A creditor’s AMC offers $200 for a 48-hour appraisal of a borrower’s principal dwelling, while comparable local assignments commonly pay about $450 with more time. Which rule is most directly implicated by the offered fee?
Correct Answer
A) Customary and reasonable fee provisions
For a covered transaction, Regulation Z 1026.42(f) governs the creditor’s and its agents’ customary-and-reasonable fee obligation. The low fee and short turnaround warrant assessment of comparable services and relevant factors; those numbers alone do not prove a violation or permit inadequate scope.
Why This Is the Correct Answer
Option A is correct because, for a covered transaction, Regulation Z 1026.42(f) requires the creditor and its agents, such as an AMC, to compensate a fee appraiser at a customary and reasonable rate for comparable services in the geographic market. An offer of $200 against a common local rate of about $450 warrants assessment under those provisions, although the numbers alone do not prove a violation.
Why the Other Options Are Wrong
Option B: Title XI appraiser certification requirements
Option B points to Title XI appraiser certification requirements, which concern who is qualified to perform appraisals, not how much the appraiser is paid. The $200 fee issue is a compensation question.
Option C: USPAP confidentiality requirements
Option C points to USPAP confidentiality requirements, which address disclosure of confidential information and assignment results. Nothing in the fee offer involves confidential information.
Option D: FIRREA transaction threshold requirements
Option D points to FIRREA transaction threshold requirements, which address when an appraisal is required for certain transactions. The question concerns the fee offered for the appraisal, not whether one is required.
Fee problem, fee rule
When the issue is how much the appraiser is paid, think customary and reasonable.
How to use: Use this to match a compensation fact pattern to the right regulation.
Exam Tip
Match the rule to the subject of the facts: payment amounts point to the customary-and-reasonable provisions.
Common Mistakes to Avoid
- -Assuming a low fee automatically proves a violation
- -Confusing licensing rules with fee rules
- -Reducing scope of work to match a low fee
Concept Deep Dive
Analysis
This question tests recognizing which rule an appraisal fee issue implicates. A low offered fee compared with local rates for comparable assignments points to the customary-and-reasonable fee provisions of Regulation Z 1026.42(f). The other options address unrelated topics.
Background Knowledge
The customary-and-reasonable fee rule applies to covered consumer credit transactions secured by a principal dwelling. Fee and turnaround comparisons trigger an assessment of comparable services and relevant factors rather than an automatic finding, and a low fee does not permit an inadequate scope of work.
Real-World Application
An appraiser receives an AMC offer far below the usual local fee with a rushed deadline. She compares the offer with what comparable assignments in her market pay and raises the issue with the AMC rather than cutting her scope of work to fit the fee.
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