Federal Reserve Board to Clarify Customary and Reasonable Appraisal Fees
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Author:
n/a -
Send To:
Federal Reserve Board, U.S. Congress, Federal Financial Institutions Examination Council, Federal Trade Commission
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Sponsored By:
Appraisers and Concerned Citizens -
More Info at:
Federal Reserve Board - [email protected]; [email protected] ; [email protected] ; [email protected] ; [email protected]
Subject: Potential violations of the prohibitions in TILA against the use of AMC fees as the basis for determining reasonable and customary appraisal fees.
On October 18, 2010, the Federal Reserve Board announced an interim final rule to Regulation Z of Title 12, also known as the Truth in Lending Act (TILA). One of the elements to Regulation Z is a binding requirement upon creditors and appraisal management companies to ensure that appraisers who are not employees of creditors or of the appraisal management companies receive customary and reasonable payments for their services.
In preparing this interim final rule, the Federal Reserve Board did not specifically identify which appraisal fee schedules, surveys or studies that would be appropriate to designate as a safe harbor for creditors and their agents to comply with the reasonable and customary fee requirements of TILA. In lieu of identifying these schedules, surveys or studies, the Board basically offered two alternatives to creditors and appraisal management companies; either conduct their own surveys of fees for a locale and operate off the presumption that those surveys are reasonably accurate (Presumption 1), or rely on other fee surveys or studies conducted by objective third parties such as government agencies, academic institutions, and private research firms and rely on the presumption that they are accurate (Presumption 2).
The specific language of both (TILA) and the FRBs interim final rule specifically exclude the use of AMC fees as the basis for identifying the thresholds for reasonable and customary appraisal fees. In fact, the final interim rule specifically refers to this prohibition several times.
It is our assertion that there is no language in the "Presumption 1" paragraphs that indicate that either Congress or the Board intended to allow the AMCs to include their own fees or those of other AMCs as the basis for reasonable or customary appraisal fees. We believe it is obvious that the term:
"...recent rates paid for comparable appraisal services..."
as stated in Presumption 1 *is not* synonymous with, nor should it be interpreted as:
"...recent rates paid by AMCs for comparable appraisal services..."
We also assert that ample evidence exists in the market in virtually all locales as to what local appraisers charge their non-AMC clients for such appraisal work. No AMC is compelled to actually wonder what fees the appraisers charge their non-AMC clients - all they have to do is pick up the phone and start asking.
As of the implementation date of the final interim rule, many appraisal management companies have made a good faith effort to comply with the requirements in TILA to ensure that the appraisers they engage are paid fees that are reasonable and customary for those markets. Some of these AMCs have accomplished this by employing Presumption 1 (conducting their own market surveys), while others have accomplished this by employing Presumption 2 (relying on other published fee schedules and surveys developed by objective third parties). Some AMCs have gone so far as to employ both methods as a means of ensuring their compliance. As appraisers, we applaud and support the good faith efforts of those AMCs that have chosen to adhere to the law as written.
Sadly, as of the implementation date of 04/2011, some AMCs have chosen to flaunt both the letter and specific intent of the law (TILA) as well as that of the interim final rule. Despite the specific prohibition against including AMC fees as part of those surveys, a few of the high profile AMCs have even gone so far as to erroneously assert that the final interim rule specifically allows them to reference their own fees and/or those of other AMCs in their surveys. This, despite the repeated references in TILA and the interim final rule to the contrary.
To the extent such violations are occurring in the market the results serve to undermine both the letter and intent of the law (TILA) as written. The violator AMCs have undermined the level playing field on which they compete in the market with other AMCs that are in compliance, not to mention seriously degrading the economic viability of the appraisers who actually perform the appraisals being used in these transactions. The damages to the professional appraiser community extend across all levels of experience and competency, and serve to induce some appraisers who work for the AMCs to attempt to compensate for these grossly substandard fees by sacrificing quality and due diligence for increased assignment volume. Obviously this has also had a negative impact on the utility of those appraisals as used by the creditors, not to mention the negative impacts on consumer interests and the federal banking regulatory interests.
Simply put, if a violator AMC is billing a consumer $500 or more for a comprehensive residential appraisal, that consumers interests cannot be well served on a consistent basis when that AMC makes their primary choice of appraiser based on a unilaterally imposed fee structure that is, in some cases, less than half of the prevailing rate being charged in the market to any other type of user. That some of the biggest AMCs are wholly-owned subsidiaries of the lending institutions they represent essentially amounts to an additional hidden fee being paid - by the consumers - to those lenders in those loan transactions.
