LREAB Response to FTC Allegations
FTC seeking to punish LREAB for following federal regulatory mandates…
BATON ROUGE, LA (May 31, 2017) – In an administrative complaint filed today by the Federal Trade Commission (FTC), it was alleged that the Louisiana Real Estate Appraisers Board (LREAB) had fixed the minimum price of residential real estate appraisals by enforcing the Board’s obligations under federal law to ensure that appraisers are paid customary and reasonable fees for their services.
Bruce Unangst, Executive Director of the Louisiana Real Estate Appraisers Board (LREAB), said:
“Respectfully, the FTC is just plain wrong. By issuing this legally faulty and factually incorrect complaint, the FTC is seeking to punish a Louisiana state agency for following federal regulatory mandates. Specifically, Dodd-Frank regulations – intended to protect consumers by ensuring the integrity of home mortgage appraisals – require that state appraisal agencies ensure Appraisal Management Companies (AMCs) pay “customary and reasonable” fees for home appraisals. It is the federal government that put these requirements on state appraisal agencies, and our Board followed these federal regulations after an open, public and transparent rulemaking process. To now suggest that LREAB’s good faith efforts to comply with federal law is some sort of shadowy price-fixing conspiracy is ludicrous. Congress and six financial regulatory agencies in Washington have directed Louisiana to do exactly what the FTC is now alleging is an antitrust violation.
These claims distort the reality of the Board’s conduct in an attempt to stitch together a conspiracy where none exists. We plan to vigorously contest these charges and defend the interests of Louisiana consumers while ensuring our state complies with federal appraisal independence regulations.”
W. Stephen Cannon, Constantine Cannon LLP, Washington, D.C., counsel to LREAB, said:
“This is truly an overreach by the FTC, in direct contradiction to the federal government’s focused and consistent efforts since the 1980s to ensure the integrity of the residential mortgage market. With this misguided attempt at antitrust enforcement, the Commission has placed both federal and state efforts to protect consumers from unsound mortgages in serious jeopardy. I have no doubt a judge will agree that the Board’s actions to protect Louisiana consumers were appropriate and justified.”
Louisiana Real Estate Appraisers Board (LREAB) – Background
May 31, 2017 – In filing its administrative complaint against the Louisiana Real Estate Appraisers Board (LREAB), the FTC seeks to punish a Louisiana state agency for complying with the mandates established by federal financial regulatory agencies, including the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Consumer Financial Protection Bureau, as well as the Federal Housing Finance Agency.
Over three decades, Congress and the federal financial regulatory agencies have sought to prevent the recurrence of mortgage-based financial crises by ensuring the integrity of the real estate appraisal process by mandating state regulation of appraisers:
- Responding to the savings and loan crisis, in 1989, Congress mandated the establishment of state appraisal licensing agencies, such as the Board, and subjected their activities to federal oversight and audits. The Board was established as Louisiana’s agency to comply with the 1989 federal requirements.
- Responding to the residential mortgage crisis, the 2010 Dodd-Frank Act required lenders and their agents — Appraisal Management Companies (“AMCs”) — to adhere to “appraisal independence” standards to protect consumers from manipulated mortgage appraisals or appraisers with limited knowledge or experience. These independence requirements included a Congressionally-mandated obligation to pay customary and reasonable fees to compensate appraisers for necessary skills and geographic experience, as set out in implementing Federal Reserve Board rules.
- The Dodd-Frank Act further mandated that the federal financial agencies establish minimum requirements for state appraisal agencies, such as the Board, to register AMCs and ensure AMCs’ compliance with the appraisal independence standards, including paying customary and reasonable fees to appraisers. Finally Dodd-Frank expanded the scope of federal audits of state appraisal agencies to ensure they have complaint, investigation, and enforcement programs in case of AMC rule violations.
- In response to Dodd-Frank, in 2012, the Louisiana Legislature amended the Appraisal Management Company Licensing and Regulation Act, requiring the Board to promulgate the Customary and Reasonable Rule. The Board spent an entire year working with Louisiana stakeholders – lenders, appraisers, and appraisal management companies – to promulgate a Customary and Reasonable Rule that complied with the mandated federal requirements.
