On May 31, 2017, the Federal Trade Commission (FTC) filed an administrative complaint against the Louisiana Real Estate Appraisers Board (LREAB). The FTC alleges that the LREAB is “unreasonably restraining price competition for appraisal services in Louisiana, contrary to federal antitrust law.”
In a press release issued by the FTC, they state:
“According to the FTC’s complaint, the 2010 Wall Street Reform and Consumer Protection Act, popularly known as “Dodd-Frank”, required appraisal management companies to pay “a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.” The FTC alleged in its complaint that the appraisal board’s regulations exceeded the scope of the federal mandate. Specifically, the board required appraisal fees to equal or exceed the median fees identified in survey reports commissioned and published by the board. The board then investigated and sanctioned companies that paid fees below the specified levels. The complaint alleges that Dodd-Frank neither requires nor authorizes the restrictions that the board placed on appraisal fees.”
After the mortgage crisis, the Dodd-Frank Act was established in 2010 and required lenders and their agents to adhere to “appraisal independence” standards to protect consumers from manipulated mortgage appraisals or appraisers with limited knowledge or experience. These independence requirements included an obligation to pay customary and reasonable fees to compensate appraisers for necessary skills and geographic experience.
The Dodd-Frank Act further mandated that the federal financial agencies establish minimum requirements for state appraisal agencies to register AMCs and ensure AMCs’ compliance with the appraisal independence standards.
Bruce Unangst, Executive Director of the Louisiana Real Estate Appraisers Board, stated:
“Respectfully, the FTC is just plain wrong. By issuing this legally faulty and factually incorrect complaint, the FTC is seeking to punish a Louisiana state agency for following federal regulatory mandates. Specifically, Dodd-Frank regulations – intended to protect consumers by ensuring the integrity of home mortgage appraisals – require that state appraisal agencies ensure Appraisal Management Companies (AMCs) pay “customary and reasonable” fees for home appraisals. It is the federal government that put these requirements on state appraisal agencies, and our Board followed these federal regulations after an open, public and transparent rulemaking process. To now suggest that LREAB’s good faith efforts to comply with federal law is some sort of shadowy price-fixing conspiracy is ludicrous. Congress and six financial regulatory agencies in Washington have directed Louisiana to do exactly what the FTC is now alleging is an antitrust violation.
“These claims distort the reality of the Board’s conduct in an attempt to stitch together a conspiracy where none exists. We plan to vigorously contest these charges and defend the interests of Louisiana consumers while ensuring our state complies with federal appraisal independence regulations.”
In a statement made by the Louisiana Real Estate Appraisers Board, they noted that in response to Dodd-Frank, the Louisiana Legislature amended the Appraisal Management Company Licensing and Regulation Act, requiring the Board to promulgate the Customary and Reasonable Rule. LREAB spent an entire year working with Louisiana stakeholders – lenders, appraisers, and appraisal management companies – to promulgate a Customary and Reasonable Rule that complied with the mandated federal requirements.
The administrative trial between the FTC and LREAB is scheduled to begin on January 30, 2018.