Legislative Action News, January 17, 2012

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USDA Announces Streamlining Initiative
By Stephen Frerichs

Last week Secretary of Agriculture Vilsack announced a sweeping initiative to close 259 domestic offices, facilities and labs across the country, as well as seven foreign offices. Along with other administrative streamlining, USDA expects to save close to $150 million annually once all of the recommendations are implemented. As part of the initiative, the Farm Service Agency will consolidate 131 county offices in 32 States. To see which FSA offices are impacted click here: http://www.usda.gov/documents/BPSS-Factsheet-FFAS.pdf 

Farm Bureau Adopts New Farm Policy
By Stephen Frerichs

During its annual meeting in Hawaii last week the American Farm Bureau Federation (AFBF) adopted a new farm policy platform. The new policy supports eliminating direct payments and replacing them with a catastrophic revenue program that is sold by the private industry and is WTO compliant. AFBF staff presented a policy called the Systemic Risk Reduction Program (“Syrup”) which would essentially provide a free GRIP policy (70 or 80% coverage depending on budget costs using a 5 year Olympic price rather than market price) for program crops and possibly expanding it to all crops. While the name appears to have been rejected by AFBF delegates, the basic concept is now official AFBF policy.

 So rather than wrapping an area plan around individual insurance, which was pursued during the farm bill deliberations last fall (Total Coverage Option and STAX for cotton growers), the AFBF approach would start with a virtually free area plan and then wrap individual coverage around it.  Since the area plan would pay first under the AFBF approach, individual plans would have to be rerated with the expectation that rates would drop significantly in some parts of the country. It will be interesting to see if other commodity groups embrace this approach as it has significant disproportionate regional impacts.  Recall some of the commodity groups argued against area coverage as the base for federal risk management support last fall.  As AFBF releases more information on it approach, we’ll make it available.

EPA Releases Farm, Ranch and Rural Communities Report
By Stephen Frerichs

The Environmental Protection Agency‘s (EPA) Farm, Ranch, and Rural Communities Committee (FRRCC) has concluded over a year of evaluation of EPA efforts to restore, maintain and enhance water quality through nutrient management programs. Among the key findings are a need for more public engagement, more effective two-way communication with the agricultural community, and refinement in the application of science with respect to the water quality programs it oversees. You can find the full report here: http://www.epa.gov/ocem/frrcc/pdf/2011_dec_frrcc_final_report.pdf

Feds Doom LightSquared’s LTE 4G network
Colleen Scherer, Ag Professional, January 17, 2012

Nine federal agencies decided that none of LightSquared’s proposals for its LTE 4G broadband network would overcome significant interference with GPS (Global Positioning System) devices. The National Space-Based Positioning, Navigation, and Timing Executive Committee (PNT ExComm) announced Friday that the nine federal agencies that make up the body made the decision unanimously.

PNT ExComm released a memo on Friday with its findings after being involved in testing the proposed network at the request of the Federal Communications Commission and the National Telecommunications and Information Administration (NTIA), which were providing LightSquared opportunities to provide alternatives to its original proposed network.

Both the original and modified proposals by LightSquared would cause harmful interference to many GPS receivers, the PNT ExComm chairmen said in the memo. The agency also said a Federal Aviation Administration analysis had concluded the network would be incompatible with aircraft safety systems.

“Based upon this testing and analysis, there appear to be no practical solutions or mitigations that would permit the LightSquared broadband service, as proposed, to operate in the next few months or years without significantly interfering with GPS. As a result, no additional testing is warranted at this time,” the memo said.

LightSquared reacted to the decision by claiming “bias and inappropriate collusion” by the government. It claimed the process used to evaluate its original and proposed plans was compromised by a conflict of interest since one of the government’s key advisers on the matter is a board member of Trimble, a manufacturer of GPS receiver equipment.

The company further called for an investigation into the alleged conflicts of interest by the PNT Advisory Board, which advises the PNT ExComm. LightSquared said both the PNT Advisory Board and PNT ExComm had abandoned their commitment to test GPS receiver filters that LightSquared believes can solve the interference issue.

“Under an agreement worked out directly between representatives of Trimble—the same company that has paid for a year-long lobbying campaign against LightSquared’s network—LightSquared was specifically excluded from the testing process,” the press release said. “The devices selected as part of the most recent round of testing include numerous obsolete and off-market GPS receivers that nearly guaranteed failure. Power levels used for testing were 32 times that of real-world conditions further stacking the deck in favor of GPS industry interests.”

The Coalition to Save Our GPS, which was formed in response to concerns raised by LightSquared’s network interference, responded to the recent announcement in a press release.

