News & Events

Mississippi State Law Requirements For Appraisals And Evaluations

Mississippi’s Real Estate Appraiser Licensing and Certification Act (the “Act”) prohibits any person from engaging in real estate appraisal activity without a license. Real estate appraisal activity is defined in the act as “the act or process of making an appraisal of real estate or real property and preparing an appraisal report.” Real estate appraisal activity also includes evaluations of property. There is an exception for bank employees acting on behalf of the bank, but that exception does not apply if a fee is charged for the appraisal or evaluation.

The licensing requirement only applies to those who provide significant professional assistance. The Act provides three examples of activities that are not considered to be significant professional assistance. These activities are: (1) assistance with the gathering of data upon which the report will be based (2) taking photographs, preparing charts or graphs, typing or other similar acts of preparing the appraisal report, and (3) other assistance that does not involve analysis or developing opinions or judgments.

Therefore, if your bank charges a fee for an internal appraisal or evaluation, then such activity falls within the scope of the Act. In-house appraisals or evaluations for which a fee is charged must only be prepared by a licensed appraiser.

Clarification on Final Escrow Rules

At the February meeting, we discussed the CFPB’s final escrow rules that were issued on January 10, 2013, relating to higher-priced mortgage loans. The final rule extends the length of time for which escrow accounts for higher- priced mortgage loans must be maintained.

The final rule will apply to applications received on or after June 1, 2013.

On April 12, 2013, the CFPB issued a proposed rule providing clarification on certain aspects of the final escrow rule, including the exception for creditors operating predominately in rural and underserved areas. This proposal is expected to be the first of additional guidance to follow soon. This guidance was given priority because the final escrow rule becomes effective June 1, 2013, while the remaining, recently finalized rules do not become effective until January 10, 2014. It is important to note that the clarifications related to the rural and underserved exception will apply not only to the final escrow rule, but to the applicable provisions in the ability-to-pay, HOEPA, and appraisal 2013 final rules as well.

First, the CFPB clarified the definition of rural. A rural county is one that is not located in a metropolitan statistical area (MSA) or one that is adjacent to a micropolitan statistical area and 2% of its population commutes to the MSA for work. In the proposed guidance, the CFPB clarified that in order for an area to be adjacent to a MSA, physical contiguity coupled with the commuting standard mentioned previously are required.

The method of determining which counties are rural is also further explained in the proposal. The determination is based on applicable Urban Influence Codes (UICs) developed by the USDA’s Economic Research Service.

The determination of whether a county is underserved is based on HMDA data. The rule currently provides that the determination of underserved status is based on HMDA data “for that calendar year.” There was some confusion with the final rule due to the fact that HMDA data is not typically available until the third or fourth quarter of any given year. Therefore, the CFPB proposes to clarify that the intent was for the most recent HMDA data, the data for the “preceding calendar year,” to be used in making the determination of underserved status.

Finally, as previously mentioned, the final escrow rule takes effect on June 1, 2013, and other recently finalized rules relating to higher priced mortgage loans, including the ability to repay rule and limitations on prepayment penalties, do not take effect until January 10, 2014. In the final rule, the CFPB inadvertently removed consumer protection provisions that are currently in place. In order to prevent a gap in consumer protection provisions for higher-priced mortgage loans, this proposed rule provides for an expansion of the current protections through January 9, 2014, with the new finalized protections effective beginning on January 10, 2014.

Comments on this proposal are due May 3, 2013.