The Texas Appraiser Licensing and Certification Board (TALCB) adopts new §§159.3, 159.4, 159.102 - 159.104, 159.107 - 159.109, 159.156, and 159.159, concerning Rules Relating to Provisions of the Texas Appraiser Management Company Registration and Regulation Act, without changes. Sections 159.1, 159.101, 159.105, 159.161, 159.162, 159.201 and 159.204 are adopted with changes to the proposed text as published in the September 2, 2011, issue of the Texas Register (36 TexReg 5617) and will be republished. The nonsubstantive changes to the adopted text that were not in the proposed rules are outlined below in the summaries of §159.1, Definitions, §159.101, Registration Requirements, §159.105, Denial of Registration, §159.161, Appraiser Panel, §159.162, Dispute Resolution, §159.201, Guidelines for Revocation, Suspension, or Denial of a Registration, and §159.204, Complaint Processing. These revisions do not change the nature or scope so much that they could be deemed different rules. The rules as adopted do not affect individuals other than those contemplated by the rules as proposed. The rules as adopted do not impose more onerous requirements than the proposed versions and do not materially alter the issues raised in the proposed rules. Changes in the adopted rules respond to public comments or otherwise reflect nonsubstantive variations from the proposed rules to clarify their intent and improve readability.

The new rules implement House Bill 1146, which enacted Texas Occupations Code, Chapter 1104 (The Texas Appraisal Management Company Registration and Regulation Act, or the Act) to provide for registration and regulation of appraisal management companies.

New §159.1, Definitions, establishes definitions relevant to registration and regulation of AMCs. The definition of "licensee" was deleted from this section because the term is not used in the rules and does not therefore need to be defined. The definition of "advertising" was moved from §159.101, Registration Requirements, to this section.

New §159.3, Appraisal Management Company Advisory Committee, establishes parameters for the Appraisal Management Company Advisory Committee.

New §159.4, Jurisdiction and Exemptions, clarifies the Board's jurisdiction over AMCs acting within various exceptions to the registration requirement as outlined in Chapter 1104 of the Act.

New §159.101, Registration Requirements, requires registrants to notify the Board within 30 days after beginning or ceasing to use an assumed business name. The definition of "advertising" was moved from this section to §159.1, Definitions, for better organization of the rules.

New §159.102, Eligibility for Registration; Ownership, permits applicants to rely on Appraisal Subcommittee records for the purpose of certifying to the Board that its owners have not had adverse action against a license that would prevent the applicant from becoming registered as an AMC.

New §159.103, Applications, establishes technical requirements for applications and would also require registrants to retain ownership records for a period of five years from the date of application.

New §159.104, Primary Contact; Appraiser Contact, establishes parameters for the primary contact and appraiser contact and would establish a process by which a registrant may add, remove, or change either of these persons.

New §159.105, Denial of Registration, establishes moral character/criminal history requirements, standards for evaluating criminal history information, and the process by which the Board may deny an application for registration. The adopted rule differs from the proposed rule in that a sentence was added to the end of subsection (f) to clarify that, consistent with the concept of a presumption, the presumption of unfitness for registration articulated in this section may be rebutted by credible evidence to the contrary.

New §159.107, Expiration, provides that a registration is valid for the term for which it was issued unless it is suspended or revoked for cause.

New §159.108, Renewal, establishes a process for the issuance of renewal notices and for the renewal of a registration.

New §159.109, Inactive Status, provides a process for returning to active status and clarifies that a registrant may not engage in any act for which registration is required while on inactive status.

New §159.156, Business Records, clarifies that a communication between an AMC and an appraiser is "substantive" if it relates to the appraiser's qualifications or to the scope of work of an assignment.

New §159.159, Disclosure of Registration Number, clarifies that the requirement that registrants include their registration number on all documents used to procure appraisals applies to all types of documents used for that purpose but not to general advertisements.

New §159.161, Appraiser Panel, establishes a process by which a panelist may be added or terminated from a panel. The adopted text has been changed from the rule as proposed in that (1) the term "notice" was substituted for "request" in provisions regarding notifying the Board of the addition or termination of membership on an AMC's panel to clarify that such changes are effective upon notice to the Board (upon mailing for paper forms) and do not require Board approval, and (2) a provision was added to clarify that neither a notice nor a fee must be submitted to terminate an appraiser from a panel if the appraiser's license or certification has expired or been revoked.

New §159.162, Dispute Resolution, would provide guidelines for a registrant's dispute resolution process as required under the Act. The adopted text has been changed from the rule as proposed in that the word "relevant" was added to clarify that the appraiser only has a right to receive copies of documentation that is relevant to the basis for the dismissal or the claim of improper conduct by the registrant.

New §159.201, Guidelines for Revocation, Suspension, or Denial of a Registration, establishes parameters for the revocation, suspension, or denial of a registration for conduct, as articulated in the rule, that suggests that a person is unfit to act as an AMC.

New §159.204, Complaint Processing, establishes a process, modeled after the process for complaints against an appraiser, by which the Board would receive and process complaints against AMCs. The adopted text of this section has been changed from the proposed rule in that references to an AMC's submission of appraisal workfiles in response to a complaint have been corrected to refer to records more generally, and provisions specific to workfiles have been deleted in accordance with that change.

