The Appraiser Shortage Myth Part 43

[DWiley]

Sounds like Denis may have one:

Many people fought hard for exactly what Denis stated, but the regulators had no appetite for that change. In my personal interactions on the matter it seemed to me that they did not see appraisal fees being significant enough for them to make the change. They didn't come right out and say that, that is just my take from the conversations I had with them on the topic.

 

[hastalavista]

Frustrating for sure, but doesn't TRID allow for changes as long as they are addressed prior to closing? (I believe 3 days? correct me if I'm wrong)

That sounds easy in theory (something I'm accused of doing! ). In practice, it just isn't worth it for regulated institutions to take the chance of being reviewed and challenged when they have an alternative method (bulk contracting for appraisals).

 

[DWiley]

That sounds easy in theory (something I'm accused of doing! ). In practice, it just isn't worth it for regulated institutions to take the change of being reviewed and challenged when they have an alternative method (bulk contracting for appraisals).

Nailed it.

Technically, it can be done but I have yet to meet a lender who wants to do that as often as cost plus would require when the system they have now works for them (at least with regard to disclosure)

 

[bnmappraisal]

Because the current model allows them to contract out at a set price a large volume of appraisals.

And therein lies the rub!

I forgot about that. As DWiley stated recently, people not on the AMC side don't know (I'm paraphrasing DW, I'm not good with quotes from multiple pages; gotta work on that)

SvcLink is definitely a large player. I know (from first hand person) they had nearly 700 orders from just one client recently - that was just for one week and only one client.

Lowly "one man shops" can't imagine those type of numbers. So it is easy for us (myself included) to say "What's the matter with just adding your fee?" (cost plus)

When you're dealing with hundreds or even thousands of orders per week, and each appraiser on EACH order may have a different fee (even within the same market - I know my fee isn't the same as my competition) I guess that could make it a problem for TRID rules/regs ...

FTR: I'm in favor of cost plus, but I guess I can see the problems/push back from lenders, especially when they are ordering in such high volumes

 

[J Grant]

Please do a little research on the zero-tolerance requirement and how the regulated institutions are taking steps to ensure they never (in deed or in perception) cross that line.

?? Why would separating out the appraisal management fee as a line item cost impact compliance with that?

Line item to consumer the fees with the compliance about zero tolerance of changing fees or exceeding them in place.

Appraisal management fee -$135 ( zero tolerance.) Appraisal fee-$400, ( zero tolerance. )

 

[J Grant]

Many people fought hard for exactly what Denis stated, but the regulators had no appetite for that change. In my personal interactions on the matter it seemed to me that they did not see appraisal fees being significant enough for them to make the change. They didn't come right out and say that, that is just my take from the conversations I had with them on the topic.

Why do regulators have to impose cost plus? Can't it be voluntary?

 

[Evincere]

There are certainly no AMC regs that stop it. The problem is the lender regs. Lenders are required to disclose the appraisal fee on the front end, and most lenders cannot figure out how they can do that in a cost plus model.

Some lenders who do use cost plus address the disclosure challenge by setting the fee that will be paid to the appraiser. But most are unwilling to do that in a C&R world.

Any suggestions?

Well. Within the last few years I actually worked for an AMC - Equity National so I am very familiar with the inner workings. For example, for Florida. The Appraisal fee was charged to the Borrower - $450 wherein the Lender required that the Appraiser be paid no less than a certain amount - $350. That was the SLA and the Lender was Suntrust - who had their own panel of Appraisers for which the AMC acted as the firewall. Basically, even without disclosure they were operating on cost plus which actually restricted the profit margins on that particular client's account. Sunstrust was able to establish C&R as $350 in many of the states with high demographics and an adequate number of Appraisers to service their appraisal needs. RARELY were the orders refused. Complex properties were open to fee negotiations.

In other states, the COW states which by the way, we never had a problem finding Appraisers to accept orders because they were paid according to their fee schedules and fees were collected accordingly upon taking the loan application. It wasn't very difficult to determine fees those Appraisers were charging, hence they charged Borrower appropriately or accordingly. And YOU and all other AMCs already know what the COW state Appraisers charge. We have ALL seen the various fee schedules, even your company's.

I will tell you what the problem is - and its not with the Lender or their regulations. The problem is with the AMCs because they are scared sxit to go to the Lender to negotiate a cost plus per appraisal proposition which would increase the cost to the Borrower. For fear the Lender will move to another service provider. And/or that switching to a cost plus SLA would require not less than specific amounts to be paid to the Appraiser which would seriously limit their ability to make up the differences elsewhere in areas where the fastest and cheapest are more easily obtained.