- The FTC is alleging that the Board turned an academic study of fees paid to appraisers in Louisiana – conducted by Southeastern Louisiana University (SLU) and specifically permissible under federal regulations – into a “floor” on such fees. This ignores the Board’s federal regulatory obligation to investigate complaints regarding appraisal fees paid for specific appraisals to determine whether those fees paid are customary and reasonable. A fee study is just one way to show that appraisal fees meet a federal regulatory “presumption of compliance” with the customary and reasonable standard. LREAB regulations expressly allow use of other approaches to demonstrate compliance as well. Moreover, the FTC alleges an antitrust violation because several of LREAB board members hold appraiser licenses, even though only two of the Board’s ten current members are active residential appraisers.
- LREAB Response to FTC Allegations - June 2, 2017
This whole debacle started with statement mandating C&R fees by Dodd Frank, but by never stating what was C&R, as it varies significantly across the country and house to house. AMC’s are able to hide behind paying DOG POOP and simply saying “see we mass broadcast the order and it’s accepted, so therefore it’s C&R since someone is willing to work for that. The current system is SO SCREWED UP, many appraiser’s simply refuse AMC work all together. It’s ironical that these same AMC’s that ruined the profession, are the only ones screaming about the appraiser shortage.
I want an investigation into the LREAB beyond what this article comments on. FROM TOP TO BOTTOM!
More particularly the General Real Estate Appraisal Exams between 2012 and 2017…
I am calling the LREAB flaky…
Benjamin Brossette. interesting comment. Is there some hidden thing for you in this? Very odd post that has a different agenda than what the article is about. Did you not pass the Appraiser exam? Just curious as to the meaning of your post?
Good questions. See my reply to Mike, please.
Benjamin, state tests are at their core based on AQB requirements. No disrespect intended but tests for general certification are not supposed to be easy, any more than state bar exams are supposed to be easy. Ask yourself honestly, “Did I take all the necessary educational courses required for foundational knowledge? Did I study as thoroughly as I could?” Good luck in your endeavors. If you ever need guidance on what courses may be helpful we’d be happy to help. Mike Ford, Chairman, National Appraiser Peer Review Committee American Guild of Appraisers.
I will try to get back to you later on this, Mike. I am having unforeseen personal issues at the moment. I would rather be talking about and doing something else besides dealing with some these personal issues that popped up yesterday. I agree with your comment, however. Thank you for reaching out, as well. I will get back to your comment.
Benji..
Good luck on the personal issues. It’s an open offer. One appraiser to another.
Phil jumps on the FTC investigation and “breaks down the news and information from the FTC investigation and complaint filed against the Louisiana Real Estate Appraisers Board. Everything will change now…
We are now ALL under the microscope…”
https://youtu.be/-Vo476shLys
Related to Jason’s informative post links (thank you).
Relax Phil! Respectfully, It’s a serious issue but inferring appraisers should go back to thinking the same way that allowed AMCs and others to put us in this position in the first place is a bigger mistake than all the (potential) anti trust cases that the feds could begin to imagine putting together.
I represent a national labor organization.
It’s an appraisers UNION. Unions have advocated for minimum wages, benefits and compensation all across the country for many decades. It’s what we do. There are federal laws that protect the rights of workers to organize and to seek redress of grievances INCLUDING inadequate compensation.
Just as there are both federal and state minimum wage laws, there is no reason appraisers cannot also establish minimal standards for compliance with Dodd Franks Reasonable and Customary fee requirements.
The myth that we are or even should be true independent contractors ended with the third party and governmental imposed requirements to obtain our work through Appraisal management Companies. If there is any anti trust issue, THAT is the aspect that should be under investigation. Not what we believe to be minimal fees in order to meet the minimum standards of performance required for our profession. (Yes, professionals are allowed to organize too).
