Gov. Baker Signs Rep. Stanley’s Consumer Protection Legislation

(Boston, MA) – Governor Baker signed Rep. Stanley’s legislation (formerly House Bill 1114) that licenses Appraisal Management Companies (AMCs) into law. The new law (Chapter 43 of the Acts of 2019) is supported by the MBREA (the Association for Valuation Professionals), appraisal management companies, mortgage industry professionals, and real estate appraisers.

In 2010, the Dodd-Frank Wall Street Reform Act was signed into law. Under the provisions of Dodd-Frank, states are required to enact licensing of AMCs. Without passage of Rep. Stanley’s bill, AMCs would have been prohibited from operating in the state, seriously impacting everyone looking to buy a home or refinancing a mortgage.

Requiring the licensing of appraisal management companies is driven by consumer concerns. Appraiser independence requirements were established in Dodd-Frank to halt the inordinate pressure from lenders that was placed upon appraisers to reach a pre-determined value that would make a home loan work. This pressure came mostly in the form of threats to withhold payment for appraisal services and/or blackballing the appraiser from future work. As a result, lenders were compelled to establish a firewall between staff (compensated based on a loan closing) and appraisers. The firewall most typically employed was made by engaging third-party appraisal management companies to act as an intermediary between the lender and the appraiser.

“Appraiser independence is vital to both safety and soundness of financial institutions, and to consumers who regularly rely on appraisals obtained by lenders to determine if the price they are paying for a house is reasonable,” said Rep. Stanley. “With more than 80% of all Massachusetts residential appraisal orders processed by AMCs, the Commonwealth’s economy would have been negatively disrupted as well. I’d like to thank Speaker DeLeo, Senator Spilka and Governor Baker for their support in getting this legislation signed into law.”