Staff from the Federal Reserve Board recently requested survey results from the
OREP.org/Working RE Customary and Reasonable Fee Survey, with over 16,500
appraisers participating.
Customary and Reasonable Fees-Still Breathin'
By David Brauner, Editor
The
issue of Customary and Reasonable Fees may not be dead.
Staff from the Federal Reserve Board recently requested survey results from the
OREP.org/Working RE Customary and Reasonable Fee Survey, with over 16,500
appraisers participating. Why? Because customary and reasonable fees and other
issues related to the Dodd-Frank Financial Reform Legislation are not settled,
according to the Federal Reserve, who is tasked with implementing the law- sort
of.
As we know, the Fed was tasked with implementing Dodd-Frank initially. Its
Interim Final Rule was released in 2010 but instead of finding a way to enforce
the intent of the C&R fee provision in the Legislation, it rendered it impotent
by way of convoluted logic that permits the status quo- appraisals to the lowest
bidder. As a result, the issue of fair fees was dead in the minds of most
appraisers. But maybe not quite.
The Consumer
Financial Protection Bureau (CFPB) took over from the Fed in July 2011- well,
not exactly. According to a Fed staffer (Fed staff are not permitted to be
quoted by name), “As explained in the
testimony of Division Director Sandy
Braunstein, in the last paragraph of the section on appraisal independence (p.
12-15), authority for issuing permanent rules to revise the Interim Final Rule
is shared by the Board with several agencies, including the CFPB. The Board and
the other agencies are also required under Title XIV of the Dodd-Frank Act to
issue several other rules related to appraisals which must be finalized by
January 2013. Thus, we are focused on those rulemakings but are also actively
assessing the Interim Final Rule and will consider whether changes should be
made in issuing permanent rules in the future.”
As for the CFPB, which was a creation of Dodd-Frank, it is in a state of
regulatory limbo until a Director can be confirmed by the U.S. Senate, which is
not expected to happen soon since many in Congress oppose it and, in fact, wish
to repeal Dodd-Frank entirely. Not much is expected to happen until the
November election.
Worth Exploring
While considering the
Rules Implementing Title XIV of the Dodd-Frank Act,
many appraisers believe the Fed ought to explore
how lenders are allowed to own all or part of the appraisal management companies
(AMCs) that handle their appraisals, in light of the following from the 2010
Interim Final Rules: “(Rules) Prohibit appraisers and appraisal management
companies from having a financial or other interest in the property or the
credit transaction that is the subject of the appraisal.”
Here’s another surprise: At a recent industry gathering, it was stated, rather
matter-of-factly, that AMCs are a profit center for lenders for reasons other
than reducing their work load: apparently it is accepted practice for AMCs to
“bid” for lender contracts by providing “incentives” (kickbacks) to banks for
service contracts. So lenders profit both from a free value added service and
cash. Great work if you can get it!
Take the Working RE/OREP.org Customary and Reasonable Fee Survey
if you have not. Find the results
here (Closed).