Do you think you will see much change regarding Customary and Reasonable fees come April 1st? It sounds like we are going to have to take up law school to straighten out this question.
Below is an article I received from WorkingRE.com on the subject of Customary & Reasonable Fees.
Challenging Low Fees
By David Brauner, Editor
As the April 1 implementation date of Dodd-Frank looms, attorneys at the Federal Reserve direct appraisers to a method for challenging low fees (see last issue: Customary Fees: Good, Bad and Uncertain). Here’s where to find the information.
According to Federal Reserve Board attorneys, Section 312(c) of Dodd-Frank (reprinted below), lays out which agencies regulate which types of transactions- this is the “where” to properly file complaints. It revises section 3 of the Federal Deposit Insurance Act.
Section 1100 (A)(8) of Dodd-Frank (below) sheds light on the authority under which provisions of the Act are enforced. This Section revises the enforcement provisions of the Truth in Lending Act (with cross references the FDI Act), according to a Board spokesperson.
With implementation of Dodd-Frank only a few days away a new chapter begins. A Federal Reserve Board attorney told WRE in a recent interview that according to the Interim Final Rule (IFR) recent market fees do not necessarily meet the first presumption of compliance (customary). The Board attorney said, “Someone can rebut the presumption(s) of compliance with evidence that a fee is not reasonable or customary for a reason other than a condition addressed in a presumption of compliance. What evidence supports an allegation depends on the facts and circumstances of a particular case. The rule addresses compensation paid in a particular geographic market.’” (Read the article here: Fed Board Update: Customary and Reasonable Fees.)
The language addressing how and where to rebut low fees is reprinted below. In an interview at the release of the IFR, a Board attorney also pointed to the following language from the IFR, which she seemed to interpret as also reinforcing the notion that recent fees do not necessarily meet the “customary” test under the first presumption: “[T]he Board understands that some AMCs have begun requiring fee appraisers to agree that the fee is ‘customary and reasonable’ as a condition of obtaining the appraisal assignment. In these situations, the Board believes that an appraiser’s agreement that a fee is ‘customary and reasonable’ is an unreliable measure of whether the fee in fact meets the statutory standard.”
Appraisers are reporting, with greater regularity now as we move nearer to the Dodd-Frank implementation date, receiving inquiries from AMCs as to what their “customary and reasonable fees” will be come April 1. Many appraisers are tapping into the Working RE/OREP.org survey results for data. The penalties for noncompliance are stiff: $10,000 for each day any such violation continues and $20,000 civil penalties for subsequent violations. For many appraisers, of course, a return to customary and reasonable fees means staying in business.
WorkingRE.com is published by OREP.org, providing low-cost E&O insurance for appraisers, agents/brokers and other real estate professionals.