When Customary Fees Become Unreasonable

[Meandering]

Do you guys argue with stop signs while driving?

Just saying,

The minimum fee is the law, has been the law, and the USPAP mandates you to abide by the law.

And because it is THE LAW, appraisers are owed back money.

Why is any of this suddenly an opinion?

J is right, you can't argue that low fee skippys are being rewarded with all the work, while balking at the law and promoting everyone should bid the fee they are happy with.

What is needed is a class action suite, one AMC at a time until they get in line with abiding by the law and the Skippys face the board for accepting fees below what the law allows.

Because guess what else.

Accepting fees below the C&R that is a law pertinent to GSE lending work, is a violation of the Competency and Ethnics rules which makes those reports, no longer USPAP compliant, and wham!

Some appraisers could be very upset if those loans get called or default. Because it is the Appraiser's responsibility to follow the law regarding the USPAP.

Since 2011 it has been the appraiser's responsibility and it was only June this year that it has been the AMCs responsibility. But they just file BK and move on to their next leeching opportunity. How do appraisers get out from under the law?

They don't.

.

 

[J Grant]

I have no idea if the effort would be successful. Probably not , as any effort to change the landscape beyond the low fees they can get away with now will be fought tooth and nail by lenders. But it might bring attention to the issue and if lenders consider it has any chance, it might scare them into voluntary compliance, even if at the lowest levels of that definition.
The present system rewards the skippies and shuts out many competent appraisers from doing res lender work which is a shame not only for the appraisers, but for consumers and secondary market who are denied the service of competent simply because these appraisers won't accept a bargain basement fee. Especially galling is that the borrower paid fee usually covers what many of the more competent appraisers charge plus management expenses. The problem is , the borrower paid for appraisers who charge a fair fee does not allow the big spread of profits back to the lender or thrid party under the current system. The current system creates an ongoing incentive for lenders/their agents to drive fees down, select appraisers by low fees, and deny a large segment of work to well qualified experienced appraisers for relatively low fee differentials, as small as $25 in many instances.

 

[Terrel L. Shields]

Marion - JG. C & R is a joke. Polls, etc. radical differences between who run the poll. And so what does "customary and reasonable" really mean. It means some bureaucrat wrote it so vague as to be unenforceable without legal action and legal action is a roll of the dice. The court might decide $175 is "reasonable" but likely are to say that "it depends" and with that answer you are right back to negotiating the fee on your own until the number of appraisers falls so drastically you can name your fee and the problem then is what is already happening in the banking industry. Namely, they are using alternatives and soon, no appraiser will be used (and currently are not required) for a $250,000 or less transaction. Do you think the bankers would not go to congress and make a compelling case that property is worth more, the de minimis has not changed in 20 years...raise it to $500,000 and let Fannie and FHA use evaluators instead of appraisers.

One way or the other the bankers will cap the appraisers fee, either by not using them or if they try to raise the fees, by claiming that fee is too high. No one should get the idea that price controls (which is exactly what this is) are a one way street. It may serve as a base or bottom...but likely it eventually morphs into a top fee.

 

[J Grant]

It might make more sense to cap the C and R a lender or AMC can charge as a % of their portion of the blended fee on the HUD...as the contributory fee not the main fee ( the main fee being the appraisal). If the value of a contributory fee such as appraisal management service were capped at 25%, for example, any overage could be charged to the lender or borrower as a separate billed appraisal processing/management fee. Might be easier/more in line with the HUD clause as it is now, than trying to establish a national minimal base fee, though I support the drive behind the idea.

 

[SpartanAG]

The minimum fee is the law, has been the law, and the USPAP mandates you to abide by the law.

Why is any of this suddenly an opinion?

J is right, you can't argue that low fee skippys are being rewarded with all the work, while balking at the law and promoting everyone should bid the fee they are happy with.

What is needed is a class action suite, one AMC at a time until they get in line with abiding by the law and the Skippys face the board for accepting fees below what the law allows.

Because guess what else.

Accepting fees below the C&R that is a law pertinent to GSE lending work, is a violation of the Competency and Ethnics rules which makes those reports, no longer USPAP compliant, and wham!

Some appraisers could be very upset if those loans get called or default. Because it is the Appraiser's responsibility to follow the law regarding the USPAP.

Since 2011 it has been the appraiser's responsibility and it was only June this year that it has been the AMCs responsibility. But they just file BK and move on to their next leeching opportunity. How do appraisers get out from under the law?

They don't.