We, the undersigned, represent a large number of licensed and certified real estate appraisers in the United States. We respectfully request that the Board take action to publicly reiterate the prohibitions contained in both TILA and the Boards interim final rule against the reliance on any survey, conducted by any party, that unlawfully includes AMC fees and purports to use them as the basis, in part or in whole, for establishing the thresholds for reasonable and customary appraisal fees as referenced. In addition to public guidance, we also request that the Board act promptly and effectively to investigate complaints involving allegations of the blatant violations of these prohibitions as stated.
We thank you for your cooperation and assistance.
Subject: Potential violations of the prohibitions in TILA against the use of AMC fees as the basis for determining reasonable and customary appraisal fees.
On October 18, 2010, the Federal Reserve Board announced an interim final rule to Regulation Z of Title 12, also known as the Truth in Lending Act (TILA). One of the elements to Regulation Z is a binding requirement upon creditors and appraisal management companies to ensure that appraisers who are not employees of creditors or of the appraisal management companies receive customary and reasonable payments for their services.
In preparing this interim final rule, the Federal Reserve Board did not specifically identify which appraisal fee schedules, surveys or studies that would be appropriate to designate as a safe harbor for creditors and their agents to comply with the reasonable and customary fee requirements of TILA. In lieu of identifying these schedules, surveys or studies, the Board basically offered two alternatives to creditors and appraisal management companies; either conduct their own surveys of fees for a locale and operate off the presumption that those surveys are reasonably accurate (Presumption 1), or rely on other fee surveys or studies conducted by objective third parties such as government agencies, academic institutions, and private research firms and rely on the presumption that they are accurate (Presumption 2).
The specific language of both (TILA) and the FRBs interim final rule specifically exclude the use of AMC fees as the basis for identifying the thresholds for reasonable and customary appraisal fees. In fact, the final interim rule specifically refers to this prohibition several times.
It is our assertion that there is no language in the "Presumption 1" paragraphs that indicate that either Congress or the Board intended to allow the AMCs to include their own fees or those of other AMCs as the basis for reasonable or customary appraisal fees. We believe it is obvious that the term:
"...recent rates paid for comparable appraisal services..."
as stated in Presumption 1 *is not* synonymous with, nor should it be interpreted as:
"...recent rates paid by AMCs for comparable appraisal services..."
We also assert that ample evidence exists in the market in virtually all locales as to what local appraisers charge their non-AMC clients for such appraisal work. No AMC is compelled to actually wonder what fees the appraisers charge their non-AMC clients - all they have to do is pick up the phone and start asking.
As of the implementation date of the final interim rule, many appraisal management companies have made a good faith effort to comply with the requirements in TILA to ensure that the appraisers they engage are paid fees that are reasonable and customary for those markets. Some of these AMCs have accomplished this by employing Presumption 1 (conducting their own market surveys), while others have accomplished this by employing Presumption 2 (relying on other published fee schedules and surveys developed by objective third parties). Some AMCs have gone so far as to employ both methods as a means of ensuring their compliance. As appraisers, we applaud and support the good faith efforts of those AMCs that have chosen to adhere to the law as written.
Sadly, as of the implementation date of 04/2011, some AMCs have chosen to flaunt both the letter and specific intent of the law (TILA) as well as that of the interim final rule. Despite the specific prohibition against including AMC fees as part of those surveys, a few of the high profile AMCs have even gone so far as to erroneously assert that the final interim rule specifically allows them to reference their own fees and/or those of other AMCs in their surveys. This, despite the repeated references in TILA and the interim final rule to the contrary.
To the extent such violations are occurring in the market the results serve to undermine both the letter and intent of the law (TILA) as written. The violator AMCs have undermined the level playing field on which they compete in the market with other AMCs that are in compliance, not to mention seriously degrading the economic viability of the appraisers who actually perform the appraisals being used in these transactions. The damages to the professional appraiser community extend across all levels of experience and competency, and serve to induce some appraisers who work for the AMCs to attempt to compensate for these grossly substandard fees by sacrificing quality and due diligence for increased assignment volume. Obviously this has also had a negative impact on the utility of those appraisals as used by the creditors, not to mention the negative impacts on consumer interests and the federal banking regulatory interests.
Simply put, if a violator AMC is billing a consumer $500 or more for a comprehensive residential appraisal, that consumers interests cannot be well served on a consistent basis when that AMC makes their primary choice of appraiser based on a unilaterally imposed fee structure that is, in some cases, less than half of the prevailing rate being charged in the market to any other type of user. That some of the biggest AMCs are wholly-owned subsidiaries of the lending institutions they represent essentially amounts to an additional hidden fee being paid - by the consumers - to those lenders in those loan transactions.
