UAD 3.6 discussion

[J Grant]

Instead of capping AMC percentages, we should cap these AMCs in the a$s, putting an end to these scammers.

How are we going to do that?
We can't cap the AMC percentages, but the regulators can. The regulators can, in the same way they opted to allow the AMC's to hold their own C and R, which was an abomination.

I personally do not work for any AMC except one captive order company owned by the lender ( mainly do their high-value orders ). It took a long time for me to get enough other work to replace them. I understand some appraisers have no choice with the work, and I despise the system that allows the lender to be free of cost AMC service - the lenders should pay the AMC's with no involvement of the appraisal fee in compensation.

 

[timd354]

How are we going to do that?
We can't cap the AMC percentages, but the regulators can. The regulators can, in the same way they opted to allow the AMC's to hold their own C and R, which was an abomination.

I personally do not work for any AMC except one captive order company owned by the lender ( mainly do their high-value orders ). It took a long time for me to get enough other work to replace them. I understand some appraisers have no choice with the work, and I despise the system that allows the lender to be free of cost AMC service - the lenders should pay the AMC's with no involvement of the appraisal fee in compensation.

I am not aware of any law or regulation that gives the regulators the ability to cap the percentage of the appraisal fee that an AMC can keep. Additionally, even if the regulators had such power, I doubt that it would make a difference in what appraisers who do AMC work get paid. For example, I recently reviewed an appraisal obtained through an AMC and the appraiser was paid $300 and the AMC collected $500. Let's say that regulators capped the amount of the appraisal fee an AMC could keep at 20% (per your proposal), which in this case would be $100. Under that scenario, an AMC would simply charge a $300 appraisal fee and pay the appraIser $300 and charge the lender a $200 management fee....the appraiser would get paid the same $300 and the lender would not care as the total fee paid for appraisal and the AMC managing the process would still be the same $500.

The sad fact is that as long as AMC's keep finding enough appraisers to do the work at the fees that they are offering, AMC appraisal fees are simply not likely to increase.

 

[J Grant]

I am not aware of any law or regulation that gives the regulators the ability to cap the percentage of the appraisal fee that an AMC can keep. Additionally, even if the regulators had such power, I doubt that it would make a difference in what appraisers who do AMC work get paid. For example, I recently reviewed an appraisal obtained through an AMC and the appraiser was paid $300 and the AMC collected $500. Let's say that regulators capped the amount of the appraisal fee an AMC could keep at 20% (per your proposal), which in this case would be $100. Under that scenario, an AMC would simply charge a $300 appraisal fee and pay the appraIser $300 and charge the lender a $200 management fee....the appraiser would get paid the same $300 and the lender would not care as the total fee paid for appraisal and the AMC managing the process would still be the same $500.

The sad fact is that as long as AMC's keep finding enough appraisers to do the work at the fees that they are offering, AMC appraisal fees are simply not likely to increase.

You are figuring it differently from the way it occurs, starting with the consumer level. The AMC does not charge an appraisal fee to the borrower. The lender collects the AMC fee from the borrower, and the AMC gets a split as a third party, legally, per the bundled HUD fee.

The lender charges the borrower, for example, a common C and R of $525-$ 600 for regular non-complex assignments. Lets say $600 for this example. The borrower pays $600 to the lender. With a 15% cap, the AMC gets paid $90, and the appraiser gets $510. If the AMC service is worth more to the lender, the lender is free to pay them ore than $90.

Better yet the lender pays the fee of whatever they agree to the AMC for their management service and the appraiser gets the full C and R the borrower paid. If the lender can pass the AMC service fee on to the borrower, so be it.

Of course, I am aiming for a more equitable system that might never happen.

 

[timd354]

You are figuring it differently from the way it occurs, starting with the consumer level. The AMC does not charge an appraisal fee to the borrower. The lender collects the AMC fee from the borrower, and the AMC gets a split as a third party, legally, per the bundled HUD fee.

The lender charges the borrower, for example, a common C and R of $525-$ 600 for regular non-complex assignments. Lets say $600 for this example. The borrower pays $600 to the lender. With a 15% cap, the AMC gets paid $90, and the appraiser gets $510. If the AMC service is worth more to the lender, the lender is free to pay them ore than $90.

Better yet the lender pays the fee of whatever they agree to the AMC for their management service and the appraiser gets the full C and R the borrower paid. If the lender can pass the AMC service fee on to the borrower, so be it.

Of course, I am aiming for a more equitable system that might never happen.

