Customary and reasonable fees - 90 days

[moh malekpour]

That's long overdue and I hope you are right.

Thanks, Joan.

Denis,
Joan is right. All you have to do is just read the law and see it for yourself. What Joan says is exactly what the law says and there is no doubt that it is going to be implemented. There is no way around it. There were many attempts from Mega banks and big AMCs' lobbyists to stop or water down this law but they could't do it. This section of the law has strong public support as it is part of Consumer Financial Protection Bureau. CFPB is authorized to protect consumers from the abuse of predatory lenders and dishonest mortgage brokers and has the power to make rules and enforce them. The administration is in process of nominating a right person for the director of CFPB. Sheila Bair the chairwoman of FDIC and Elizabeth Warren the Chairwoman of TARP and a Harvard Law Professors are two strong candidates for this position but there are few others too.

 

[Ken B]

Oh, if only people would actually read the thing. The assumed resulting action is to comprehend it. But then, maybe I ask too much.

 

[NC Appraising]

"Lenders practically can't collect a different fee for each and every order."?

Res,

I was at the CE that Joan put on around 3 years ago. One of the speakers was our buddy George from LSI.

He said the same exact thing, it would be a accounting nightmare.

I agree a tad. If every appraiser on every transaction had a different price (would call to each time for a fee), the amount of time to get it approved and the man power to accommodate this type of ordering system would be a nightmare.

Now I admit, I work for one very large AMC (I get very little work due to my high fee). They pay their appraisers all different SET fees. I think that the difference. It is set or static, when you signed up with them. I think most AMCs operate like this (except for LSI and RELS). Most AMCs that I spoke with have appraisal fees from appraisers from $200 to $400.


Streetlinks has this type of system and they seem to be OK with it. You can put in whatever fee you want. It's not one of those "We pay x amount for County x. So maybe it's a technology issue with the big AMCs or they know that they can get away with it?



That being said, I think most can agree that 80% of our work can be set on one price. It's been that way for most of my appraisal career. For the complex jobs, a set price is just not acceptable.




I do not think that most appraisers have a problem with the above type of system. All of my Clients pay good fees, and I can't remember when I called for a fee increase. Some are easier and some are harder, but for the most part it equals out. When that complex property does come up, my client does not even hesitate to give me a fee increase. They trust me, and unlike AMCs, their fee is not affected.

 

[Elliott]

Sounds putting a frog in cold water and slowly turning up the heat works.

I've set my fees and turn time for 24 years prior to HVCC, and for the
last year plus after HVCC. I don't care that some regulator or AMC thinks they
can set fees. Its sounds like price fixing to me or something that use to
be done in communist countries.

 

[Adios]

I am pretty sure it will be the lender setting the fees.

 

[Ken B]

Price fixing is performed on the supply side. The demand side can set acceptable prices paid all day long, but they can't fix a price.

 

[Adios]

They must determine prices from an independent fee survey, the VA. or academic studies. Those are the options. There is no prescription beyond that. So if for example your fee is $600 and the survey shows $375 to be the mean fee for the area then you won't be engaged. Your fee is not reasonable and customary.

There are exceptions allowed for complex properties.

It really isn't that difficult. And with a proper survey there will be outliers and they will be obvious. I think the only challenge will be the rural areas where there aren't sufficient responses. AMCs and Lenders should audit the surveys.

 

[DonRico]

I don't want the debate over fees to get bogged down over "who has the biggest" invoice.

Let's use the unbiased studies that are out there to establish a Reasonable Fee, and in 90% of the assignments.....our time is covered. If there is a super-complex assignment offered, state why it deserves a higher fee and make your bid.

I can cover my time on a W-I-D-E range of SFR assignments at a fee of $400. That was my fee before HVCC and I will deliver an accurate appraisal, with the 1004MC and the Additional Listings that satisfy every underwriter.

Let the AMC make their case to the lender for their "reasonable" fee to "Manage" and stated separately on the HUD-1 for all to see.

Here is an excerpt from the letter I have been sending out. It states the unbiased sources for establishing Reasonable Fees for Appraisal Services.....

"1 - Government Agency Fee Schedules -- Veterans Administration (VA) indicates fees for New Jersey range from $375 to $525.

INDIVIDUAL APPRAISAL FEES:


-------------------------SFR----- 2-4------Condo--Manufactured Home

New Jersey-------------- $375.00 $525.00 $375.00 $375.00

Source http://www.vba.VA.gov/ro/cleveland/Info_Ltrs_2009/26-09-01 Revised maximum VA appraisal fees.pdf

2 - Academic Studies -- See Appraisal Institute News Release http://www.appraisalinstitute.org/ano/current.aspx?volume=11&numbr=13/14

"H.R. 4173 will require that "reasonable and customary" fees be paid to appraisers to reflect what an appraiser would typically earn for an assignment absent the involvement of an appraisal management company.

AMCs that violate "customary and reasonable" requirements will be subject to severe penalties of $10,000 for First Offense and $20,000 for each Subsequent Offense under the Truth in Lending Act."

3 - Independent Private Sector Analysis -- see Survey (page 42) my coverage areas are $350 to $375 for standard 1004. Extra charges apply for Market Conditions Addenda & for Additional Comparable Listings.

http://www.mercuryvmp.com/documents/Free_AFR_February_2010.pdf?ClickID=AFRDOWNLOAD&ClickThruEmail=&ClickThruCustomerNumber=0"

 

[William K]

Price fixing is performed on the supply side. The demand side can set acceptable prices paid all day long, but they can't fix a price.

I agree with the statement and the principle, however who is the supplier?
Is it the lender who is supplying the appraisal order/ job request or the appraiser who is supplying the appraisal?

I understand which way it is supposed to be, however my belief is the market for Mortgage appraisals is controlled by the lender who is supplying the job order not the appraiser who is supplying the appraisal and has been for a number of years.

 

[Ken B]

When I was doing residential, my standard fee was my standard fee unless the property was VERY complex. On the somewhat complex properties, I made a little less an hour; on the cookie cutter properties, I made a little more an hour. In the end, things evened out.

The problem with this arrangement is that, as AVMs are "proven" to be reliable, there will be fewer and fewer cookie cutter appraisal assignments. This will skew the average income per appraisal as a higher percentage of assignments are for the more difficult properties.

The problem with using a fee schedule such as VA's is that the percentage of VA assignments that are cookie cutter is higher than the percentage for conventional financing. The same is true of FHA properties. (I used to be a VA fee appraiser, if that helps support credibility for that assertion.)

That said, if the lenders pay a decent fee for a 2075 assignment used in support of a lending decision based upon credit score and AVM results, then income should return to something more "normal."