New Jersey Adopts Provisions Regarding Appraiser Fees

The New Jersey Department of Banking and Insurance recently amended N.J. Admin. Code § 3:1-16.2 which governs appraisal fees in the context of fees charged by lenders incident to the origination, processing, and closing of first mortgage loans.  The amendment eliminates the annual survey conducted by the Department to determine “usual, customary and reasonable” fees that would be the benchmark for permissible fee amounts, and adopts a simpler requirement that an appraisal fee charged to a consumer must total no more than the amount charged by the third-party appraisers.  In addition, the amendment includes a process for lenders to charge consumers for a second appraisal in connection with the same loan when certain criteria are met.

As background, the pre-amendment form of the provision was in response to concerns that borrowers were being charged for the cost of appraisals, plus the added cost of in-house or appraisal management company services.  Thus, the provisions required that an annual survey be conducted in order to assess the “usual, customary and reasonable fee,” creating a standard for the direct cost of an appraisal in order to safeguard consumers from added fees.  Because this concern has been alleviated, the Department has determined that the annual survey may constitute an unneeded and burdensome regulatory requirement imposed upon lenders.

The amended N.J. Admin. Code § 3:1-16.2 became effective on December 18, 2017, and the Notice of the Rule Adoption is available here.