Union Time?

[J Grant]

And you should HOPE that more of your competition gets starved out so your fees will improve.

Reality is I might be the one to starve if I dont' lower my fee! (for example). And though I personally am doing okay ( I work for a number of non AMC clients), I don't support things getting so dire due to AMC antics that my competitors have to STARVE in order for decent fees to be paid.

This is what I hope, AMC's start paying decent fees, get the F** lenders to pay the AMC service, so appraisers can survive. The competitors leaving the field should attrition out by quality or if there is simply not enough work as a natural course of business. However, there is enough work, but the fees are so low from AMC's or the work assigned by volume to cheap and fast that appraisers ( some very good ones )are being starved out.


Again, why is taxpayer backed $ mortgage backing and public trust intertwined in a professional environment so toxic that the AMC supposed firewall is in reality starving out many good appraisers? Since the survivors on an AMC panel come down to the cheap and fast who can "pump out volume." Why is taxpayer backed funded $ involved in that may I ask?
.
Really, the AMCs are in more danger of being starved into extinction than the appraisers.

I don't think so. They will adapt, not starve. Adapting might mean lowering education or requirements who can appraise, or persuading lenders not to use appraisals, if AMC can sell an alternate product and make more $. If appraisals are still in the mix, and adapting means finally paying better fees, why should appraisers be starved out for years to get that to happen? A simple regulatory change could fix it of course..

 

[Rick Stillman]

Of course a buyer will normally take advantage of the law of substitution. How is that fine for oranges and cars and houses but somehow immoral for appraisals?

Because oranges and cars are NOT financed using tax payer backed loans, with an appraisal underpinning the value. So for taxpayer public trust collateral we have a corrupt system using the cheapest and fastest appraisers so that third parties ( AMC's can profit form it. Yes, I think it's imoral, even if it's legal. The AMC's also fail to provide the firewall against lender pressure, they are often complicit in lender pressure about hitting SC price/high Refi $ ( which can be another thread ) so not only are they picking the fastest/cheapest, they also are complicit often times in evading their supposed purpose as a firewall. I find that imoral as well.

There is also a crucial difference between the sales of oranges, cars, or houses to buyers, in that the buyer acts as a normal consumer, free to choose the orange, car, or house, and many buyers choose to pay MORE for higher quality. In appraisal, the borrower paying for the appraisal, , can not act like a normal consumer. They are not allowed to personally choose the appraiser. The appraiser gets chosen for them by the lender or AMC, and if it is an AMC, the choice will be for fast and cheap, eliminating from consideration many good appraisers who the borrower might choose, or who might be better for the order .

As for what the borrower pays, IRL appraisal fees are the least of their concern. The spread between the wholesale price the AMCs are paying appraisers and retail price they're charging their customers is the AMCs problem.

All the more reason to get the AMC's hands out of the fee. Let lender pay an AMC for a service apart from what borrower pays for the appraisal.

Well said J.

I have always been amazed that such a gargantuan industry such as the mortgage industry, can be so focused on doing things so fast and cheap. And we are supposed to have regulators that watch over this. Right?

I vividly remember Angelo Mozilo running full speed ahead in his business hopes of selling a mortgage to everyone with a pulse from sea to shining sea. Those were the glory days of being a lender, for sure. Appraisers weren't making the big bucks back then, and are not today either. Funny how that works so well in the favor of some, but not others.

And then, it all crashed. And like a plane flying at 5,000 feet, it crashed hard.

Two things need to happen to fix everything in the lending business. Yes, everything in this ludicrous business. Fix these two biggies, and all the small stuff will fall into place.

First, hold the lenders RESPONSIBLE for the quality of the appraisals attached to their loans - and they will suddenly realize how important quality and competence are. And, secondly, have the AMCs charge a fee for their services. They do provide a service, and they do deserve to be paid for that; but not at the expense of appraisers.

With those two changes, the entire focus will change from fast and cheap (which everyone it seems has an inherent interest - except the homeowner/borrower and the appraiser) to quality and solid results.

That may take more time, and cost more, but since we are dealing with the largest financial investment of someones life - it is worth it.

My God - I'm glad the car I drive is built with SOME semblance of quality in mind. If any other industry operated the way the mortgage industry does, with the main focus being cheap and fast - the people would revolt against it. And they have - I remember the Ford Pinto and Yugo as two notable examples. But there was no blind eye turned to Ford when they had substantial DEFECTS in their product, as is with the lenders today that CONTINUE to fly fast and loose. Without the acknowledgement/protection of the regulators, which the lenders enjoy, it was Ford and Yugo that took the brunt of the punishment for their low quality. Yugo died a painful death from being the cheapest car one could buy. Cheap is good, but only to a point. If there is one lesson to take away from that, it is that cheap is cheap - it is not inexpensive - it is LOW quality. There are huge differences between cheap and inexpensive. Hmmm. Imagine that. The similarities in lending and appraising are astounding.

Banks and lenders don't have to play by the rules (wink, wink) nearly as much. The mortgage industry continues, unabated, to often treat their customers (and appraisers) as just one big pool of consumers in a commodity business. That's wrong. Too much of the mortgage lending today is not only not good - it is toxic. We only need to look back a short distance to cause and effects of the great recession.