The minimum fee is the law, has been the law, and the USPAP mandates you to abide by the law.

If we already have a minimum fee law, why do we need another one? If the law we have now isn't enforced, what makes anyone think a new minimum fee law would be? Logic would dictate that all this time and energy being focused on getting a new minimum fee law passed (that wont' be enforced), should be spent on getting the authorities to enforce the current law.

And because it is THE LAW, appraisers are owed back money.

Why would we want to reward appraisers for breaking the law? (See below) They aren't owed back money, they should be held accountable for breaking the law.

Accepting fees below the C&R that is a law pertinent to GSE lending work, is a violation of the Competency and Ethnics rules which makes those reports, no longer USPAP compliant, and wham!
Some appraisers could be very upset if those loans get called or default. Because it is the Appraiser's responsibility to follow the law regarding the USPAP.


I agree, the law should be followed and enforced. I'm sure the AMC's have a record of all fees offered and excepted. What is the statute of limits on this type of violation of the law? We could have the AMC's forward all their records to the proper authorities posthaste to begin prosecuting all the law breakers, AMC's and appraisers alike. No one is above the law.

What is needed is a class action suite, one AMC at a time until they get in line with abiding by the law and the Skippys face the board for accepting fees below what the law allows.

No need to mess with a class action suit. Just use that time, money and energy to get the proper authorities to enforce the existing law. Many of the evil AMC's will be pushed to bankruptcy and the Skippys will be sent to appraiser jail.

One thing to keep in mind is the "Law of unintended consequences." How many appraisers out there that aren't skippy's have broken the law by accepting below C & R fees because they needed to feed their family? What if we have conflicting opinions of what C & R is since in most markets it isn't specifically defined? Will the prosecuting authorities make that determination in such cases? A judge? What if they default to the VA fee because there isn't a defined C & R fee for the area and the VA fee is above what is typical in the market? That would result in a ton of violations.

Something else to keep in mind: Per the Final Rule, any mortgage transaction secured by a consumer's principal dwelling falls under the Rule if an AMC is involved - not just "Federally related" transactions. And based on the Definition of an AMC, any appraisal shop with more than 15 appraisers in a state or 25 nationally is most likely considered an AMC.

Looks like the state boards and enforcement authorities are going to have their hands full for the foreseeable future. I'm sure they will love all the revenue generated from the fines and fees though. Of course the attorney's for all parties involved will have a field day with all the litigation that will follow the enforcement of the law.

 

[J Grant]

I am not aware of any set minimum $ amount fee as a law. I don't know if M is referring to a law about C and R in general, but there is no set $ amount minimum fee $ amount they have to comply with (if there were such a thing we would have heard about it by now )

 

[Meandering]

Terrel,

I understand your prospective, but you do realize that C&R was written by HUD in 1997?

ML 1997-22
"F H A field offices will no longer establish maximum appraisal fees. However, a lender's charge to the borrower for an appraisal must be no more than the actual amount charged by and paid to the appraiser, subject to the fee being reasonable and customary for an appraisal in the area in which the property is located."

Fee splitting, as a stand alone entity, has been illegal under R E S P A for decades under Section 12 U.S.C. 2607(A) and Section 8(b). Furthermore Section 12 U.S.C. 2607(c)(2). R E S P A also requires the disclosure of settlement costs to consumers at the time of or soon after a borrower applies for a loan and again at the time of real estate settlement.


December 2001
Settlement Overcharge Crackdown: Are Appraisals Next?
The Department of Housing and Urban Development's tough new campaign against home finance kickbacks and settlement overcharges could be heading to a new area ripe for investigation: unreasonably large appraisal mark-ups.

Last week HUD announced $2.25 million in legal settlements with 44 firms around the country, including prominent mortgage bankers, title and escrow companies, home builders, credit unions and others. The legal actions were the first by the department in more than 10 years, and were intended to symbolize HUD Secretary Mel Martinez's personal commitment to consumer protection reforms.

a HUD official said the agency is taking a hard look at allegations of upcharging on home valuations. He cited the example of a settlement where the appraiser was paid $300 for a valuation, but the borrower was charged $450 at closing. The lender, broker or an appraisal management entity pocketed the $150 extra for "doing essentially little or nothing," said the official, "and that constitutes an unearned fee" that violates Section 8(b) of RESPA.
http://realtytimes.com/consumeradvice/buyersadvice1/item/17290-20011203_overcharge

October 30th, 2007
“Under no circumstances, may a borrower pay a fee that is not commensurate with the amount normally charged for the similar services, goods or facilities. If the payment or a portion thereof bears no reasonable relationship to the market value of the goods, facilities or services provided, the excess over the market rate may be used as evidence of a compensated referral or unearned fee in violation of section 8(a) or (b) of RESPA and 24 CFR 3500.14(g).”

