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Customary and Reasonable Compensation 1026.42

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  • #107324
    timob1973
    Participant

    I was reviewing some appraisal invoices and notice one in which the appraiser did not charge a fee. The loan notes that the fee was waived as a courtesy to the customer. As of right now, I don’t have any more information on why the fee was waived.

    Does the waiver by the appraiser raise any issues related to 1026.42(f) or any other areas of 1026.42? Your help is greatly appreciated.

    #113662
    kboatwright
    Participant

    Looking into section 1026.42 there doesn’t appear to be glaring issues related to the fee waiver by the appraiser since it is more designed around the relationship between the bank and the appraiser. However, with the “why” I’d want to understand if there was any UDAP or conflict of interest issues. What made this person get a free appraisal?

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    #113668
    jholzknecht
    Keymaster

    As you are aware, Section 1026.42(f)(2) of Regulation Z, which deals with the issue of valuation independence, contains a presumption of compliance. The first element of the presumption requires the creditor to compensate the fee appraiser in an amount that is reasonably related to recent rates paid for comparable appraisal services performed in the geographic market of the property being appraised. The regulation is primarliy concerned with appraisal fees that exceed the market rate, which might be an attempt to influence the appraiser. At this point, it is not presumed that your bank is in compliance. The regulation states, “If a creditor or its agent does not meet one of the non-required conditions set forth in paragraph (f)(2), the creditor’s and its agent’s compliance with paragraph (f)(1) is determined based on all of the facts and circumstances without a presumption of either compliance or violation.”

    You should discern the reasons for the deletion of the fee. If the appraisal was for a house owned by family or a friend, there could be an issue with appraisal independence. I am not as concerned by the appraisal independence rule under Regulation Z but with the USPAP rules.

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