Bottom line - no AMC wants to be locked into a fee that must, should, would (via agreement with the Lender) be paid to the Appraiser. The Lender? Gimme a break. They could care less - all they want is for their appraisals to be completed in a timely manner. .

 

[hastalavista]

?? Why would separating out the appraisal management fee as a line item cost impact compliance with that?

Line item to consumer the fees with the compliance about zero tolerance of changing fees or exceeding them in place.

Appraisal management fee -$135 ( zero tolerance.) Appraisal fee-$400, ( zero tolerance. )

I don't think you get it.
Separating out the AMC and appraisal fee is not what Cost-plus is about. Separation can occur now, but it is not mandatory or typical.
The AMC & appraisal fee are both considered as a single cost in TRID (although they can be separated out, they represent a single charge to the consumer for a single service) and are currently included in the no tolerance bucket.
If appraisal fees are removed from that bucket, the AMC fee will still be set and still be reported; but not linked to the appraisal fee as it is now (which is why it can be combined as a lump sum).
Until appraisal fees are released from the zero tolerance bucket, the adaptation of the cost-plus model will likely never happen. For all the reasons I've posted, and for all the reasons you'll discover if you did some independent research on the matter.

You don't like the current system and want to change it; I get that.
But if you want to change it, don't you think it is worth some time and effort to understand how and why it works the way it does, so the solutions/changes you advocate for will address the specific issues in the current process, and once changed, will achieve the outcomes you desire?

 

[J Grant]

And therein lies the rub!

I forgot about that. As DWiley stated recently, people not on the AMC side don't know (I'm paraphrasing DW, I'm not good with quotes from multiple pages; gotta work on that)

SvcLink is definitely a large player. I know (from first hand person) they had nearly 700 orders from just one client recently - that was just for one week and only one client.

Lowly "one man shops" can't imagine those type of numbers. So it is easy for us (myself included) to say "What's the matter with just adding your fee?" (cost plus)

When you're dealing with hundreds or even thousands of orders per week, and each appraiser on EACH order may have a different fee (even within the same market - I know my fee isn't the same as my competition) I guess that could make it a problem for TRID rules/regs ...

FTR: I'm in favor of cost plus, but I guess I can see the problems/push back from lenders, especially when they are ordering in such high volumes

AMC's and lender divisions pay/charge a simple flat fee for appraisals and have for years. (Lenders do so now successfully under TRID ) That would be the case with cost plus. If the flat fee an AMC offers for appraisal in an area is not acceptable, then the appraiser would not work for them. Simple as that.

When you're dealing with hundreds or even thousands of orders per week, and each appraiser on EACH order may have a different fee (even within the same market - I know my fee isn't the same as my competition) I guess that could make it a problem for TRID rules/regs ...

Is there a regulation prohibiting an AMC from paying a flat fee of X $ for non complex orders? I am not aware of any. In fact AMC's used to do have lists of the fees they pay in an area. And indeed this is what direct lenders do, ( pay a flat fee to appraises in a regional area for appraisals, the appraisers agree to it) Same for VA. .

I presume AMC's do not want do it, because for AMC's to pay out a flat fee for assignments, to be in compliance the fee would have to be in line with C and R, (similar to non lender work and VA ). We know that except in 3 COW states, AMC;'s pay much lower-with the rationale that they are paying each appraiser "their fee."

 

[J Grant]

I don't think you get it.
Separating out the AMC and appraisal fee is not what Cost-plus is about. Separation can occur now, but it is not mandatory or typical.
The AMC & appraisal fee are both considered as a single cost in TRID (although they can be separated out, they represent a single charge to the consumer for a single service) and are currently included in the no tolerance bucket.
If appraisal fees are removed from that bucket, the AMC fee will still be set and still be reported; but not linked to the appraisal fee as it is now (which is why it can be combined as a lump sum).
Until appraisal fees are released from the zero tolerance bucket, the adaptation of the cost-plus model will likely never happen. For all the reasons I've posted, and for all the reasons you'll discover if you did some independent research on the matter.

You don't like the current system and want to change it; I get that.
But if you want to change it, don't you think it is worth some time and effort to understand how and why it works the way it does, so the solutions/changes you advocate for will address the specific issues in the current process, and once changed, will achieve the outcomes you desire?

Read Evincere's post, # 257, who has direct experience working with an AMC, and Evincere understands the problem as I do. if AMC and appraisal management fees are both considered a single cost under TRID, there is nothing stopping as you say, from separating the two out, at time of application, as to what segment is going where. Evincere explains how it works ( similar to my call in above post for a flat fee)

I assume lenders could opt to pay for AMC service out of their pocket, there is no requirement for them to pass it on as a charge to the consumer? ( I know they are not lining up for that to happen, just saying)