But, but but - we took steps to prevent these problems right? FIRREA, way back in 1989 - HVVC - Dodd Frank - AIR. Maybe a college degree is the answer. No, on second thought, maybe desk top appraisals are what we need. Maybe just waiving appraisals entirely would help things. All of these things have been implemented, and they all look like something is being done to improve the lending industry. It sure looks like that, anyway. But, in reality, it only makes things even MORE blurred and MORE simple, and MORE unregulated - because that's where the money is. Luckily, we still have an ample supply of taxpayers that can be used to underwrite everything.

Mortgage lending, not being underpinned by quality appraisals, may indeed be the ULTIMATE failure of our entire economy...

 

[Mike Kennedy]

Should cops and firefighters be allowed to unionize???

You betcha

https://en.wikipedia.org/wiki/Patrolmen's_Benevolent_Association_of_the_City_of_New_York

http://nycpba.org/index1-flash.html

http://www.ufanyc.org/about_us/history.php

 

[Deleted member 130081]

Sigh.

I have been looking into the American Guild of Appraisers and am likely to join. Do I think they are going to be my savior and solve all my woes? Of course not. It's a step forward and in the right direction and beats giving up without trying.

Its a strange thing how getting people to work in their own best interest is so difficult so often.

 

[hastalavista]

Two things need to happen to fix everything in the lending business. Yes, everything in this ludicrous business. Fix these two biggies, and all the small stuff will fall into place.

First, hold the lenders RESPONSIBLE for the quality of the appraisals attached to their loans - and they will suddenly realize how important quality and competence are. And, secondly, have the AMCs charge a fee for their services. They do provide a service, and they do deserve to be paid for that; but not at the expense of appraisers.

I'm glad to see you arguing for the same positions I've been arguing for.

 

[J Grant]

Yes, let AMC;s thrive as long as lenders will pay them apart from the appraiser fee. Of course lenders would drop them in a heartbeat or pay only a small fee per order if the lender had to pay out of their own costs for the AMC service, which is why AMC's do not want Cost plus and lobby hard to keep the status quo.

Of course lenders could perhaps pass along the additional AMC service charge to the borrower. Would a borrower care if a $100 AMC service charge is added to all their other loan costs? Probably not.

 

[hastalavista]

And, secondly, have the AMCs charge a fee for their services. They do provide a service, and they do deserve to be paid for that; but not at the expense of appraisers.

Although some don't think it is necessary to remove appraisal fees from the TILA disclosures (3rd party fees; very difficult to alter once quoted) I think removing the appraisal fee from the disclosure is the best way to effect the above change.

The AMC fee can be disclosed as it would be (presumably) set: The AMC needs to $X fee in order to make $Y profit. That fee should be relatively constant (one could argue, the higher the volume the AMC has, the lower per-unit cost it should have, and its fees should drop; that's a competitive force they can use among themselves). The appraisal fee should be excluded from the 3rd party fee as it should be able to float depending on (a) complexity of the assignment and (b) the availability of appraisers to take the job (the two are significantly correlated). Appraisal fees are (or should be) assignment-complexity sensitive along with supply and demand. Let those fees float based on that dynamic.
That doesn't mean appraisers will not compete among themselves using price. It just means that lenders for covered transactions won't be held responsible for pre-determining the fee.

 

[hastalavista]

Yes, let AMC;s thrive as long as lenders will pay them apart from the appraiser fee. Of course lenders would drop them in a heartbeat or pay only a small fee per order if the lender had to pay out of their own costs for the AMC service, which is why AMC's do not want Cost plus and lobby hard to keep the status quo.

Of course lenders could perhaps pass along the additional AMC service charge to the borrower. Would a borrower care if a $100 AMC service charge is added to all their other loan costs? Probably not.

I think (at least based on my conversations with those who are decision makers within AMCs) would prefer the cost-plus system. This takes them totally out of the fee controversy to a large degree and puts the final appraisal-fee decision making on the lender.
AMCs would still get bids for jobs but (as you have pointed out) their profits wouldn't be dependent on finding the low fee. Certainly the lenders would want some kind of metric to ensure that the AMCs are actually putting the work out to bid (to qualified appraisers) and picking the appraiser who meets the assignment's complexity/geography profile. It stands to reason that if I am equally qualified among 5 other appraisers for a job, and I constantly bid higher or longer than the other 5, I'm going to get less work than those other 5. But that's OK with me. If I want to adjust, I can adjust.

Certainty is always better than uncertainty.
If I'm an AMC and have a client that sends me 5,000 orders a month for which they pay a set fee, I have certainty of volume for that month but no certainty of operating profit.
On the other hand, if I can set my unit cost per order ($150, let's say), then I have certainty of volume and operating profit (I'll drop 20% to the net operating profit line, or $30 per order).
I'll take the second over the first.

Also, just think how I can shift my staff's focus from trolling for the lowest fee appraiser to ensuring that the appraisers who are selected are qualified.

 

[J Grant]

Then if the AMC's supposedly would prefer it, or at least accommodate to it., we need to pressure the lenders for cost plus. Some catalyst has to make it happen. The regulators are MIA or in the pocket of the lending industry to allow this travesty to continue.

I believe appraisers need to go public with the problem with an outreach website to consumers and expose this cozy arrangement of free of cost service to lenders. The lenders do not want to be embarrassed or seen as crooks/ exploiting the public trust by consumers, who are their future borrower customers.

 

[George Hatch]

Go ahead, knock yourself out. A lot of people thought consumers would react to fee disclosures in appraisal reports and closing documents but that apparently hasn't panned out.

Maybe this time it will be different.