Dan’s Take – The Customary and Reasonable Mirage

By Dan Bradley, SRA, CDEI

McKissock Dan Bradley 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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2010 Appraisal News, Winter 2010

Dec 23, 2010

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Federal Reserve Board Interim Final Rule: What Does It Mean?

In July 2010, when the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act was signed into law, appraisers rejoiced over the provision that required lenders and appraisal management companies to pay “customary and reasonable fees.” The Federal Reserve Board (FRB) was delegated the responsibility for promulgating the regulations that would implement customary and reasonable fees, as well as other requirements of the Act which were made as amendments to the Regulation Z – Truth In Lending Act (TILA).

On October 18, 2010, the FRB released its interim final rule on appraiser independence and customary and reasonable fees. This rule was published in the Federal Register on October 28, which began a 60-day public comment period for the rule. The appraiser independence requirements in this rule will become effective on December 27, 2010, while the requirements related to customary and reasonable fees will become effective April 1, 2011.

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