I know exactly how it works as I have been in this business for 30 years and see the Closing Disclosure (and often the appraisal/AMC invoice) on every file that we run through our QA process and I can tell you with 100% certainty that the lender is going to pay no more under your proposal for the combination of the appraisal and AMC management than they currently do and they are going to pass those fees through to the borrower one way or another. It makes no difference to the lender whether they collect $600 as an appraisal fee and pay that to the AMC, which then keeps $200 and pays the appraiser $400 or if they collect some lower fee from the borrower (say $400) that is still labeled the appraisal fee, which is is passed through to the appraiser and also collect an additional $200 "processing" fee (or "application" fee) from the borrower which is then used to pay the AMC's management fee if it needs to be separated out. Your proposal does not change the dynamics of supply and demand which dictates that AMC's and lenders are not going to pay any more for appraisals and managing appraisals than they presently pay as long as they can find enough appraisers to work for the fees they offer.

I know that sucks for residential appraisers because there is currently an excess supply of appraisers in most markets compared to the demand for residential appraisals, but fees are not likely to increase unless the demand for appraisals increases or the supply of appraisers decreases. Unfortunately, the residential mortgage business (and those businesses related to it) is a highly cyclical business and when mortgage originations are low, most residential appraisers make less money and many underwriters, closers, and loan officers lose their jobs because they get laid off or the lender or broker they work for goes under.

You have been around long enough to know that the regulators are not going to save appraisers or specify some sort of enforceable minimum fee.

 

[J Grant]

I know exactly how it works as I have been in this business for 30 years and see the Closing Disclosure (and often the appraisal/AMC invoice) on every file that we run through our QA process and I can tell you with 100% certainty that the lender is going to pay no more under your proposal for the combination of the appraisal and AMC management than they currently do and they are going to pass those fees through to the borrower one way or another. It makes no difference to the lender whether they collect $600 as an appraisal fee and pay that to the AMC, which then keeps $200 and pays the appraiser $400 or if they collect some lower fee from the borrower (say $400) that is still labeled the appraisal fee, which is is passed through to the appraiser and also collect an additional $200 "processing" fee (or "application" fee) from the borrower which is then used to pay the AMC's management fee if it needs to be separated out. Your proposal does not change the dynamics of supply and demand which dictates that AMC's and lenders are not going to pay any more for appraisals and managing appraisals than they presently pay as long as they can find enough appraisers to work for the fees they offer.

I know that sucks for residential appraisers because there is currently an excess supply of appraisers in most markets compared to the demand for residential appraisals, but fees are not likely to increase unless the demand for appraisals increases or the supply of appraisers decreases. Unfortunately, the residential mortgage business (and those businesses related to it) is a highly cyclical business and when mortgage originations are low, most residential appraisers make less money and many underwriters, closers, and loan officers lose their jobs because they get laid off or the lender or broker they work for goes under.

You have been around long enough to know that the regulators are not going to save appraisers or specify some sort of enforceable minimum fee.

The retail fees of C and R are in effect, and the lenders and wholesalers do not use AMC; the borrower pays the appraiser's paid fee to the appraiser. The AMC takes a cut of that same fee when an AMC is involved. Taht is how it works. Unless the lender is violating the law, the lender can not split a fee with itself ( only a third party can split the fee on the HUD ). So why would a lender pay an appraiser less? It makes no sense. Stop trying to spin this - it is not the dynamics of supply and demand that created teh low fee point at AMC's. When many lenders switched to AMC's after HVCC, there was the same number of appraisers and clients as the day before. But as soon as the AMC s became the middleman, the AMC s had an interest in hiring by a low fee, which the lender did not ( since the lender could not profit from a lower fee to the appraiser )

A lender can own an AMC with the AMC a different name and company, under an umbrella form of ownership, which you know. Those captive order AMCs typically operate on cost plus, where the AMC does take a fixed, smaller percent of the C and R consumer paid fee ( thus operating like a voluntary cap on the % taken from the fee by a middleman )

I am aware taht the regulators who proved themselves crooks the first time by allowing the second proposal to C and R to wipe out the original HVCC, which only had one C and R (VA fees and lender or other gov't surveys ). When an AMC owns internal surveys of fees,s they are pushed down by their unique position in the market, it was game over

Regulators without some incentive will likely not correct this, and I agree with you. Thankfully, some lenders and wholesalers do not use AMCs. Hopefully, that will not change, but one never knows.

 

[J Grant]

I know exactly how it works as I have been in this business for 30 years and see the Closing Disclosure (and often the appraisal/AMC invoice) on every file that we run through our QA process and I can tell you with 100% certainty that the lender is going to pay no more under your proposal for the combination of the appraisal and AMC management than they currently do and they are going to pass those fees through to the borrower one way or another. It makes no difference to the lender whether they collect $600 as an appraisal fee and pay that to the AMC, which then keeps $200 and pays the appraiser $400 or if they collect some lower fee from the borrower (say $400) that is still labeled the appraisal fee, which is is passed through to the appraiser and also collect an additional $200 "processing" fee (or "application" fee) from the borrower which is then used to pay the AMC's management fee if it needs to be separated out. Your proposal does not change the dynamics of supply and demand which dictates that AMC's and lenders are not going to pay any more for appraisals and managing appraisals than they presently pay as long as they can find enough appraisers to work for the fees they offer.

