While the battle over customary and reasonable fees rages on with no end in sight, there has been a new shot fired by the Louisiana Real Estate Appraisers Board, which created a rule that seems to turn a blind eye to the federal law presumptions, K&L Gates reported. 

The issue is with the two presumptions put forth by the Dodd-Frank Act. The first presumption of compliance includes fees that are “reasonably related to recent rates for appraisal services performed in the geographic market of property.” The creditor must figure out the rate and make adjustments based on things like the type of property, scope of work and fee appraiser’s qualifications.

The second, dubbed the “alternative,” presumption allows the fee to be based on the rates in the geographic market as established by objective third-party information, including fee schedules, studies and surveys, prepared government agencies, academic institutions and private research firms, to name a few. This presumption excludes the history of fees paid to appraisers by appraisal management companies (AMCs). 

The major sticking point in these presumptions is that the first presumption allows for the fees AMCs have paid appraisers in the past to be taken into account.

Not so fast, said the Louisiana Real Estate Appraisers Board. The K&L Gates Consumer Financial Services Watch blog explained that the board is requiring AMCs to choose one of the presumptions. 

“The Board’s proposal is based on a recently enacted Louisiana statute, which tracks the language of TILA in requiring an AMC to compensate appraisers at customary and reasonable rates, ‘consistent with the presumptions of compliance under federal law,’” wrote the blog. “However, in mandating that AMCs comply with one of the presumptions, the board has disregarded the TILA Rule’s clear provision that the presumptions are not requirements for compliance, and that if a creditor does not meet a presumption, then customary and reasonableness is determined based on “all of the facts and circumstances.”

The K&L Gates Consumer Financial Services Watch blog hypothesized that the rule may also push fees onto appraisers and consumers. “If the rule forces AMCs to pay higher rates to appraisers, they will be forced to charge their lender clients more in order to offset the cost of compliance. Creditors, in turn, will pass the costs on to borrowers, increasing the overall cost of credit,” the blog stated.

For the full details and blog opinion, head over to the K&L Gates Consumer Financial Services Watch blog.