The reasoned justification for these rules is enforcement of Texas Occupations Code, Chapter 1104, in accordance with the legislative mandate of House Bill 1146.

The Board received 20 comments during the notice and comment period regarding adoption of the proposed rules (including other sections of Chapter 159 that were proposed at the same time but are not adopted in this issue). The comments regarding these rules are as follows:

COMMENT: Responding to §159.1, Definitions, one commenter noted that the term "licensee" does not appear in the rules and therefore does not need to be defined.

RESPONSE: The Board agrees and has deleted that definition from the adopted rule.

COMMENT: Regarding §159.105, Denial of Registration, one commenter objected to a presumption of a lack of fitness for any applicant that had violated the appraiser independence standards of the Truth in Lending Act.

RESPONSE: The Board has addressed this concern by adding a sentence to clarify that this presumption may be rebutted by credible evidence.

COMMENT: Regarding §159.159, Disclosure of Registration Number, three commenters sought clarification regarding the term "documents used to procure appraisals" (which are required to include the AMC's registration number).

RESPONSE: The rule defines this term to include all written documents and electronic communications, including e-mail, used for that purpose and specifically excluded general advertisements. Without mandating that registrants use a particular type of document to procure appraisals, the Board believes this clarification is sufficient to include the range of documents registrants may employ for this purpose.

COMMENT: Regarding §159.161, Appraiser Panel, eleven commenters indicated that they opposed a requirement to file a request with the Board before adding or terminating a panelist because they believed this requirement gave the Board authority to deny such a request. Four commenters further opposed the requirement to inform the Board of the composition of the AMC's panel, citing concerns regarding statutory authority and trade secrets.

RESPONSE: The Board has addressed the first concern by changing the term "request" to "notice" to clarify that the Board simply needs to be notified of such changes, which are effective when submitted or mailed. The Board respectfully disagrees that the composition of a panel is a "trade secret," in that neither the federal law or state law provides such protection; in fact, several relevant factors in the laws imply that this most highly regulated field of economic activity is intended to be extremely transparent. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the federal AMC registry fee that states will collect is to be based on the number of panelists in each state; therefore the composition of the panel must be disclosed, or regulators will be required to accept any number provided by an AMC, a questionable outcome. Moreover, upon investigation of any complaint related to an appraiser or an AMC vis-a-vis the other, the Board would need to undergo the additional step of validating that a relationship exists between the two parties. The delay of this step is removed with a routine disclosure of panel composition. Because many complaints must be resolved within 180 days, removing any unnecessary delay is a key factor is meeting this short deadline. Per Dodd-Frank, AMCs, their employees and others involved in a covered transaction have a mandatory duty to file a complaint with the state appraiser regulatory body every time an appraiser is reasonably suspected to have violated USPAP in a material way. If the existence of an independent contractor relationship between the parties was meant to be "confidential," this affirmative duty would violate any "protected" status. The Board further points to statutory authority for this provision under Texas Occupations Code, §1104.051, which authorizes the Board to adopt rules necessary to administer the provisions of the chapter. This rule is necessary to determine registrants' size and, by establishing a fee structure that is based on the size of the AMCs, to ensure that this regulatory structure is minimally burdensome to AMCs of all sizes.

COMMENT: Regarding §159.162, Dispute Resolution, four commenters questioned the Board's statutory authority to define a suitable dispute resolution process, and three expressed concern that the requirement to provide copies of "all documentation" to a panelist seeking dispute resolution could require a registrant to disclose confidential information.

RESPONSE: The Board respectfully disagrees with the first point, noting that Texas Occupations Code, §1104.051, authorizes the Board to adopt rules necessary to administer the provisions of the chapter. This rule establishes basic parameters for dispute resolution to ensure that the statutory requirement to participate in such a process provides a meaningful opportunity for the appraiser to seek redress while still leaving wide latitude for an AMC to establish its own dispute resolution process. The Board agrees that a requirement to provide copies of "all documentation" to appraisers is overly broad and has clarified that only all relevant documentation be provided upon request. However, the Board respectfully declines to create an exception based on confidentiality, noting that the mandatory reporting requirement of Dodd-Frank allows no such exception and that this exception could easily be misused by registrants wishing to curtail an appraiser's right to receive copies of relevant documentation.

COMMENT: Regarding §159.201, Guidelines for Revocation, Suspension, or Denial of a Registration, three commenters sought clarification regarding the meaning of "the person applying for or holding the registration."

RESPONSE: The Board respectfully disagrees that such clarification is necessary, noting that, under the Texas Appraiser Management Company Registration and Regulation Act, the AMC is the person who would apply for and hold a registration.

COMMENT: Regarding §159.204, Complaint Processing, one commenter noted that references to a "workfile" (a term referring to the file in which an appraiser retains records documenting various aspects of each appraisal assignment) are not appropriate for AMCs, which do not maintain workfiles for each assignment.

RESPONSE: The Board agrees and has changed such references to instead refer generally to the AMC's records.

COMMENT: Two commenters expressed general dissatisfaction with the existence of AMCs in the appraisal market.

RESPONSE: The Board is bound to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act and to enforce Texas Occupations Code, Chapter 1104.

The new rules are adopted under the Texas Occupations Code, §1104.051, Rules.

The statute affected by this adoption is Texas Occupations Code, Chapter 1104. No other statute, code, or article is affected by the new sections.