The Appraiser Shortage Myth Part 43

[Terrel L. Shields]

why? Because it is still beneficial for a lender to off-load the appraisal management process.

My question is since the appraisal fee is a pass thru cost, why do they care?

 

[hastalavista]

The excuse that it would be to difficult to accomplish with TRID because AMC;s are paying appraisers many different fee amounts, ( they pay each appraiser "their " fee ) is hogwash. The regulation is not that an appraiser must be paid "Their " fee, the regulation is to pay C and R.

(my bold)

Unfortunately for your argument, they are being paid C&R as defined by the regulation you cite.
Again, without understanding how the system works, it will be very difficult to develop a practical solution that has a chance of being adopted and implemented.

 

[bnmappraisal]

Obviously, if AMC X charges $140 per assignment and AMC Y charges $130 per assignment, then a lender would likely consider AMC Y to be the better proposition (all other things being the same). But I don't think a lender will necessarily bail over a 8% difference in costs if AMC X is performing to the lender's requirements.

Denis, it sounds like you're talking about AMCs choosing their appraiser (my bold) and not lenders choosing their AMC ... oh wait, that's right ... it's a business decision and is the same either way! (again, my bold)

 

[hastalavista]

My question is since the appraisal fee is a pass thru cost, why do they care?

Your a bit late to the discussion and I don't expect you to have read every one (I don't when I step in late).
They don't care, as a rule.
What they do care about is meeting the TRID requirements. They care a lot about that. And as long as the appraisal fee is no tolerance fee, they want to ensure they quote a fee to the consumer that doesn't change (except for the most atypical of scenarios).
It is a pass-through cost but it is a pass-through cost that has to be stated and is extremely difficult to change once stated. Get rid of the requirement to state it (let it "float") and they won't care since it is no longer their responsibility to quote it firmly and once and for all.

 

[J Grant]

I read it. And I don't dispute what s/he is reporting ($450 SLA, $350 must go to the appraiser).
But riddle me this... What happens if the AMC cannot fill the assignment at $350? What happens if it must pay $400? Not the appraiser's problem, you may think, and you'd be right. Except that if the AMC in question has other clients who do not set the minimum fee to be paid, then they will be under pressure to squeeze out the margin from those other clients' assignments. And, the AMC may decide to dump the client (that happens, BTW, despite the order volume); then, the client tries another AMC until the same scenario occurs. That isn't a sustainable solution and doesn't address the problem.

The one example isn't a solution to a systemic problem.
For cost-plus to have a chance at being adopted, appraisal fees have to be removed from the no tolerance bucket. We are talking about the current regulatory environment scheme.

But, I've posted enough. Gnashing teeth and wailing at the AMCs is a waste of time because that is not where the issue is in regard to the cost-plus model.

Why is TRID now the bogeyman (according to your view) preventing cost plus from being adopted? Evincere, who worked for an AMC and has direct knowledge, explained how it could work. IF wailing at AMC's ( I thought it was a discussion) if approaching it from AMC angle is not a solution to the issue, then what is the solution in your view ( assuming regs will not roll back TRID and even if they do, the issue was in place before TRID).

But riddle me this... What happens if the AMC cannot fill the assignment at $350? What happens if it must pay $400? Not the appraiser's problem, you may think, and you'd be right. Except that if the AMC in question has other clients who do not set the minimum fee to be paid, then they will be under pressure to squeeze out the margin from those other clients' assignments. And, the AMC may decide to dump the client (that happens, BTW, despite the order volume); then, the client tries another AMC until the same scenario occurs. That isn't a sustainable solution and doesn't address the problem.

Denis, what you describe above is the force of the market at work, only this time it is the AMC feeling it, not the appraiser. If the AMC can not fill the assignment at $350 for Bank A, and AMC pays $400, why do you assume AMC has to squeeze out the margin from other cient assignments? AMC has to tell their client Ban kA, I can not fulfill the orders paying $350, I need to pay appraisers $400. At which point, Bank A has to figure it out- cut the amount down paid to AMC if BAnk A was paying the AMC $150, they could reduce it to $100 ( AMC could take it or leave working for less, as appraisers do now). Or, Bank A can drop the AMC and pay the appraiser $400 direct, or Bank A needs to raise the amount they charge the customer., or shop for a better run AMC. Lots of workable options.

