New USPAP

On January 1, 2008, the 2008-2009 revision of USPAP became the effective law of the land ("The Financial Institutions Reform, Recovery and Enforcement Act of 1989 recognizes USPAP as the generally accepted appraisal standards and requires USPAP compliance for appraisers in federally related transactions. State Appraiser Certification and Licensing Boards; federal, state, and local agencies, appraisal services; and appraisal trade associations require compliance with USPAP.") with regard to standards for appraisers in the USofA. It can be found at:

Table of Contents

Skimming through it, there have been a number of changes. The DEFINITIONS section drops the terms "advocacy" and "supplemental standards". The Conduct section of the ETHICS RULE now simply states, "An appraiser must not advocate the cause or interest of any party or issue.", and the comment that "An appraiser may be an advocate only in support of his or her assignment results." has been removed.

The SUPPLEMENTAL STANDARDS RULE has been removed. We will undoubtedly see many interpretations of this action. The Supplemental Standards Rule allowed "government agencies, government sponsored enterprises, or other entities that establish public policy" to add to (but never take away from) the requirements of USPAP. This requirement is now wrapped into the "Problem Identification" portion of the SCOPE OF WORK RULE. The phrase "supplemental standards" has been replaced with the phrase "laws and rules". The Second Exposure Draft (March 5, 2007) for the change shows the rationale :


"Today in USPAP, because Fannie Mae is a GSE, portions of the Fannie Mae guidelines are Supplemental Standards. Conversely, the guidelines of the Employee Relocation Council (ERC) are not Supplemental Standards simply because the ERC is not a GSE. Although both guidelines are recognized as part of competent performance when they apply, Fannie Mae’s guidelines are currently looked at differently because they are identified as Supplemental Standards under the current definition.

The guidelines of Fannie Mae are not laws or regulations. However, the proposed edits will not change: 1) the necessity for an appraiser acting in compliance with USPAP to follow Fannie Mae guidelines where applicable; and 2) the enforcement of USPAP, including those items necessary for competent performance and meaningful reporting. The appraisal guidelines of GSE’s such as Fannie Mae and Freddie Mac will remain part of proper development and reporting when they are applicable to a given assignment.

Eminent domain appraisal assignments are commonly subject to laws and regulations. The requirement to recognize and comply with such an assignment condition is part of competent performance in USPAP, but also has a clear and obvious basis outside of USPAP.

In both examples compliance with USPAP (today or under the proposed edits) requires adherence to those assignment conditions that are necessary for proper development and reporting. The appraiser’s identification of the intended use and intended users drives the applicable assignment conditions, such as the appraisal guidelines of Fannie Mae, the ERC, or the laws of eminent domain."


Other changes include:

• Advisory Opinion 5, "Assistance in the Preparation of an Appraisal" has been retired and replaced by Advisory Opinion 31, "Assignments Involving More Than One Appraiser".
  
• Advisory Opinion 30, "Appraisals for Use by a Federally Regulated Financial Institution" has been added, outlining the appraiser's obligations to understand the rules made by the Office of the Comptroller of the Currency, Federal Reserve Board, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and National Credit Union Administration. (What may be interesting for non-appraisers is that the statement of the legal definition of market value promulgated by the Federal agencies is specifically quoted here).
  
• Advisory Opinion 32, "Ad Valorem Property Tax Appraisal and Mass Appraisal Assignments" has been added, outlining the applicability of USPAP to such people as county assessors. Individual jurisdictions need to specify whether or not their assessors must adhere to the Standards. The individual jurisdictions also need to specify the Intended User(s) of the mass appraisal report. There is a statement that in mass appraisal assignments, individual tax record cards for a particular property are not appraisal reports since the mass appraisal assignment takes in a universe of properties and not any specific property.
  

Interesting stuff, but not particularly easy reading. I am looking forward to my next 7-hour USPAP Update class, though.