We, the undersigned, represent a large number of licensed and certified real estate appraisers in the United States. We respectfully request that the Board take action to publicly reiterate the prohibitions contained in both TILA and the Boards interim final rule against the reliance on any survey, conducted by any party, that unlawfully includes AMC fees and purports to use them as the basis, in part or in whole, for establishing the thresholds for reasonable and customary appraisal fees as referenced. In addition to public guidance, we also request that the Board act promptly and effectively to investigate complaints involving allegations of the blatant violations of these prohibitions as stated.
We thank you for your cooperation and assistance.
11100 Signatures
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Walter Vance R
- State:
- NC
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
- Comments:
- 35 years experience,VA, first FHA in county
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mary ann w
- State:
- md
- Status: (Appraiser, Appraisal Mgt Company, other)
- appraiser
- Comments:
- Please address this situation. We have seen a 30-50\% drop in income due to reduced fees.
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Sharon O
- State:
- NC
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
- Comments:
- It is a disgrace that bank owned AMC firms are profiting from borrowers on the backs of desperate appraisers. AMC's are charging $500 to consumer then shopping for the cheapest appraiser they can find with no regards to competency. The real estate industry will NOT recover if there is no consistency and/or competency in the valuation of most peoples single largest investment. AMC's not only want 1/2 my fee - they pressure me daily to manipulate comp data so it will pass their "quality control" guidelines. They are declining good loans to rural markets because we don't have 3 comps that sold last week. Maybe the desperate appraisers the are finding are willing to manipulate the data just to get paid 1/2 the fee a competent professional should be charging??
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Bruce A. G
- State:
- MD
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
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Lore D
- State:
- Virginia
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
- Comments:
- Real estate appraisers are one of two parties in a RE transaction that protect the public (the other is attorneys). No one has openly tried to cut attorneys fees or put them out of business. Within the past year, as much as 50\% of appraisers (depending on the area) have gotten out of the business or are no longer practicing. Do you want this to continue? For instance, how are bank appraisers going to protect the public when the bank will sell the loan and let tax payers AGAIN pay the bill?Thank you for your consideration.
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Ian C
- State:
- VA
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraisal Profession Advocate
- Comments:
- The entire premise that the Fed or federal law (D-F Act) can simulate and substitute what should be a function of free-market competition is absurd. There is no "free market" for appraisals anymore thanks to HVCC and D-F. C&R "rules" can never be sufficient to replace market forces. The only sensible thing the FED can say about C&R, is that the free market must be restored in the realm of appraisals. That means that other rules in D-F must be changed such as allowing loan originators to order appraisals again. With enforcement of the SAFE Act and other anti-coersion rules, that should be sufficient to protect the system from risks. And do not forget, appraisers must also know when to say "no" to pressure! How about mandatory reporting of lenders by appraisers when the lenders use pressure?! Remember, this whole crisis started because of the lenders taking stupid risks and MASSIVE REGULATORY FAILURES!
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Heather B
- State:
- Virginnia
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
Christine T
- State:
- Michigan
- Status: (Appraiser, Appraisal Mgt Company, other)
- other
- Comments:
- Please consider grandfathering in those without a formal degree - perhaps after testing for compentency.
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Charlene P
- State:
- SC
- Status: (Appraiser, Appraisal Mgt Company, other)
- Certified Real Estate Appraiser
-
Travis P
- State:
- Fl
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
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robert k
- State:
- nj
- Status: (Appraiser, Appraisal Mgt Company, other)
- appraiser
- Comments:
- i spoke to an owner of an amc. the fees they were offering were offensive. i asked if he plans to comply with customery and reasonable fees and he left. he actually laughed and said there is no provisions to prevent him from offering low fees. not to mention he expects 24 hour turn around time!
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Cynthia J
- State:
- MD
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appriaser
-
Charles L. F
- State:
- Maryland
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
James P M
- State:
- Maryland
- Status: (Appraiser, Appraisal Mgt Company, other)
- Certified Residential Appraiser
- Comments:
- We need help and we need it now or we'll be out of business!
-
Jeffrey C. B
- State:
- PA
- Status: (Appraiser, Appraisal Mgt Company, other)
- Certfied General RE Appraiser
-
Douglas B
- State:
- DE
- Status: (Appraiser, Appraisal Mgt Company, other)
- Certified Residential Appraiser
- Comments:
- If you continue to let Lenders define "customary & reasonable", they will continue to define it to their benefit, not ours, and we are the ones responsible for doing the work involved with the appraisal, not them. Take a stand and support the hardworking appraisers out there.
