A little over a year ago we spoke with Bruce Unangst, the Executive Director of the Louisiana Real Estate Commission, to talk about oversight of AMCs. We were able to touch base with him again recently to see what has been going on since the adoption of their final AMC rules. Appraisers will definitely be interested in his responses to our questions in this latest interview.
Buzz: Bruce, as you are aware the contentious debate over Customary and Reasonable (C&R) fees continues and Louisiana has been at the center of the controversy. Can you share what enforcement actions you have taken on this issue?
Bruce: Since adoption of our final rules a few months ago, we have been pleased to see voluntary efforts by many AMCs to adjust their C&R fee schedules to reflect what is more in line with the intent of both Federal law and our state requirements. For those AMCs who have chosen to ignore Louisiana law and rules, we have several open investigations now in the discovery phase which should be fully adjudicated within the next few months.
Buzz: How did Louisiana decide what is a customary and reasonable fee?
Bruce: We do not decide what a customary and reasonable fee is. However, we have published an independent fee study completed by Southeastern Louisiana University, which provides C&R fee information gleaned from Louisiana lenders and appraisers. This study is broken down by parish (county) and is available on our Appraiser Board website for use by any AMC. Any AMC choosing to utilize this fee study in compensating fee appraisers will be in compliance with our C&R requirements. An AMC may also be in compliance by producing their own independent fee study; however, I have yet to see any other independent fee study used by any AMC we have reviewed. If an AMC chooses to establish their own fee schedule by any other means, Louisiana rules require the AMC to document six different factors on each appraisal assignment as to how their fee was calculated. It is our preliminary view from ongoing investigations that this is not being done. Those AMCs found to be flaunting our requirements will have their cases adjudicated.
Buzz: The Louisiana Real Estate Appraisers Board had a substantive change hearing on the proposed AMC rules. What should appraisers know about your rules and how they have changed?
Bruce: Our substantive change hearing and AMC rule making process concluded on November 20, 2013. While our rules may be tweaked down the road, we have sufficient regulatory and enforcement language in place to move forward with specific disciplinary actions when warranted. Our rules provide for full audits, subpoena power, and records inspections necessary to build solid cases, with proscribed penalties up to and including revocation. Building solid cases takes time and we ask our industry stakeholders to understand that we will take whatever time necessary to maximize the likelihood of adjudicatory success in any case. We want to be firm, fair, and consistent in our enforcement actions.
Buzz: How will the draft federal AMC Rules impact Louisiana?
Bruce: The draft federal AMC Rules serve to reinforce the position Louisiana has taken from the beginning. If there was ever any doubt as to an individual state's authority to regulate AMC activity within their respective jurisdiction, publication of the proposed federal rules provides clarity. Basically, these joint rules issued by the various federal regulatory bodies clarify that their rules are minimum standards, and that individual states may enact additional requirements as long as these requirements don't conflict with federal rules.
Buzz: Aside from the C&R issue, what other activities will be a part of your oversight?
Bruce: Quality control to assure geographic competency is a priority. “Blacklisting” or other abuse of fee appraisers for anything other than quality issues is another focus. Although your questions are centered on AMC regulation, we are also strengthening our oversight of fee appraisers. Consumers are entitled to a quality report produced by a qualified appraiser and fairly administered by the AMC.
Buzz: Will Louisiana be proactively auditing AMCs?
Bruce: We respect the time and quality business practices of the many good AMC organizations doing business in Louisiana. Our current audit focus is on those organizations failing to respond adequately to specific information requests, or where a specific AMC may be consistently late in their payments to fee appraisers for completed work. Consistent late payments indicate the potential for insolvency and must be addressed. We will proactively audit an AMC if sufficient evidence of wrongdoing or potential insolvency justifies this action. If an AMC is acting as a good corporate citizen and is in apparent compliance with our laws and rules, they would not be subject to audit.
Buzz: How will these rules help AMCs who are trying to do the right thing?
Bruce: The biggest beneficiaries of our regulatory efforts are those AMCs trying to do the right thing in Louisiana. If we don't clean up the bad actors, it makes it difficult for the good guys to compete.
Buzz: Is there any confusion about the proposed rule you would like to clear up with our readers?
Bruce: Louisiana is not anti-AMC. AMCs have been providing quality appraisal management services long before the provisions of Dodd Frank elevated their position in the industry. We value and welcome quality AMCs wanting to do business in Louisiana. The LREAB encourages voluntary compliance and we continue to work with many AMCs in upgrading their practices to meet our requirements. However, for those AMCs who choose to flaunt our requirements and abuse our real estate industry, please know there will be a day of reckoning, sooner rather than later.
Buzz: Thank you for taking the time to speak with us about this important topic and for all you are doing for appraisers.
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