The State of California recently passed into law the Fair Appraisal Act (the “Act”). The Act was one of over 30 bills signed into law on September 28, 2021 as part of state efforts to promote affordable housing and fair housing principles. Specifically, the Act addresses discrimination during the appraisal process of a residential real estate transaction.
The Act adds Section 11310.3 to the California Business and Professions Code. It requires the Bureau of Real Estate Appraisers (the “Bureau”) to collect demographic information, voluntarily provided by sellers, buyers, and borrowers that are refinancing a loan, when a complaint is received. The Bureau must report this information to the California legislature by July 1, 2024. The Act also requires the Bureau to add a check box to its existing complaint form, asking if the complainant believes that an appraisal provides a value amount below market value.
Section 11340 of the California Business and Professions Code was amended under the Act to add a requirement for new appraisal licensee applicants to complete a least one hour of instruction in cultural competency beginning January 1, 2023. Existing licensees will also be required to complete at least one hour of cultural competency every four years beginning on January 1, 2023, as part of continuing education requirements.
The law also creates a notice requirement with the addition of Section 1102.6g to the California Civil Code that applies to residential real property containing up to four units. As of July 1, 2022, a new notice must be provided in every sales contract for single-family residential purchase loans. Also, when refinancing a first lien purchase money loan, licensees must deliver the new notice prior to or with the Loan Estimate or the Mortgage Loan Disclosure Statement or may include it with the federal Equal Credit Opportunity Act (12 C.F.R. § 1002 et seq.) disclosure. For purposes of the notification requirement, a licensee is defined as “a depository institution chartered under federal or state law, a person covered by the licensing requirements of Division 9 (commencing with Section 22000) or Division 20 (commencing with Section 50000) of the Financial Code, or a person licensed pursuant to Part I (commencing with 10000) of Division 4 of the Business and Professions Code.”
The notice must state the following:
“Any appraisal of the property is required to be unbiased, objective, and not influenced by improper or illegal considerations, including, but not limited to, any of the following: race, color, religion (including religious dress, grooming practices, or both), gender (including, but not limited to, pregnancy, childbirth, breastfeeding, and related conditions, and gender identity and gender expression), sexual orientation, marital status, medical condition, military or veteran status, national origin (including language use and possession of a driver’s license issued to persons unable to provide their presence in the United States is authorized under federal law), source of income, ancestry, disability (mental and physical, including, but not limited to, HIV/AIDS status, cancer diagnosis, and genetic characteristics), genetic information, or age. If a buyer or seller believes that the appraisal has been influenced by any of the above factors, the seller or buyer can report this information to the lender or mortgage broker that retained the appraiser and may also file a complaint with the Bureau of Real Estate Appraisers at https://www2.brea.ca.gov/compliant/ or call (916) 552-9000 for further information on how to file a complaint.
DocMagic will provide the new notification beginning on July 1, 2022. The form will be provided in initial packages for all refinance loans with a property state of California. For purchase loans, the required language must be provided in the sales contract, so a notification will not be provided by default.
If you have questions regarding this article, please contact DocMagic’s Compliance Department.
