclude the management of appraiser lists for

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bona fide administrative or quality-control reasons based on written policy;

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     (9) Obtaining, using, or paying for a second or subsequent appraisal or ordering an

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automated valuation model in connection with a mortgage financing transaction unless there is a

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reasonable basis to believe that the initial appraisal was flawed or tainted and such basis is clearly

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and appropriately noted in the loan file, or unless such appraisal or automated valuation model is

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done pursuant to a bona fide per-funding or post-funding appraisal review or quality control

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process; or

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     (10) Any other act or practice that impairs or attempts to impair an appraiser's

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independence, objectivity, or impartiality.

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     (b) Nothing in subsection (a) of this sections shall be construed as prohibiting the

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appraisal management company from requesting that an independent fee appraiser:

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     (1) Consider additional property information;

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     (2) Provide additional information about the basis for a valuation; or

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     (3) Correct objective factual errors in an appraisal report.

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     5-20.9-12. Prohibitions.

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     An appraisal management company registered in this state shall not:

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     (1) Require an independent fee appraiser to collect the appraisal fee from a borrower,

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homeowner, or other person;

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     (2) Require an independent fee appraiser to provide the company with the appraiser's

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digital signature;

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     (3) Alter, amend, or change an appraisal report submitted by an independent fee appraiser

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in any fashion, including removing the appraiser's signature or adding information to or removing

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information from the report;

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     (4) Transmit an appraisal to the appraisal management company's client if the appraisal

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has been altered in any fashion after it was transmitted to the appraisal management company; or

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     (5) Require an independent fee appraiser to sign any indemnification agreement that

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would require the independent fee appraiser to defend and hold harmless the appraisal

 

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management company or any of its agents, employees, or independent contractors for any

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liability, damage, losses, or claims arising out of the services performed by the appraisal

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management company.

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     5-20.9-13. Adjudication of disputes.

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     Except within the first thirty (30) days after an independent appraiser is added to the

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appraiser panel of an appraisal management company, an appraisal management company may

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not remove an appraiser from its appraiser panel, or otherwise refuse to assign requests for real

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estate appraisal services to an independent appraiser without:

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     (1) Notifying the appraiser in writing of the reasons why the appraiser is being removed

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from the appraiser panel of the appraisal management company, including the alleged statutory or

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USPAP violation, if any; and

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     (2) Providing an opportunity for the appraiser to respond to the notification of the

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appraisal management company.

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     5-20.9-14. Investigations.

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     (a) If the department has reasonable grounds to believe that an appraisal management

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company has violated the provisions of this chapter or that facts exist that would be the basis for

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an order against an appraisal management company, the department may at any time investigate

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or examine the books, accounts, records, and files of any registrant or other person relating to the

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complaint or matter under investigation. The department may require any registrant or other

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person to submit a criminal history record check in connection with any examination or

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investigation. Refusal to submit the requested criminal history record check shall be grounds for

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disciplinary action. The reasonable cost of this investigation or examination shall be charged

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against the registrant.

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     (b) The department shall have the power to issue subpoenas requiring the attendance of

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persons and the production of papers and records before the department in any hearing,

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investigation, inquiry, or other proceeding conducted by it. Upon the production of any papers,

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records, or documents, the department shall have the power to authorize true copies thereof to be

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substituted in the permanent record of the matter in which the books, records, or documents shall

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have been introduced in evidence.

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     (c) The department may from time to time conduct routine examinations of the books and

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records of an appraisal management company registered with the department in order to

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determine the compliance with this chapter and any rules promulgated thereunder.

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     5-20.9-15. Enforcement.

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     The department may censure an appraisal management company, conditionally or

 

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unconditionally suspend or revoke any registration issued under this chapter, levy fines or impose

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civil penalties not to exceed five thousand dollars ($5,000) per violation, if in the opinion of the

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department, an appraisal management company is attempting to perform, has performed, or has

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attempted to perform any of the following acts:

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     (1) The appraisal management company has filed an application for registration that, as

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of its effective date or as of any date after filing, contained any statement that, in light of the

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circumstances under which it was made, is false or misleading with respect to any material fact;

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     (2) The appraisal management company has violated or failed to comply with any

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provision of this chapter, or any rule adopted by the department;

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     (3) The appraisal management company is permanently or temporarily enjoined by any

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court of competent jurisdiction from engaging in or continuing any conduct or practice involving

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any aspect of the real estate appraisal management business;

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     (4) The company is the subject of an order of the department or any other state appraiser

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regulatory agency denying, suspending, or revoking that person's license as a real estate

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appraiser;

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     (5) The company acted as an appraisal management company while not properly

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registered with the department; and

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     (6) The company has failed to pay the proper filing or renewal fee under this chapter.

