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Feds to Reconsider Customary & Reasonable Fees – Maybe
by David Brauner, Editor
Appraisers might have some good news regarding fees after all but it’s hard to tell.
Speaking at the Appraisal Summit last month, the lead enforcement attorney for the Consumer Financial Protection Bureau (CFPB), Anthony Romano, told appraisers that he is aware of the ongoing controversy surrounding low fees and said that his agency intends on looking at the issue more closely in early 2014.
Appraisers at the show seemed genuinely buoyed by Romano’s remarks, which seemed to support the view that the customary and reasonable fee provision of Dodd-Frank is not being properly enforced and that low fees can and do adversely affect quality. A follow up statement issued by his office, however, seemed much less clear (see below).
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RESPA to the Rescue?
At the conference, Romano cited his experience as a mortgage banker to emphasize his understanding and respect for the role appraisers play in the lending process. He stressed his high regard for appraisers throughout his virtual presentation. (Romano was scheduled to speak at the Summit but an illness prevented his travel.)
Romano said lenders should not be cutting corners on appraisals. He noted that appraisals are the last defense against fraud and that consumers deserve quality when participating in what is for many, the largest financial transaction of their lives. He noted that while the agency doesn’t want consumers to pay more for appraisals, it also doesn’t want bad values.
Romano cited RESPA (Real Estate Settlement and Procedures Act) as a possible starting point for addressing low fees. He said that one suggestion is to list appraiser and AMC fees separately on closing documents, something many appraisers have long called for. The CFPB took over the administration and enforcement of RESPA in July 2011. RESPA was passed in 1974.
Romano explained that historically the “Lender Processing Fee” line item on settlement documents included items that were a lender’s expense. Today, lenders continue to collect “lender processing” fees but no longer bear the total cost of these services, which are partly handled by AMCs. Some of these costs now show up in the “Appraisal Fee” line item, which does not provide transparency to consumers- who might reasonably expect the “appraisal fee” to cover the cost of the appraisal. Part of it goes to the appraiser and part covers AMC costs.
Romano made no other substantive statements about how customary and reasonable fees might be achieved, either at the conference or in follow up questions from WRE. At the conference, he did say that whatever actions his agency takes will be phased in slowly so as not to disrupt the marketplace.
At the conference, Romano voiced what many appraisers believe, saying that if more attention had been given to appraisal independence issues it might have helped avoid the real estate collapse. He seemed to be aware of “black” and “do not use” lists but made no comment. Numerous appraisers have complained about not seeing any action to appraiser independence complaints made to the CFPB. In a follow up with WRE, Romano did not answer why this is the case.
A spokesperson for Romano issued the following statement to WRE on his behalf: “The CFPB will continue to look at fees as part of the supervision process to determine whether they are customary and reasonable as specified in Dodd-Frank. Additionally, the Bureau will continue to work within an interagency group to develop proposals to implement the Dodd-Frank Act’s amendments concerning appraisal issues. For information about the CFPB’s regulatory agenda, you can consult the Bureau’s strategic plan at http://files.consumerfinance.gov/f/strategic-plan.pdf, or see our current notices here: http://www.consumerfinance.gov/notice-and-comment/.”
The statement issued by the office also said that Romano’s remarks at the conference were his own opinions and do not necessarily represent the views or plans of the CFPB.
About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states. He has covered the appraisal profession for over 20 years. He can be contacted at email@example.com or (888) 347-5273. Calif. Insurance Lic. #0C89873.
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