Dan’s Take – The Customary and Reasonable Mirage

By Dan Bradley, SRA, CDEI

I like to think of myself as a realist, as opposed to being an optimist or a pessimist.  For me, the glass is neither “half full” nor “half empty”; it contains approximately 6 ounces.  When it comes to the issue of customary and reasonable fees, however, my take is that not only is the metaphorical glass half empty, but the beckoning oasis that has been promising to fill up the glass is merely a mirage.

When the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law, mandating that lenders and AMCs pay customary and reasonable fees, appraisers everywhere stood and applauded (some quite literally!)  The Act did not specify exactly what was customary and reasonable – instead this responsibility was delegated to the Federal Reserve Board.  In late October 2010, the FRB released an interim final rule for implementation of the Dodd-Frank Act, and it appears that customary and reasonable has been defined to mean essentially whatever an appraiser is willing to accept.  Allow me to explain…

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Customary and Reasonable?

Dodd-Frank Financial Reform

On July 21, 2010, President Obama signed H.R. 4173, which is known by its short title, the Dodd-Frank Wall Street Reform and Consumer Protection Act. It has been widely hailed as the most significant financial and lending reform since FIRREA in 1989.

Much has been made of the “appraiser-friendly” provisions in this new law; some of these are more meaningful than others. This law actually contains a series of amendments to existing federal laws, including the Truth in Lending Act (TILA), the Equal Credit Opportunity Act (ECOA), and the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).

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