The Federal Reserve Board on Monday afternoon issued its much anticipated interim rules on appraisals, declaring that refusing to pay appraisers a "customary and reasonable" fee will violate the agency's new guidelines.
"Under the interim final rule, a creditor or its agent must pay a fee appraiser at a rate that is reasonable and customary in the geographic market where the property is located," according to the Fed. The rule goes into effect in 60 days.
The Fed also included conflict-of-interest guidance in the rule, which prohibits loan officers and mortgage brokers from selecting appraisers.
The prohibition against LOs and brokers is "generally consistent" with the GSE Home Valuation Code of Conduct, the Fed says. (The Fed was widely expected to incorporate the HVCC prohibition its interim final rule.)
However, major banks and appraisal management firms urged the central bank to postpone implementation of the C&R fee standard until the industry could conduct a nationwide study of appraisal fees.
But the Fed went along with the appraisal groups and noted the lenders and AMCs could rely on the fee schedule the Department of Veterans Affairs uses for its panel of approved appraisers.
Now that the Fed has acted, Fannie Mae, Freddie Mac and their regulator are expected to issue a rewrite of the HVCC in a few days — as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
One source noted the new GSE appraiser independence standard will be substantially similar to the HVCC but the word "code" will be taken out.