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     5-20.9-16. Order to cease and desist.

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     (a) If the director has reason to believe that any person, firm, corporation, or association

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is conducting any activities requiring registration under this chapter without obtaining registration

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or, after the denial, suspension or revocation of a registration conducts any activities requiring

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registration under this chapter, the department may issue an order to that person, firm,

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corporation, or association commanding them to appear before the department at a hearing to be

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held no sooner than ten (10) days nor later than twenty (20) days after issuance of that order to

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show cause why the department should not issue an order to that person to cease and desist from

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any violations of this chapter.

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     (b) The order to show cause may be served on any person, firm, corporation, or

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association named in the order in the same manner that a summons in a civil action may be

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served, or by mailing a copy of the order to that person at any address at which they have done

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business or at which they live. If, upon that hearing, the department is satisfied that the person is

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in fact violating any provision of this chapter, the department may order that person, in writing, to

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cease and desist from that violation.

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     (c) All hearings shall be governed in accordance with chapter 35 of title 42, the

 

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administrative procedures act. If that person fails to comply with an order of the department after

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being afforded a hearing, the superior court has jurisdiction upon complaint of the department to

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restrain and enjoin that person from violating this chapter.

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     5-20.9-17. Hearing before revocation or suspension; refusal of certification or

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licensing.

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     (a) Before refusing to issue a registration or suspending or revoking a registration, the

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director shall notify the applicant or registrant of their intended action and the grounds for the

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action. The applicant or registrant may, within twenty (20) days, file with the director a request

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for a hearing setting out an answer to the grounds specified in the notification. The director shall

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consider the answer and set a date for the hearing, notifying the applicant or registrant of that date

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at least twenty (20) days prior to the hearing date.

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     (b) Before refusing to issue a registration or suspending or revoking a registration upon

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the verified written complaint of any person setting out a cause of action under this chapter, the

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director shall, in writing, notify the accused applicant or registrant of its receipt of the complaint,

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enclosing a copy of the complaint. The accused applicant or registrant shall, within twenty (20)

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days, file with the department its answer to the complaint or complaints.

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     (c) The department shall transmit a copy of the answer to the complainant or

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complainants and set a time and place for a hearing, which shall be at least twenty (20) days prior

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to the hearing date.

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     (d) All notices and answers required or authorized to be made or filed under this section

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shall be satisfied by personal service on the controlling person of the registrant, or the registrant's

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agent for service of process in this state, or by sending the notice by registered mail to the

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controlling person of the registrant to the registrant's last known address on file with the

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department. If served personally, the time runs from the date of service; if served by registered

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mail from the postmarked date of the letter enclosing the document.

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     (e) The director shall render a decision on any application or complaint within sixty (60)

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days after the final hearing in the matter and shall immediately notify the parties to the

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proceedings, in writing, of its rulings, orders, or decisions. If the matter contained in the

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complaint has been filed or made a part of a case pending in any court in this state, the director

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may then withhold its decision until the court action has been concluded.

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     (f) Hearings shall be held in accordance with rules promulgated by the department in

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conformity with the provisions of chapter 35 of title 42, the administrative procedures act

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("APA"). Any party aggrieved by a final administrative decision of the director may appeal the

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decision in accordance with the provisions of the APA.

 

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     5-20.9-18. Rulemaking authority.

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     The department shall create and adopt rules which promote and effectuate the purposes of

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this chapter.

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     SECTION 2. This act shall take effect 180 days after its passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO BUSINESSES AND PROFESSIONS - REAL ESTATE APPRAISAL

MANAGEMENT COMPANIES

***

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     This act would provide for the registration and oversight of appraisal management

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companies operating in this state.

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     This act would take effect 180 days after its passage.

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LC001745

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