September 2014
CFPB Fines Lender, AMC for Inflated Appraisal Fees
The Consumer Financial Protection Bureau announced Aug. 12 that it fined mortgage lender Amerisave Mortgage Corp., its affiliate, Novo Appraisal Management Company, and the organizations’ collective owner, Patrick Markert, $19.3 million for allegedly luring prospective borrowers with misleading interest rates and trapping them with inflated appraisal fees.


The CFPB alleged that starting in 2011, Amerisave began advertising inaccurate interest rates online, and once borrowers were on Amerisave’s website, it gave quotes to consumers based on an 800 FICO score, even when consumers disclosed a lower credit score.

The CFPB has ordered Amerisave and Novo to pay $14.8 million to refund consumers, in addition to a $4.5 million penalty. Markert has been ordered to personally pay a $1.5 million penalty for his part in the scheme.
http://www.appraisalinstitute.org/CFPBFinesLenderAMCforInflatedAppraisalFees/

 

[Meandering]

The minimum fee is the law, has been the law, and the USPAP mandates you to abide by the law.

If we already have a minimum fee law, why do we need another one? If the law we have now isn't enforced, what makes anyone think a new minimum fee law would be?

We lack, what we have always lacked.

ENFORCEMENT.

It is long past time for a class action suit to get the Feds off their backsides. But in their defense, if they have no evidence of the crime, there is nothing they can really do, until loans start to default.

APPRAISERS

Need to be sending those low fee assignments to the fed. Forward those blast emails with a comment on what C&R for the work should have been.

.

 

[SpartanAG]

Marion - JG. C & R is a joke. Polls, etc. radical differences between who run the poll. And so what does "customary and reasonable" really mean. It means some bureaucrat wrote it so vague as to be unenforceable without legal action and legal action is a roll of the dice. The court might decide $175 is "reasonable" but likely are to say that "it depends" and with that answer you are right back to negotiating the fee on your own until the number of appraisers falls so drastically you can name your fee and the problem then is what is already happening in the banking industry. Namely, they are using alternatives and soon, no appraiser will be used (and currently are not required) for a $250,000 or less transaction. Do you think the bankers would not go to congress and make a compelling case that property is worth more, the de minimis has not changed in 20 years...raise it to $500,000 and let Fannie and FHA use evaluators instead of appraisers.

One way or the other the bankers will cap the appraisers fee, either by not using them or if they try to raise the fees, by claiming that fee is too high. No one should get the idea that price controls (which is exactly what this is) are a one way street. It may serve as a base or bottom...but likely it eventually morphs into a top fee.

It means some bureaucrat wrote it so vague as to be unenforceable without legal action and legal action is a roll of the dice. The court might decide $175 is "reasonable" but likely are to say that "it depends" and with that answer you are right back to negotiating the fee on your own until the number of appraisers falls so drastically you can name your fee and the problem then is what is already happening in the banking industry.

This is exactly what will happen when C & R hits the courts. Well said T!

Do you think the bankers would not go to congress and make a compelling case that property is worth more, the de minimis has not changed in 20 years...raise it to $500,000 and let Fannie and FHA use evaluators instead of appraisers.

There is already a push to raise the de minimis. Of course I've seen a push from appraisal organizations to lower it also. I thought I read somewhere that loans backed by government agencies and GSE's are exempt from the appraisal requirements. I understand they currently get appraisals, but they aren't required too. Once they get enough data, I figure they will switch mostly to an AVM type evaluation. A push for a minimum fee may accelerate that process.

 

[SpartanAG]

We lack, what we have always lacked.

ENFORCEMENT.

It is long past time for a class action suit to get the Feds off their backsides. But in their defense, if they have no evidence of the crime, there is nothing they can really do, until loans start to default.

APPRAISERS

Need to be sending those low fee assignments to the fed. Forward those blast emails with a comment on what C&R for the work should have been.

.

So how will adding another minimum fee law solve this problem? It won't. It will just go unenforced like the current one. A more logical solution would be to take the time, money and energy that would be use to pass a new law, and spend it on getting enforcement of the new law kick-started. And would most likely be cheaper.