Minimum wage laws were established in America to end what amounted to virtual involuntary servitude whereby pay was so low that mere survival depended on working every available hour of the day.
This left no time for education to advance one’s economic station in life or to even seek other work. Minimum wage laws ended the ability of unscrupulous bosses to retaliate when workers sought higher pay (at least it did until the advent of AMCs). It also lowered risks to consumers where manufacture of goods, and providers of services were too tired to assure safety or consistent quality (anyone see any similarities yet?).
Free enterprise does NOT mean that labor is supposed to be provided for free!
I have previously submitted a proposed NATIONAL MINIMUM FEE formula to our federal regulatory agencies that is in turn based on the federal civil service appraiser pay scales adjusted to reflect the differences between federal salaries by location; and inclusion of comparable benefits. It can be viewed at http://www.appraisersguild.org or at my own personal website http://www.mfford.com (under C&R fees tab).
I urge every single organized appraisal group as well as individual appraisers in the nation to read it; study it, understand it and to advocate it (either as written or as they believe it should be modified). MOST OF ALL TALK ABOUT IT! It was and still is a specific union proposal that has already been brought forward to the public eye and federal regulators for scrutiny and discussion and adoption by state agencies as it was written (though two years COLA updating would be appropriate now).
No anti trust law in the nation forbids y’all from discussing and opining about it’s merits or drawbacks (assuming there were any *g*).
Phil the Louisiana case is not really about anti trust. It is about special interests organizing to suppress workers (appraisers) rights to fair, just and most of all, reasonable compensation in order to assure protection of the public. The only price fixing going on is by the banking industry telling their agent-AMCs they must provide services nationally in a range of from $550 to $650 and force the appraisers to take less, or to sacrifice their (AMC) “share” when assignment conditions warrant higher fees.
It still takes from 8 to 12 hours to properly complete an appraisal of the fee interests in residential real estate in most parts of the country in complete accordance with USPAP. For any third party trade groups or government anti trust organization to infer this can be done without assurances of adequate compensation runs contrary to the original intent of FIRREA itself and Dodd Frank.
As for the FTC’s ‘less than a quorum of Commissioners’ I offer the following invitation. The links noted above contain the American Guild of Appraiser’s Official Proposal for Reasonable and Customary Fees intended to be applied across the entire United State, It’s Territories and the District of Columbia. It IS our intent and goal that appraisers across America promote and adopt this format for establishing minimum fees (a well as to serve as a general guideline on a per hour basis for more complex assignments) .
If you (FTC) believe promotion of the fee process we outlined represents a credible potential anti trust violation then let us know; in writing and with a level of specificity that can be reviewed by our attorneys sufficient to judge whether your own view and opinions are accurate representations of limitations that may be imposed on organized labor.
Additionally please cite the specific authority that allows two out of a mandated five commissioners to initiate actions such as that undertaken against the Great State of Louisiana.
lastly, I urge the FTC to investigate the system or appraisal ordering by FNMA, FHLMC, Credit Unions, and HUD/FHA as well as any other organizations that have resulted in virtual enslavement to that system by 75% of the appraisers in the country.
Michael F. Ford, Vice President (Special Projects) & Chairman National Appraiser Peer Review Committee of the American Guild of Appraisers; Office Professional Employees International of the AFL/CIO. I can be reached directly at (714) 366 9404 or you can contact us through our website linked to my name above this comment.
To my fellow appraisers, stop cowering in fear of the FTC or anyone else that tells you we cannot discuss reasonable compensation for our professional services. That mentality has allowed the current conditions to fester and grow in the first place! Join with me and your fellow appraisers and lets take back our profession NOW!
If you want to screw anything up, give it to the federal government to fix. Irony is the two that caused the problem, dodd & frank, were given the job of fixing it. firrea became law 30 years ago, how has it done? Originally lenders were in charge of fees, “what they were going to pay”, where was the ftc between 1987-2010 when lenders were price fixing?
The appraisal fee to the borrower is already set by the AMC. The FTC need to recognize what a scam the AMC model is to the consumer.
