I think appraisers have to communicate with elected officials re the AMC model. The AMCs assert that appraisal fees are being set by "the market" and that's true since only a few AMCs dominate. They have a market-but there is little real choice for the appraiser in their market. AMCs must be broken-up or some alternative must come into existence. Otherwise this "profession" turns into a modern-day version of serfdom.
Part of a letter (sent yesterday) to Senator Schumer...
I have been in the Real Estate Appraisal profession for twenty years. I'm a Certified Residential Real Estate appraiser licensed in New York and New Jersey. I am writing to you re a very serious problem with Appraisal Management companies (AMCs).
Senator Shumer, as you know, the Home Valuation Code of Conduct that took effect after May 1, 2009 was designed to eliminate undue influence on appraisers by mortgage lenders in the matter of home values. It was designed to insure that those who ordered residential appraisals had no commission interest or financial interest in the appraised value. For years, appraisers had been calling for the removal of sales personnel from the appraisal ordering process (many had recommended that home appraisals be ordered by the mortgage loan underwriters because of the abuses).
Appraisal Management Companies (AMCs) were supposed to help "reform" the mortgage lending abuses by providing a buffer between the appraiser and the lender. However, AMCs are proving to be a new species of abuse to appraisers.
AMCs have become quite predatory in driving down fees and thus compromising the quality of appraisals. For example: the typical fee for a Single Family URAR appraisal in the Rockland County market is between $300 and $350.00. However, one major AMC (Core Logic) recently advised that the appraisal fee paid in the Rockland County market area is $175.00. Since about 80% of appraisal assignments are now coming from about four or five AMCs, appraisers are finding it increasingly difficult to earn a living as their expenses (MLS fees, tax data servers, E and O insurance, appraisal software, etc.) continue to rise .
Because of the bank problems of the past several years, and the much thinner volume of work assignments available, AMCs are well aware that we are at their mercy in the matter of fees. On top of this: AMCs often require six or more Sales Comps. That, as well as the new Market Conditions Addendum, requires significantly more time in completing an appraisal assignment. However, instead of recognizing that, many AMCs are demanding 2 day day TAT (turn-around-time) which severely compromises the ability of the appraiser to do proper research to establish the market value of the subject property.
..................Senator Shumer, there are numerous other grievances I could bring to your attention., including the AMC use of BPOs (Broker Price Opinions) in which a Real Estate Broker is paid as litlle as $45 for an opinion of a subject property value. In this, the AMCs are willing to "race to the bottom" on appraisal fees and are also willing to put hundreds of thousands of dollars at risk in the matter of home value. Talk about being "penny wise and pound foolish"! But I guess they figure the taxpayer will finally pay if things go wrong.
In closing, I wish to assert that the appraisal profession cannot remain viable, cannot serve the public interest, in a market dominated by a few AMCs that require discounts (AMC "profits") from the appraiser who has little or no power anymore in the matter of appraisal assignments and fees. The AMCs seek to control every aspect of the appraisal profession-even to the point of who who will get in office "fee-split" appraisal assignments. (In the past, appraisers with integrity could get rid of Mortgage Brokers who leaned on them to play with values, and eventually an honest appraiser would find a Mortgage Broker with integrity. But we are losing our independence as never before because a few AMCs dominate the market. Where do we go as the industry is dominated by even fewer AMCs? Can we dump them as we did with crooked mortgage brokers?)
Senator Shumer, I firmly believe that AMCs will prove more lethal to the public good than the crooked mortgage brokers. I think the domination of the appraisal profession by a few AMCs is a danger to the independent appraiser and to the public good. There must be more competition among many AMCs that spread out the mortgage related appraisal assignments, or some alternative to AMCs must be found.
Thank you very much for reading my comments. I hope they were informative.
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