DEPARTMENT OF BANKING AND INSURANCE
DIVISION OF BANKING
Mortgage Loan Appraisal Fee
Proposed Amendment: N.J.A.C. 3:1-16.2
Authorized By: Donald Bryan, Acting Commissioner, Department of Banking and Insurance.
Authority: N.J.S.A. 17:1-8.1, 17:1-15(e) and 17:11C-49.
Calendar Reference: See Summary below for explanation of exception to calendar requirement.
Proposal Number: PRN 2002-76
Submit comments by April 20, 2002 to:
Karen L. Garfing, Assistant Commissioner
Department of Banking and Insurance
20 West State Street
P.O. Box 325
Trenton, New Jersey 08625-0325
Fax: (609) 292-0896
The agency proposal follows:
The Department of Banking and Insurance ("Department") is proposing an amendment to N.J.A.C. 3:1-16.2(a)3 regarding appraisal fees for appraisers in connection with first mortgage loans on residential properties. The Department notes that mortgage lenders use appraisal management companies to handle the growth in mortgage lending and to help them expedite their processing of mortgage loan applications. Such increase in efficiency is beneficial to consumers who are waiting for a commitment on the mortgage loan for which they have applied.
The Department has initiated an appraisal fee survey and, as a result, has proposed this amendment requiring that fees charged by a lender to a consumer for an appraisal performed by an in-house appraiser shall approximate the usual, customary and reasonable fee for comparable appraisals by third party appraisers. If the appraisal is performed by a third party appraiser and delivered by an appraisal management company, the fee charged by the lender shall not exceed the amount charged by the appraisal management company and shall approximate the usual, customary and reasonable fee charged for comparable appraisals by third party appraisers.
A 60 day comment period is provided for this proposal and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, the proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.
The proposed amendment would impact first mortgage lenders and their customers. It will assist the Department in protecting consumers from mortgage lenders who may try to pass along inappropriate costs in appraisal fees. The Department anticipates that the proposed amendment will result in some increased efficiencies for consumers.
The Department does not anticipate any economic impact on mortgage lenders as a result of the proposed amendment. Fees charged to consumers by mortgage lenders for the appraisal service will be at the usual, customary, and reasonable rate and compliance with that standard will be monitored by the Department. The Department does not anticipate any significant additional costs in conducting and publishing the result of an annual survey.
Federal Standards Statement
The proposed amendment does not contain standards or requirements that exceed standards or requirements imposed by Federal law. Relevant Federal standards that are equaled but not exceeded are set forth at 12 U.S.C.§ 2601 et seq.
The Department does not believe that the proposed amendment will cause any jobs to be generated or lost. However, to the extent that this proposed amendment helps promote a healthy mortgage lending marketplace in New Jersey, the climate for business and job growth is improved.
The Department invites interested parties to submit any data or studies concerning the job impact of the proposed amendment.
Agriculture Industry Impact
Pursuant to N.J.S.A. 4:1C-1 et seq., the Right to Farm Act, and N.J.S.A. 52:14B-4(a)(2), the Administrative Procedure Act, the Department does not expect any agriculture industry impact from the proposed amendment.
Regulatory Flexibility Analysis
The proposed amendment establishes reporting, recordkeeping and compliance requirements on residential mortgage lenders, many of which are small businesses as defined by the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq. The reporting and recordkeeping reflect current practice, which entails keeping records of the amounts charged to consumers for appraisal fees in connection with their applications for residential mortgages. The compliance costs associated with the proposed amendment involve lenders recognizing the results of the annual survey of appraisal fees to be conducted by the Department and ensuring that the amounts they charge their mortgage applicants are within the current usual, customary and reasonable range. Therefore, the reporting, recordkeeping and compliance requirements will result in minimal administrative costs, and n oprofessional services will have to be employed in order to comply.
The proposed amendment is intended to advance the protection of consumers applying for residential mortgage loans. It is for this reason that no differentiation in compliance, based on business size, is made.
Full text of the proposal follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):
(a) No lender shall charge a borrower any fees incident to the origination, processing or closing of a mortgage loan other than the following, except as otherwise authorized by State or Federal law, either explicitly or as interpreted by the appropriate regulator in official staff commentary, regulatory bulletins, or memoranda.
1. - 2. (No change.)
3. Appraisal fee[, which] : If the appraisal is performed and delivered by a third party appraiser, the fee shall not exceed the amount paid, or to be paid, directly to the party performing and delivering the appraisal. If the appraisal is [done] performed and delivered in-house, the fee shall [not exceed the going charge] approximate the usual, customary and reasonable fee for [such] comparable appraisals by third [parties] party appraisers based on a survey of such fees charged by lenders to be conducted annually by the Department and published in the New Jersey Register. If the appraisal is performed by a third party appraiser and delivered by an appraisal management company, the fee charged by the lender shall not exceed the amount charged by the appraisal management company and shall approximate the usual, customary and reasonable fee for comparable appraisals by third party appraisers based on a survey of such fees charged by lenders to be conducted annually by the Department and published in the New Jersey Register. The initial charge to the borrower may be based on a reasonable estimate, provided that any amount in excess of the amount authorized above in this paragraph is refunded to the borrower at or prior to closing;
4. - 9. (No change.)
(b) - (d) (No change.)