If FTC “works to promote competition and protect and educate consumers”, then how about first providing the consumer with a fully disclosed appraisal & amc fees. The public is being fleeced by the non-disclosure of fees. How about going after AMCs who take away our competitive pricing.
A simple but perhaps very detailed and lengthy audit of appraisal fees charged to customers, vs appraisal fee distribution should set the record straight. The important consideration point being a very large sampling size, if not a complete audit of every single HUD disclosure and subsequent fee distributions to amc’s or appraisers, over a certain and substantial period of time. By judicial order, perhaps this allegation can give ethical researchers the open door into a complete statewide audit of all management companies, not just one or two of them.
Some anti trust cases have failed in the past, because sampling size was small and companies had just enough to prove they were compliant. A management company can engage with one lender a certain way, then point to that data as being proof the whole company is compliant with rules. What investigators may not know is the majority of assignments are distributed in a more opportunistic vulture capitalist fashion. Allegations in unrelated but previous instances have stated some management companies alter these records during auditing periods.
A true audit would entail sourcing hud1 documents, then individually verifying truthful data by getting information regarding fee splits from all four parties involved, the appraiser, the management company, the lender, and the consumer.
It would be quite interesting to hear companies justify imbalanced fee approaches through a wide range of engagements. Just about everyone whom participates in the fee bidding games may very well be caught red handed. Appraisers whom don’t price ethically and fold for more work orders at lower fees, despite knowing the amc is price fixing and cost savings are not returned to borrowing consumers. Thats a violation of the management rule of providing a thing of value to be the preferred selectee. To the amc’s whom shop orders as a routine business practice, including every single amc that has appraisers enter fee schedules, while maintaining a static and constant fee for lender side and customer side billing. Then to lenders with specific inquiry if they’re receiving any billing returns or kickbacks, something some amc’s so boldly advertise as a reason to select their company instead. Also focusing on the required statement of compliance regarding quality control for the lenders (the client) selected agents (the amc’s), and reviewing if such control mechanisms meet a predetermined matrix of minimum compliance.
The cat has been out of the bag for quite some time. Glad to be out of that rat race. I won’t admit to being in trouble with my little business, until I have to answer the amc calls. It’s only so obvious. I’m getting 550-650 standard from lenders direct, but amc’s always are a few hundred below that. Lenders so much as charge consumers the exact same, regardless if the appraisal order is ultimately sent through a mix of either direct or management agency distribution. The consumer fee never changes. It’s all so obvious that the state is not engaging in anti trust, if all they’re doing is holding the management companies to the required standard per regz of paying an equivalent amount as direct lenders.
The LAREB has one of the best anti trust attorneys in the Country. My money is on the LAREB. I think REVAA and the AMC’s need to watch out or they may get in the crosshairs of the FTC or CFPB.
I tottaly agree with you Pierce. LAREB is someone you must trust ?
Bottom line: The financial industry does not care about how much risk their insert into the economy as much as they care about their own profitability..think housing bubble, causes of.
Clearly, it was obvious to the drafters of the regulations to prevent this from happening again (Frank-Dodd) that they would be subjecting the appraisal profession to nearly perfect price competition forces that would diminish if not destroy any profession. Are accountants, auto mechanics, interior decorators, etc. subject to a industry whose existence is mandated by law and which has a business model to reduce their fees? That is why they Frank and Dodd inserted the C&R fee provisions in the original draft of their bill offsetting the price shopping motivation of the AMCs.
Follow the money and the power:
It was only the after the 30 day comment period prior to becoming law, the Federal Reserve (12 member operatives of the banking profession) decided to obliterate the C&R provision by inserting just one more evidence of compliance with C&R fees essentially saying anything goes would also be evidence of compliance with the C&R provisions, just to make certain the appraisal profession would be to weak to interfere with their profitability.
The crime here is that every Appraisal Board in the country has not enacted the same provision of compliance with C&R which LA has and which, by the way, the very wording of the law clearly gives them the right to do so.