Allegations of Price Fixing Rejected by LREAB
LREAB denies FTC’s allegations as factually false & politically wrong-headed…
On June 19, 2017, the Louisiana Real Estate Appraisers Board (LREAB) filed a response to the Federal Trade Commission’s price-fixing allegations. In its 15-page response, LREAB denies all FTC’s allegations (see PDF at the end of the article).
GENERAL RESPONSE TO THE COMMISSION’S ALLEGATIONS
To shore up the integrity of the residential mortgage appraisal process and, thereby, help to avert a recurrence of the real estate-fueled financial crisis of 2007-2009, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) requires States to empower their real estate licensing agency, inter alia, to ensure that Appraisal Management Companies (“AMCs”) pay residential appraisers “customary and reasonable” fees for residential appraisal services. This requirement ensures the integrity and quality of residential mortgage appraisals.
Louisiana is one of the first States to implement these requirements of the Dodd-Frank Act by empowering the LREAB— a state board consisting of experts in mortgage lending, commercial real estate appraisal, and residential real estate appraisal, with no one constituency comprising a majority—to promulgate a “customary and reasonable” fee rule.
After receiving input from all stakeholders in various public meetings, hearings, and through written comments, the LREAB unanimously promulgated a rule regarding the AMCs’ payment of “customary and reasonable” fees (“Rule 31101”). Rule 31101 not only follows the mandates of the Dodd-Frank Act in requiring AMCs to pay appraisers a “customary and reasonable” fee for appraisals, but also in providing AMCs multiple methods of compliance with the “customary and reasonable” residential appraisal fee requirement. As part of that guidance, the Board commissioned independent studies to identify, on an annual basis, the median fees paid by lenders for five different types of appraisal services in nine geographic regions. Where the Board has received credible complaints of AMCs offering fees below “customary and reasonable” levels, it has investigated. The majority of these investigations closed with no action. In two instances involving repeated violations, the AMCs proposed or accepted, as a temporary compliance method, to pay the applicable median fee as shown by the annual independent study.
The FTC’s Complaint now asserts that, by fulfilling their duties to follow and enforce Dodd-Frank’s mandate for “customary and reasonable” residential appraisal fees, LREAB members “conspired” to raise appraisal prices. The LREAB categorically and vociferously denies these allegations as factually false and politically wrong-headed. The State of Louisiana and the LREAB diligently implemented and followed the Dodd-Frank federal mandates so as to protect the greater public interest in a financially sound home real estate market. Other States are looking to Louisiana’s example similarly to promulgate and enforce Dodd-Frank’s “customary and reasonable” residential appraisal fee requirement. These false conspiracy allegations and FTC overreach now place both Louisiana’s and other States’ federally-mandated implementation and enforcement efforts in serious jeopardy.
The LREAB did not violate Section 5 of the FTC Act. The Board’s rules were tailored to implement the federal mandate that the state licensing agency must (1) register AMCs and (2) enforce AMC compliance with the “customary and reasonable” fee requirement. LREAB’s actions throughout the rule-making process—tracking the express language of Dodd-Frank and allowing extensive public comment on its proposed rules—demonstrate LREAB’s painstaking efforts both to be consistent with federal law and responsive to public and industry concerns. The FTC has no cause, legal or factual, to punish the LREAB for acting in good faith to implement federal laws and policies designed to serve the public interest by ensuring the integrity of the residential mortgage appraisal process.