I think that you continue to ignore the effects of the lenders being able to pass fees directly to the consumer. I mean, you recognize how it affects AMCs, but you never comment on its effects on appraisal fees, likely because it has been, for the most part, a great benefit to the appraisers.
In the system we have worked under for many years, the lender has little motivation to care much about the appraisers' fees, because they will pass that cost directly to the borrower. Hence, a lender does not really care if the appraisal fee is $400, $450, $500 or whatever, because the lender just collects that directly from the borrower. That is why there is not as much fee shopping with direct engagement. People tend to care less about costs that are born by others. Anyone who has grown kids has seen this - they tend to be far more attentive to food costs after they move out of the house and pay them themselves.
You say you want a "free market" but do you really? What do you think would happen to appraisal fees if the lender was not allowed to "direct bill" the appraisal cost to the borrower and had to pay the appraisal fee out of their own (the lender's) operating budget (as would be the case in a free market)?
if you read my posts, I am NOT asking that lenders pay for the appraisal instead of borrowers!
I am askign that the lender pay a cost charge for the AMC service and if the lender can or wants to, the lender can pass that cost charge on to the borrower. That would put the AMC out of the fee split of the appraisal fee compensation model.
It would be free market competition for the AMC, because the lender can choose any AMC they want.
There is no free market competition in lender work with regard to the lender's "direct bill" of the appraisal cost to the borrower, because the borrower should then, in kind, be able to choose any appraiser they want.
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Which I am not advocating for either. I never advocate for the borrower to have the right to choose the appraiser.
If the lender had to pay for the appraisal as a hard cost and not recoup it from the borrower, lenders would try to pay less for appraisals ( if they could), or would simply increase the fee or loan points to borrowers to make up the difference.
If it were that the lender pays for the apprasial and can not recoup it from the borrower, and the lender pay for AMC service and can not recoup it from the borrower, the lenders would drop using AMC's in a heartbeat, or pay at most $25-50 a file ( as long as appraisals are required or investors in loans demand them ). But if some weird law passes making that the case, then why would loan points and other lender fees not face the same condition? In which case loan points would go from $5000 (for example ) to $500 if the lender had to get it from the borrower as a cost and not roll the points into the loan.
Making the what-if examples the topic of conversation, while interesting, does not address the current problem as it exists with AMC usorius fee splits and huge market share advantage of their service, at the same time not disclosed to borrowers upfront at the loan application, and getting covered by borrowers as a service that benefits the lender.