-
Joanne C
- State:
- NY
- Status: (Appraiser, Appraisal Mgt Company, other)
- other
-
Jorge Ladron de G
- State:
- Florida
- Status: (Appraiser, Appraisal Mgt Company, other)
- Certified Residential Appraiser
- Comments:
- Corelogic, Landsafe, Rels Valuation,
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Peter LeQuire, I
- State:
- Tennessee
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
Joeseph B
- State:
- NY
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
- Comments:
- you have taken the ability to market my business to lenders, now my fee has been cut in half by an AMC !
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james p
- State:
- nc
- Status: (Appraiser, Appraisal Mgt Company, other)
- appraiser
- Comments:
- need to get this going (amc fees are terrible)
-
Janet J
- State:
- PA
- Status: (Appraiser, Appraisal Mgt Company, other)
- other
-
John C
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
John G
- State:
- Alabama
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
PAUL D'ANNA J
- State:
- MD
- Status: (Appraiser, Appraisal Mgt Company, other)
- APPRAISER
- Comments:
- MOST AMC ARE STILL NOT PAYING "CR"
-
Kelly F
- State:
- NC
- Status: (Appraiser, Appraisal Mgt Company, other)
- Trainee Appraiser
-
Jeffery A M
- State:
- Ohio
- Status: (Appraiser, Appraisal Mgt Company, other)
- State-Certified Residential REal Eastate Appaiser
- Comments:
- UNREASONABLE LOW FEES, WHICH ARE NOT CUSTOMARY, ARE BEING DICTATED BY THE AMC'S; THE APRAISER CAN NOPT SET FEES THAT TRUELY COVER THE TIME INVOLVED TO COMPLETE EACH ASSINGMENT OR THE TECHNOLOGY REQUIRED TO COMPLETE EACH ASSINGMENT; THE LENDER'S DEMAND THAT AMC'S BE USED TO ORDER APRPAISALS, AND WILL NOT ACCEPT ANY OTHER METHOD THAN AN AMC.
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Charles J
- State:
- NC
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
- Comments:
- You want quality appraisals, help us get the fees where we can make a living and spend the time required!!
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Christopher C
- State:
- VA
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
- Comments:
- These rules (and diminished fees) will lead to the demise of the appraiser profession.
-
June C
- State:
- VA
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
- Comments:
- В
-
Francis V
- State:
- MD
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
William Walter Whitley, S
- State:
- Virginia
- Status: (Appraiser, Appraisal Mgt Company, other)
- Certified General Real Estate Appraiser
-
Julie G
- State:
- Virginia
-
James E. V
- State:
- MN
- Status: (Appraiser, Appraisal Mgt Company, other)
- Certified Residential Appraiser - FHA approved
- Comments:
- Fair fee for services rendered: We are a profession. AMCs are destroying our profession.
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MARK S. R
- State:
- Pennsylvania
- Status: (Appraiser, Appraisal Mgt Company, other)
- Liscensed Appraiser
-
Shawn M K
- State:
- AZ
- Status: (Appraiser, Appraisal Mgt Company, other)
- Certified Residential Appraiser
-
William C M
- State:
- Maryland
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
Eric P
- State:
- South Carolina
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
Donald L
- State:
- PA
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser...Company Owner
- Comments:
- If you have not run a spread sheet on your expenses in this business.....YOU NEED TO. We have a bottom line price that we need to 'fire up the car for' and if we don't get OUR minimum then we stay home and play with our stuff. Figure out your minimum hourly wage and stick to it!! :-)
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Eric St. C. P
- State:
- Maryland
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
- Comments:
- VA fee structure appears reasonable. That is currently $400 per appraisal.
-
Leah P
- State:
- DC
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
Jaclyn S. K
- State:
- WI
- Status: (Appraiser, Appraisal Mgt Company, other)
- Certified Residential Appraisal
-
DENNIS S
- State:
- CT.
- Status: (Appraiser, Appraisal Mgt Company, other)
- APPRAISER
- Comments:
- THE FEES BEING PAID ARE ABOUT $100
-
William F. S
- State:
- South Carolina
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
Marvin C
- State:
- NC
- Status: (Appraiser, Appraisal Mgt Company, other)
- Amazing Grace Appraisals
-
P. Randall P
- State:
- WV
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
Linda A
- State:
- MS
- Status: (Appraiser, Appraisal Mgt Company, other)
- Certified Residential Appraiser
-
Charles D. C
- State:
- Virginia
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
James F B
- State:
- VA
- Status: (Appraiser, Appraisal Mgt Company, other)
- State Certified Residential Appraiser
-
Brian L
- State:
- LA
- Status: (Appraiser, Appraisal Mgt Company, other)
- Appraiser
-
11100
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