On July 21, 2010, President Obama signed H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, into law. The reform bill is recognized for the Wall Street and government regulatory oversight as well as appraiser independence. Under appraiser independence the bill requires that “reasonable and customary” fees be paid to appraisers to reflect what an appraiser would typically earn for an assignment absent the involvement of an appraisal management company (AMC). AMCs that violate “customary and reasonable” requirements will be subject to serve penalties under the Truth in Lending Act. Although the “customary and reasonable” fee provision went into effect on October 19, 2010 it will be enforced as of April 1, 2011. The penalties for violation the new Truth in Lending Act provision created by the Dodd-Frank Act are as such:
A lender and their agent (AMC) has failed to pay an appraiser a customary and reasonable fee for 10 assignments. The AMC may be charged with a single, first offense and could be subject to a civil penalty of up to $100,000. However, if the same AMC subsequently does not pay another appraiser a customary and reasonable fee for 20 assignments, then the AMC could be charged, as a subsequent offender and could be fined up to $400,000.
The bill states that evidence for customary and reasonable fees may be established by objective third-party information, such as government agency fee schedules, academic studies, and independent private sector surveys. Fee studies shall exclude assignments ordered by known appraisal management companies. Assignments from AMCs would not appear to be considered evidence of customary and reasonable fees. For the Hampton Roads area of Virginia, the following customary and reasonable fees have been reported:
· The Veterans Affairs Regional Loan Centers published fee schedule
o SFR/Condo - $400
o 2-4 Family - $550
o Re-Inspection - $75
· Mercury Network by a la mode Appraisal Fee Reference
o SFR – median fee - $400
· Working RE survey
o SFR/Condo Fannie/Freddie - $351-450
o SFR FHA - $401-$450
**The Mercury Network is a Vendor Management Platform that allows lenders and AMCs to manage their appraisal orders. The appraiser fees on the network are set up by the individual appraisers and should be a reflection of their customary and reasonable fees.
**Working RE is a publication created by the Organization of Real Estate Professionals, an E&O insurance company. Their data is from a survey taken by individual appraisers.
The Truth in Lending Interim Final Rule states that a document signed by a fee appraiser indicating that the appraiser agrees that the fee paid to the appraiser is ‘‘customary and reasonable’’ does not by itself create a presumption of compliance or otherwise satisfy the requirement to compensate a fee appraiser at a customary and reasonable rate. In the Board’s view, a fee appraiser’s agreement that a fee is ‘‘customary and reasonable’’ is insufficient to establish that the fee meets the statutory ‘‘customary and reasonable’’ standard.