Lenders do not pay for he appraisal !! The borrower pays for the appraisal !! So the lender does not care if the appraisal fee is $400 or $600 - C and R is taht the fees paid by a client for an appraisal are similar to VA surveys and what other appraisal fees are. And they are (for the purpose of example ) $600. So why would the lender then suddenly tell an AMC , who they don't care jack about, to pay $400 to an appraiser? Then the lender is violating the law, and setting an appraisal fee and not paying C and R. Meanwhile, the lender goes through the bother of charging a $200 processing fee from the borrower so the lender can pay $200 to the AMC -shy? Are the lenders partners with the AMC? Getting a kickback? What incentive do they have to ensure an AMC makes $00 per order?

If the lender had to pay a cost to the AMC (whtehr charged to borrower or not ), we would see AMC 's compete on the THEIR fees. I bet lenders would figrue it a worth $75- $100 an order .

Do you honestly believe that AMCs would enjoy the same enormous market share if their lender customers had to pay a hard cost for the AMC service?

 

[J Grant]

If lenders had to pay for AMC service as a hard cost, lenders might form their own panels again as the cheaper alternative. But if lenders want to pay an AMC for management services, then go for it. Just leave the appraisal fee out of it.

If a lender can pass the AMC cost on to the borrower, so be it. The lender's choice to use an AMC, or what they pay for that service, should not be mixed in any way, shape, or form with the $ amount of the appraisal fee.

It is mixed now because of the HUD blended fee allows it, a govt regulatory perk.

 

[timd354]

If lenders had to pay for AMC service as a hard cost, lenders might form their own panels again as the cheaper alternative. But if lenders want to pay an AMC for management services, then go for it. Just leave the appraisal fee out of it.

If a lender can pass the AMC cost on to the borrower, so be it. The lender's choice to use an AMC, or what they pay for that service, should not be mixed in any way, shape, or form with the $ amount of the appraisal fee.

It is mixed now because of the HUD blended fee allows it, a govt regulatory perk.

It is curious that you somehow believe that lenders don't currently pay for an AMC's costs. When a lender pays $600 dollars to an AMC who pays the appraiser $400, the lender is paying the AMC $200 for the AMC's cost. Like every other loan cost, this cost is passed through to the borrower one way or another and it is a fantasy to think that mandating separation of the AMC cost is going to somehow result in AMC's paying more $ to appraisers. In fact, the most likely unintended consequence of such a proposal being adopted is for AMC's to directly employ more staff appraisers.

 

[J Grant]

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It is curious that you somehow believe that lenders don't currently pay for an AMC's costs. When a lender pays $600 dollars to an AMC who pays the appraiser $400, the lender is paying the AMC $200 for the AMC's cost. Like every other loan cost, this cost is passed through to the borrower one way or another and it is a fantasy to think that mandating separation of the AMC cost is going to somehow result in AMC's paying more $ to appraisers. In fact, the most likely unintended consequence of such a proposal being adopted is for AMC's to directly employ more staff appraisers.

The lender is passing along a portion of the BORROWER PAID appraisal fee to compensate teh AMC. It id

That is why I tried to differentiate it by calling it a hard cost to the lender. I assumed you would understand what that meant.

The borrower covered both the $200 the lender "paid" the AMC and the $400 paid to the appraiser. If the borrower gave the lender $600 for the appraisal, it did not COST the lender anything to use the AMC. Yes or no?

 

[J Grant]

It is curious that you somehow believe that lenders don't currently pay for an AMC's costs. When a lender pays $600 dollars to an AMC who pays the appraiser $400, the lender is paying the AMC $200 for the AMC's cost. Like every other loan cost, this cost is passed through to the borrower one way or another and it is a fantasy to think that mandating separation of the AMC cost is going to somehow result in AMC's paying more $ to appraisers. In fact, the most likely unintended consequence of such a proposal being adopted is for AMC's to directly employ more staff appraisers.

Who knows how it would play out - maybe a lot of AMC's would fold if they had to charge a hard cost to the lender apart and divorced from the appraisal fee. Lenders could pay the appraiser the apprisal fee they collected and let an AMC do all the rest .

Maybe AMCs woujld hire more staff, and lenders would hire staff appraisers or form tehur own panels, and some lenders would use hte AMC and pay for the sdervice or pass the cost on to borrowers.

It would eliminate the kind of competitive fee bidding and fee comparison that AMCs do to procure the lowest or lower fee, which drives many qualified appraisers away from AMC work, and means less qualified and inexperienced may get the orders ( and have to rush through them to make it up in volume.