 

[bnmappraisal]

Just to add...

If I were a big lender, I'd have several AMCs work for me. Some in the same geographic market. I'd do this to keep them competitive among themselves in regard to what they charge me. That would also have the impact of diluting the concentration of any one AMC with any one lender. When you think about this, it is a Business 101 commandment: Thou shalt not have all of thine eggs in one basket!

Exactly. And many do. As you mention "...not have all of thine eggs in one basket" A couple of my friends at different AMCs talk about the same clients. It's sometimes funny to hear the differences in their experiences

 

[Michigan CG]

I am sure lenders hate TRID, but how does that impact the splits regarding what appraisers get paid from an AMC, or whether a lender decides to use an AMCX or not? These same issues with AMC's, cost plus, and fees were in place before TRID.

And TRID made it worse. It is a paperwork nightmare to change the appraisal fee. Thank God for big government and restrictive regulations.

 

[hastalavista]

Why is TRID now the bogeyman (according to your view) preventing cost plus from being adopted?

It always has been. You just missed those discussions when they occurred.

Denis, what you describe above is the force of the market at work, only this time it is the AMC feeling it, not the appraiser. If the AMC can not fill the assignment at $350 for Bank A, and AMC pays $400, why do you assume AMC has to squeeze out the margin from other cient assignments? AMC has to tell their client Ban kA, I can not fulfill the orders paying $350, I need to pay appraisers $400. At which point, Bank A has to figure it out- cut the amount down paid to AMC if BAnk A was paying the AMC $150, they could reduce it to $100 ( AMC could take it or leave working for less, as appraisers do now). Or, Bank A can drop the AMC and pay the appraiser $400 direct, or Bank A needs to raise the amount they charge the customer., or shop for a better run AMC. Lots of workable options.

Ok, fine.
Continue to try to get cost-plus adopted and implemented without releasing the appraisal fee from the no tolerance bucket. If you cannot, then you are free to blame whatever entity for that failure (except TRID, of course, since that isn't an issue from your perspective).
I wish you the best of luck in that endeavor.

 

[J Grant]

Your a bit late to the discussion and I don't expect you to have read every one (I don't when I step in late).
They don't care, as a rule.
What they do care about is meeting the TRID requirements. They care a lot about that. And as long as the appraisal fee is no tolerance fee, they want to ensure they quote a fee to the consumer that doesn't change (except for the most atypical of scenarios).
It is a pass-through cost but it is a pass-through cost that has to be stated and is extremely difficult to change once stated. Get rid of the requirement to state it (let it "float") and they won't care since it is no longer their responsibility to quote it firmly and once and for all.

Denis, how can you explain that for years, TRID was not a regulation, but the same resistance to cost plus was in place?

In addition , it is feasible to be compliant with TRID and have a cost plus breakout in place. Puts a bit more burden on the AMC and a bit more pressure to pay the Appraisers better- which is a good thing. It is certainly easy to accomplish as a flat appraisal fee paid out in a region. . Those appraiser charging higher than a reasonable fee many appraisers would agree to, those higher fee appraisers are not doing much if any AMC work anyway (we are talking about the regular assignments, not fee quoted high end or complex)

 

[Terrel L. Shields]

is extremely difficult to change once stated.

Nonsense, sets closing back only if fee changes within three days according to my banker. They don't like to but not a big issue for a real (FDIC,etc.) bank.

The issue of "no tolerance" is problem for lenders who guess a fee without consulting the appraiser first. AMC flat fee (or averaging) eliminates their problem. Cost is fixed but AMC may need weeks to find a cheap appraiser. Because they won't order the appraisal until late in process is where TRID pinches, bank underestimating fee means they pay shortfall or restart TRID.