AMCs, Banks May Be Misinterpreting “Customary and Reasonable”: Fed Staff
Excerpted from the Appraisal Institute.
"Some banks and appraisal management companies may be misinterpreting Presumption 1 of the Federal Reserve’s Interim Final Rule “customary and reasonable” fee language, the Fed’s staff said April 10 at the Association of Appraiser Regulatory Officials spring conference in San Antonio.
"...representatives from the Federal Reserve indicated that utilizing AMC-involved assignments when assessing fees as part of a six-part test under Presumption 1 may be inconsistent with the Rule, which became effective on April 1. Federal Reserve officials indicated that AMC fees were not to be included in any assessment of recent fees paid to appraisers.
"...the provision of the Interim Final Rule that states that just because an AMC requires an appraiser to sign a document indicating that the fee that they are paid for an assignment is customary and reasonable does not necessarily satisfy the AMC’s responsibility to ensure that an appraiser is actually paid a customary and reasonable fee.
"...In determining [C&R fees] under Presumption 1, a creditor or its agents shall review the factors and make any adjustments to recent rates paid in the relevant geographic market necessary to ensure that the amount of compensation is reasonable. These factors include the type of property, the scope of work, the time in which the appraisal services are required to be performed, the fee appraiser qualifications, the fee appraiser experience and professional record and the fee appraiser work quality.
"..Some have speculated that creditors and their agents may not be interpreting the lengthy explanation in the preamble for the customary and reasonable fee rule. Doing so may be place the creditor at risk of significant fines and penalties. Unfortunately, it is up to an appraiser to proactively rebut Presumption 1, and it’s not clear what information is necessary for a satisfactory rebuttal.
"...Federal Reserve staff indicated they take complaints on this issue seriously, although no word was given on whether the Fed plans to issue any clarifying guidance regarding Presumption 1.
"There are two websites that appraisers can use to find the federal regulator for a creditor. Visit the Federal Reserve System – National Information Center website at www.ffiec.gov/nicpubweb/nicweb/nichome.aspx and the FDIC website at the “Bank Find” webpage at www2.fdic.gov/idasp/main_bankfind.asp.
"Questions regarding the appropriate interpretation of the Truth in Lending Act, including those on customary and reasonable fees, should be directed to the Federal Reserve Board at www.federalreserve.gov/feedback.cfm".