The Appraisal Foundation’s Appraisal Standards Board (ASB) has issued a new set of USPAP Q&As to state and territory appraisal regulators to inform them of the ASB responses to questions raised by regulators and individuals; to illustrate the applicability of USPAP in specific situations; and to offer advice from the ASB for the resolution of appraisal issues and problems.
Q: I work for a state appraiser regulatory agency. I understand that background checks are required of all applicants for a new credential as of Jan. 1, 2015. However, I have several questions and would appreciate clarification:
Question 1:
It appears states are prohibited from issuing a credential to applicants that have convictions in certain areas. One of these areas includes an applicant’s “general fitness” for licensure. What exactly does this mean?
A: Section VI(C) of the 2015 Real Property Appraiser Qualification Criteria (Criteria) prohibits states from issuing a credential to applicants when:
1. The applicant has had an appraiser license or certification revoked in any governmental jurisdiction within the five-year period immediately preceding the date of application.
2. The applicant has been convicted of, or pled guilty or nolo contendere to, a felony in a domestic or foreign court: during the five-year period immediately preceding the date of the application for licensing or certification; or at any time preceding the date of application, if such felony involved an act of fraud, dishonesty or a breach of trust or money laundering.
3. The applicant has failed to demonstrate character and general fitness such as to command the confidence of the community and to warrant a determination that the appraiser will operate honestly, fairly and efficiently within the purposes of these criteria.
It is impractical, and likely impossible, to compile a list of every specific circumstance where an applicant must be denied a credential. The verbiage in Section VI(C)(3) is intended to provide states with the ability to deny a credential based on “public trust.” States have latitude to determine, based on their own guidelines, whether or not an applicant falls into this category and should be denied a credential. For example, let’s say an applicant had a fairly recent misdemeanor conviction for forgery, and upon review of the matter, the state discovered that the case involved the applicant forging appraisal reports using another appraiser’s name and signature without his or her knowledge. Because the conviction is not a felony, it does not fall under Sections VI(C)(1) or VI(C)(2). However, the direct applicability of the applicant’s conviction to the appraisal business causes great concern for a state. After thoroughly examining the issue it’s possible that the state may opt to decline the application, citing Section VI(C)(3) as the basis.
Question #2:
Are states also required to decline a credential when an applicant is found to have background issues listed in Section VI(D)?
A: No. The language in Section VI(D) requires a state to “evaluate and consider” the following:
1. Convictions of any criminal offense involving dishonesty, breach of trust or money laundering against the individual or organizations controlled by the individual, or agreements to enter into a pretrial diversion or similar program in connection with the prosecution for such offense(s);
2. Civil judicial actions against the individual in connection with financial services-related activities, dismissals with settlements or judicial findings that the individual violated financial services-related statutes or regulations, except for actions dismissed without a settlement agreement;
3. Actions or orders by a state or federal regulatory agency or foreign financial regulatory authority that:
a) Found the individual to have made a false statement or omission or been dishonest, unfair or unethical; to have been involved in a violation of a financial services-related regulation or statute; or to have been a cause of a financial services-related business having its authorization to do business denied, suspended, revoked or restricted;
b) Are entered against the individual in connection with a financial services-related activity;
c) Denied, suspended or revoked the individual’s registration or license to engage in a financial services-related activity; disciplined the individual or otherwise by order prevented the individual from associating with a financial services-related business or restricted the individual activities; or
d) Barred the individual from association with an entity or its officers regulated by the agency or authority or from engaging in a financial services-related business;
4. Final orders issued by a state or federal regulatory agency or foreign financial regulatory authority based on violations of any law or regulation that prohibits fraudulent, manipulative or deceptive conduct;
5. Revocation or suspension of the individual’s authorization to act as an attorney, accountant or state or federal contractor; and
6. Customer-initiated financial services-related arbitration or civil action against the individual that required action, including settlements, or which resulted in a judgment. State appraiser regulatory agencies implementing background checks for the first time may wish to perform a thorough review of any state-specific statutes, regulations or policies that may affect how such issues are viewed. States may also want to make inquiries of other (nonappraiser) agencies within their own state for guidance in this area. And lastly, states may also want to check with other states that have been performing background checks on appraisers to see if they can offer any additional guidance.
Question #3:
Section VI(D)(2) refers to convictions in a foreign court. Are states required to submit an applicant’s fingerprints to other countries to ensure there are no foreign convictions? If not, how does a state find out whether there are any foreign convictions?
A. Section VI(A) states: State appraiser regulatory agencies shall, at a minimum, obtain fingerprints of the individual, in digital form if practicable, and any appropriate identifying information for submission to the Federal Bureau of Investigation and/or any governmental agency or entity authorized to receive such information in connection with a state and national background check.
As can be seen from the language above, a state’s minimum obligation is to obtain fingerprints for submission to the FBI and/or a governmental agency or entity authorized to receive such information.
Because the Criteria do not mandate any additional searches, one option for states may be to ask applicants to “self-report.” States may decide to create forms where applicants are required to answer questions regarding their background, which could include any issues related to foreign convictions. If an applicant answered “yes,” a state could require the applicant to provide additional information to assist the state in determining the applicant’s fitness for licensure.