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.
FTC Case Timeline In the Matter of Louisiana Real Estate Appraisers Board
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- Slew of Negative Reviews for Appraiser Miller - March 13, 2023
- Under-Valuations Unrelated to Racial Bias - February 21, 2023
This board has done NOTHING wrong. They have responded to abusive appraisal management practices and the complaints of appraisal professionals who have been victimized.
The pimp AMC’S will do whatever it takes to hold on to what they have , even if I means taking out state boards…….stay strong Louisiana.
This is the result of excess bureaucracy combined with federal management. Just because companies have national presence and national advocacy groups, does not give them permission to deny states rights and true federalism.
Louisiana State Appraisal Board is flaky 🙂
Benjamin, I don’t know who you are and honestly do not care. If you are an appraiser or even a trainee, for you to make such a comment shows a complete disconnect with this profession and I would encourage you to find another means to support yourself. Appraisers require deep thought and analysis to be successful. I am not a resident of Louisiana, nor am I licensed in Louisiana, but they have my full support in defending this action. Louisiana is a pioneer in the industry and has set the stage for other states to follow. They are not flakey as you state. They are professionals that understand the industry, the law, and their role in protecting consumers. From your comments on appraisersblogs, not sure many could say that about you.
This case against Louisiana is a game changer for appraisers. If the FTC prevails in this case, any chance of a decent living in this industry is greatly diminished. If Louisiana prevails, we can begin to move forward and regain our profession back.
And, you have not the slightest. God Bless 🙂
So when AMCs send out their “fee list” to all appraisers on their panel that’s not price fixing, but when LREAB follows federal law and then enforces that law they get sued by FTC? Go figure!
Seems like a double standard to me !
I wonder what else LREAB was fixing besides prices…
Benjamin, based on your comments, it appears that you have some unresolved issue with LREAB. Whatever the case may be, this is not the place to settle your issue with your board. We recommend you get in touch with them and discuss your matter privately. We appreciate your cooperation!
I will remove myself from this FB Blog, Appraiser Blog Website and any further communication to Appraiser Blogs in general. I provided a reasonable question. I appreciate your past cooperation. God Bless You 🙂
If ANYONE is guilty of price fixing it is AMCs. They should be both thrown out of court and fined heavily for abusing the justice system.
This reminds me of the burglar who sued the store because he was shot while attempting to rob the store.
I am still concerned as to how the FTC came to believe it had a case to begin with.
It’s doubtful the commissioners that directed the case to be filed awoke one day and said “Gee, I wonder what Louisiana is up to these days with respect to Dodd-Frank Act C&R fee enforcement? Let’s go check.”
Let’s see the original complaint that was filed that created this. FOIA guys!
Aside from that, I want to see FTC investigate ALL banks that have service level agreements (SLAs) with AMCS wherein appraisal fees that ultimately appear on the TRID (HUD1 replacement) are set before a mortgage request is even originated by a consumer.
When a loan application is taken, the loan officer quotes the appraisal fee based on the SLA-not based on a specific property or the complexity of appraising it.
If it turns out (30% to 40% of the time) the assignment is much more complex than anticipated, there is no effective provision for negotiating a higher fee commensurate with the added work. Nominal $25 fee increases on top of fees that are already 20% to %50 low is not ‘negotiating’. AMCs and lenders including NCUA regulated credit unions all claim TRID does not allow them to go back to the borrower and ask for higher fees. Of course, they are flat out lying. They ARE allowed to go back…they just need to have a new disclosure signed.
THAT IS PRICE FIXING!
Mike, thank you for that simple direction. I will tell them in the future to simply get a new trid disclosure filed. Previously I had told them not my problem, just take a little loss I guess. This is what appraisers are up against if they choose to drive their own fees.
I searched email because I knew they’d used that excuse before, here are 2 brief exerpts.
Thank you for your email. I understand your frustration./ Unfortunately this client is TRID, and we cannot not adjust fees unless it is CIC. I thank you for your time, and wish you the best of luck.
And another one:
By virtue of our role we’re placed in a position between the appraiser and the lender (and consumer) and are often challenged with crafting solutions to satisfy all sides while meeting the compliance demands of today. Between TRID and the larger-than-one-might-imagine scale of making price changes in our clients’ systems (and with their staff) we suffered losses in the state of XX. Obviously these losses aren’t material to the company’s financial health, but we chose to do that as a service to our valued clients. As our appraiser, I can guarantee you we will pay your C&R fees in XX, which lately seems to change quite often. It sure is an interesting time there.
AMCS and quite a few credit unions lately are pretending TRID prohibits a change in the quoted fees.
That’s not true. IF it were true, then the “change in circumstances” is that the appraiser refuses to work for fees he or she never had a hand in negotiating, and which are far below the fee level considered to be ‘reasonable; for the amount of work required to properly complete the assignment.
Where is the FTC again? Oh! In Louisiana interfering with free trade again, and enforcement of federal regs designed to promote free trade..
Thank you again. I had to read up to understand the relevance of ‘change of circumstances’. Zero tolerance and cic or coc, I can see why the common acronym is cic change in circumstances. Now hold on, if I’m participating in a free market, don’t I have a say in the circumstances surrounding my independent fee? Separating the distinctly different fees between an amc and an appraiser clearly makes more sense than this. These regulations continue to redirect attention away from the obvious problem; improperly co mingled fees. If lenders assigned orders directly they could remain appraiser fee compliant even in a zero tolerance climate, merely by paying a competitive amount more than the rest, matching the VA fee, or simply averaging fee surveys from their own panel appraisers. In this time of decreasing availability for participating appraisers, it is the lenders whom should compete for the appraisers, it’s simple supply demand consideration.
I found this interesting ’40 facts you should know about trid’ article.
Points #8 & #15 caught my eye for appraisal process.
While point #23 seems to be the wink towards considering 15 year notes, but falls a little short if there is no standard comparison of figures. I think all 30 year applicants should also be presented with an alternative 15 year disclosure so they can compare cash equivalency. However they compare that, over brief term, long term, expressed as dollars or portions. The most meaningful expression of that to me as a consumer, is the total cash equivalent difference for total dollars out of pocket 30 vs 15 with the rates at the time. I read a news story yesterday the current presidential administration may take a step to wind down the gse’s. One could dare to dream that risk could be properly allocated one day in the future, and the appraisal might be meaningful again as a vital tool to measure risk, not just a speedbump along the way to subsidized insurance.
Minimum wage laws are in place throughout the country. Mandating AMC’s to pay C & R is no different.
The argument of the FTC is ridiculous – and it has an unintentional “catch-22” to it. Clearly, the AMCs (primarily owned by the big banks) spent millions with their lawyers to lobby the FTC to this position. What I find absolutely fascinating is if you read the reasoning and rationale of the FTC’s argument, it is an “excellent” argument as to why the federal minimum wage law should be repealed. I’ll bet that never occurred to them when formulating their argument.