“Every set of independent technical studies has confirmed that LightSquared’s proposed operations would create widespread interference to critical GPS uses,” the Coalition to Save our GPS said in a press statement. “The test results which were the subject of the Jan. 13, 2011, government conclusions yet again confirm the interference problem. The results also confirm that interference will not only affect high-precision GPS receivers, but also millions of GPS devices used by consumers every day in their cars, trucks and boats. In addition, the most recent studies confirm interference to critical aviation safety systems.

“LightSquared has been afforded every possible opportunity to make its technical case, and has failed to demonstrate that it can avoid interference to many critical GPS based activities. Over the last year, it has proposed numerous modifications to its proposals which it claimed would solve the interference problem. Each of these proposals has been extensively evaluated and none have been found adequate to eliminate widespread interference to GPS. No credible, independent expert or organization has come forward to support LightSquared’s claims of non-interference to millions of existing GPS devices.

“We welcome the PNT Executive Committee’s unanimous conclusion on behalf of the nine government departments and agencies that ‘no practical solutions or mitigations’ exist that would allow LightSquared to operate without causing significant interference to GPS. At this point, there is no evidence that any further modifications to its proposal would yield a different conclusion. Because of this, the Committee’s conclusion that it is time to end technical studies and that the proposal is not viable is supported by overwhelming technical evidence.”

Dodd-Frank Rulemakings Commence, Appraisal Groups Respond
By Bill Garber

Below is an update on Dodd-Frank Act regulatory activities of interest to appraisers.

Separation of Appraisal and Appraisal Management Fees

In November, American Society of Farm Mangers and Rural Appraisers and the Appraisal Institute urged the Consumer Financial Protection Bureau (CFPB) to separate appraisal fees and appraisal management fees on applicable settlement forms. A follow up meeting was held last month with CFPB staff to discuss appraisal issues centered on a new Consumer Disclosure Form slated to replace the current HUD-1 settlement statement. Of interest to appraisers, the Dodd-Frank Act authorizes, but does not require, separation of appraisal and appraisal management fees on these loan documents. The CFPB is studying this issue and likely will issue a Notice of Proposed Rulemaking in the summer of 2012 and also will be seeking public comment.

At the December CFPB meeting, officials confirmed that no decision on whether to require separation of fees or to continue to allow bundling had been made. While the first draft of the new Consumer Disclosure Form allowed for the continuation of bundling, CFPB officials indicated an upcoming version of the form will show a new line for appraisal management fees, separate from appraisal fees. This is one of several versions of the form that is scheduled to be tested with consumers in focus groups around the country.

It appears that the CFPB has three options under consideration: 1) Do nothing and continue to allow bundling of appraisal fees and appraisal management fees (despite the separation authorization in the Dodd-Frank Act); 2) Provide a new line on the Consumer Disclosure Form, but not require the fees be separated; or 3) Provide a new line and require separation of the fees. Critical issues that lie ahead for the agency are whether consumers would be confused by seeing two lines on the new Form, when they may pay for both as one lump sum at application. Additionally, some “captive” AMCs may be adversely impacted by fee separation because of another provision found in the Dodd-Frank Act that caps lender points and fees at 3 percent. Today, if the appraisal management fee is bundled with the appraisal fee, it is considered outside of this 3 percent cap. That would change, reducing the total amount available for lender fees, if the fees were separated.

The ASFMRA/Appraisal Institute believe that appraisal management is a different service than appraisal services and advocates for clear separation of fees on the new Consumer Disclosure Form. We encourage members to weigh in to this effect during the upcoming public comment periods seeking feedback on the new form, and the public rulemaking to commence later this year. Notice of these comment periods will be provided to ASFMRA members.

Interagency Appraisal Rulemakings

ASFMRA, the Appraisal Institute, and several other interested parties were invited to participate in a conference call with staff of the OCC, FED, FDIC, NCUA, FHFA and CFPB on January 11, 2012 to discuss three appraisal-related rules commencing from the Dodd-Frank Act. These rules are intended to address the following:
• When interior inspection appraisals are required in “higher-cost” (i.e., subprime) mortgages;
• When second appraisals are required for properties sold within 180 days;
• Minimum operating and state registration requirements for AMCs and reporting obligations to the National Registry maintained by the Appraisal Subcommittee; and
• Development of quality control standards for automated valuation models (AVMs).

Dodd-Frank mandates that these rules be finalized by January, 2013, so a probable timetable for action would involve issuance of proposed rules sometime in the spring or summer of 2012.

