Law firms begin addressing AMC fraud

[Mejappz]

And so it begins—one of many more to come.

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Class Action Lawsuit Filed in California Over Hidden AMC Fees

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A class action lawsuit has been filed in California against a major mortgage lender and two appraisal management companies (AMCs), alleging that their failure to disclose AMC fees to consumers constitutes unfair and deceptive business practices. The lawsuit claims that borrowers were misled about the true cost of appraisals, as the AMCs service fees were bundled into appraisal charges without proper disclosure.

The Appraisal Institute has long advocated for greater transparency in appraisal fees, supporting policy changes that would require lenders and AMCs to clearly disclose the portion of the appraisal fee that goes to the appraiser versus the AMC. The organization has pushed for reforms to ensure consumers understand what they are paying for and to prevent deceptive pricing practices that could undermine trust in the valuation process.

The plaintiffs in the lawsuit in Lacey Timmens v. Clearcapital.com, Inc. Core Valuation Management, Inc. and Rocket Mortgage, LLC seek damages and injunctive relief to prevent lenders and AMCs from engaging in similar practices in the future.

 

[Mejappz]

Here is the lawsuit against Clear Capital, Core Valuation, and Rocket Mortgage. The chickens have come home to roost.

 

[Mejappz]

Defendants’ deception as to what the appraisal fee includes is particularly problematic because the typical dynamics of a free market are not present to keep the price competitive. In this context, the lender picks the AMC but the lender does not pay the AMC—the borrower is stuck paying the AMC without being able to pick the AMC or directly negotiate the AMC’s price. The only way to make AMCs’ fees subject to the healthy pressure of an efficient market is to inform consumers of the details of the AMCs’ fees. This would give consumers a chance to demand that lenders compete for the borrower’s business by competing between each other on the price their AMC charges. This competition is not happening now because the Defendants are obfuscating that the AMCs receive an excessive middleman fee.

 

[Mejappz]

27. AMCs, including Clear Capital and Core Valuation, provide no benefit to borrowers. The only benefit AMCs provide is to the lender, to protect the lender from allegations that it violated laws requiring independence from the appraiser. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required lenders to be independent from appraisers. AMCs had existed before the 2008 financial crash, but many more sprouted up to satisfy the lenders’ desire to protect themselves from liability. AMCs offer a sweet deal for lenders: lenders receive liability protection and do nothing to select the appraiser, and the borrower picks up the cost. No law requires lenders to use AMCs to remain independent, yet many lenders have done so to take advantage of the sweetheart deal that AMCs offer them.

 

[Mejappz]

28. What services AMCs provide is obscure, to say the least. It is the appraisers—not AMCs or any of their employees—who contact borrowers, schedule appraisals, conduct appraisals, and prepare appraisal reports. The appraiser’s work can take significant time and includes traveling to the property to examine it, conducting market research on comparable properties, and then preparing a final appraisal report. The AMC receives the appraisal report and forwards it to the lender, but beyond that it is unclear what, if any, role AMCs have in supporting the work to create the appraisal report.

 

[Mejappz]

29. Even though AMCs provide no benefit to borrowers and have no apparent role in the actual appraisal services, Rocket Mortgage allows AMCs, including Clear Capital and Core Valuation Management, to enrich themselves by obtaining inflated fees that far exceed the actual appraisal cost. Rocket Mortgage sets the “appraisal fee,” charges the appraisal fee at closing, and then passes along the appraisal fees to the AMC. The AMC, not the appraiser, is the one who receives the appraisal fee charged to the borrower. The AMC pays the appraiser, but the AMC charges far more than what it pays the appraiser, thus retaining a disproportionate amount of the appraisal fee.

 

[Mejappz]

56. While the exact number of Class Members is unknown at this time, Plaintiff submits that based upon information and belief, there are at least hundreds of individuals throughout the State of California who are potential Class Members in this action. Individual joinder of these Class Members is impracticable.

 

[Mejappz]

58. There are common questions of law and/or fact shared by Plaintiff and each member of the Class. These common questions of law and/or fact include the following: a. Whether Defendants engaged in unlawful, unfair, and fraudulent business acts or practices in violation of California Business & Professions Code §§ 17200 et seq.; b. Whether Defendants engaged in unlawful practices in violation of California Civil Code § 1770; c. Whether Defendants’ conduct caused injury to Plaintiff and Class Members; d. Whether Plaintiff and Class Members sustained damages and, if so, the appropriate measure of damages;

 

[Fernando]

Can't imagine how the loan borrower is damaged. Appraisers were not supposed to discuss appraisal fees to the owner.

 

[Trihard]

They will settle and the rip offs from the AMC will continue.