Customary and Reasonable Fees - Still Breathin'

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 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!

Find the results for the Working RE/ Customary and Reasonable Fee Survey here.

Find the Testimony by FED Division Director Sandy Braunstein at, click Sidebar Info then click the link – FED Director Testimony (pg. 12-15)

About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at, 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 or (888) 347-5273. Calif. Insurance Lic. #0C89873.

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