The agencies sought feedback from the appraisal profession on all of the issues above. Representatives from the ASFMRA and Appraisal Institute emphasized that interior inspection appraisals are the “gold standard” within the industry and that the market has quickly moved away from limited scope appraisals in purchase money transactions. The Dodd-Frank Act provision sought to quell use of drive-by and desktop appraisals in higher risk mortgages. It also sought additional collateral risk assessment to combat property flipping. 

With regard to AMC registration and reporting requirements, the ASFMRA and Appraisal Institute provided perspectives gleaned from the 29 state laws that have been enacted, to date, requiring registration of AMCs. Of particular note, the organizations emphasized that there is a fair amount of consistency amongst these laws, and that the federal requirements should mirror those already enacted. The proposed rules also should attempt to rectify a few issues of ongoing concern, such as the definition of an AMC versus an “appraisal firm,” and lender obligations for agents regarding payment of fees. Other issues that should be addressed or clarified in the rules are whether commercial AMCs will be required to register with any National Registry (not authorized in Dodd-Frank), and disclosure requirements for any AMC owners and operators.

The organizations expressed support for provisions found in the Interagency Appraisal and Evaluation Guidelines as a starting point for the development of quality control standards for AVMs. The Guidelines emphasize that users of AVMs have an obligation to understand the inner-workings of the AVM and to validate the results. This is the underpinning of any quality control standard. The organizations suggested that the agencies turn to common quality control standards established by the International Standards Organization (ISO 9001) for additional inputs. Lastly, the standards should establish standards of independence between those who develop AVMs, and those who develop AVMs to avoid conflicts of interest. A

ASFRMA and the Appraisal Institute are preparing a public comment letter to the agencies outlining these, and other related issues, that were not discussed in the January 11, 2012, meeting. This comment letter will be made available to members on the AI website.

Customary and Reasonable Fees

On December 22, the CFPB issued a new Interim Final Rule on the Truth-in-Lending Act’s provisions related to appraiser independence. This rule includes the previously issued rules relating to “customary and reasonable fees” that originally were issued by the Federal Reserve Board last year. The CFPB Interim Final Rule was issued in order to restate all of the Federal Reserve’s Truth-in-Lending Act regulations as CFPB regulations, effective December 31, 2011, as authorized by the Dodd-Frank Act. As part of this exercise, the CFPB adopted the Federal Reserve’s Interim Final Rule, and the agency stated its action does not constitute any new regulatory obligations. The updated version of the IFR is under a public comment period through February 22.

As stated above, the agencies are under certain statutory deadlines to complete the three rulemakings discussed above (I.e., Requirements for higher cost mortgages, AMC registration & oversight requirements, and AVM quality control standards) by January 2013. No such statutory deadline exists for the issue of customary and reasonable fees. Under the Dodd-Frank Act, the Federal Reserve was required to issue an Interim Final Rule within 90 days of enactment. Dodd-Frank granted authority to issue a Final Rule on the customary and reasonable fee issue, but it must be completed together with all of the agencies, not solely by the CFPB, and no deadline for issuance was included in the Dodd-Frank Act.

In sum, the agencies are developing three mandatory rules relating to appraisal with a goal of completing that work by January 2013. They may (but are not required to) promulgate a Final Rule relating to appraiser independence and customary and reasonable fees, but this is not likely to occur until the statutory obligations are completed. Any Final Rule on the issue of customary and reasonable fees must be completed jointly as an interagency project. ASFMRA and the Appraisal Institute have urged the agencies to develop a Final Rule that brings consistency between the two “presumptions” of compliance. We will continue to press this issue, recognizing the agencies statutory obligations regarding the other rulemaking proceedings.

What’s Ahead for Land Values in 2012?

From LandOwner Newsletter:  The crystal ball is cloudy, as usual, but this is what we see for land values in 2012 and beyond. Net income prospects are positive, which will keep demand for quality farmland strong. Login to member resources to download the latest edition. Your login is your first and last name with NO space between and your password is your member ID#. Please contact Jeremy at 303-692-1218 or jlewis@asfmra.org if you need assistance with your login.

Stand Out Even Among the Land Experts!

Advertise your business in the ONLY directory dedicated to the Most Trusted Land Experts of ASFMRA. The 2012 Membership Directory will be released in March of 2012.  Be sure that your name and business stand out by reserving your advertisement space now.  Visit the ASFMRA website to see all the different ad size and price options.  Deadline to advertise is Feb 15th – don’t miss out!  Contact Cheryl at ccooley@asfmra.org or visit http://www.asfmra.org/directory-land-experts/ for more information.

Kiplinger Agriculture Letter

Check out the latest Kiplinger Agriculture Letter with updates on presidential candidates, winter weather effects on U.S. cros, supplies of oranges and ethanol production. Login to member resources and download the latest issue, one of the benefits of ASFMRA membership.

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