This is white washing it by using neutral words like "efficiency."
Taking a big portion of an appraisal fee as the way an AMC gets compensated, with appraisers having to "kick back" as much as possible by lowering their fee, is profiteering, not efficiency.
I agree the AMCs provide coverage and convenience. In that sense, it might be efficiency. I have no problem with a lender using an AMC. My issue is the lender should pay a COST to use the AMC, the way a lender pays a cost for accounting service, IT service etc . The AMC instead makes its money from a kickback of the split of the appraisal fee. The AMCs are not selling their service - they are GIVING their service free free of cost to the lender, since the AMC gets compensated from a fee split from the vendor. THAT is what gives the AMC its huge market share.
An AMC might keep $200 as a split off a $500 appraisal fee passed through by the lender. It cost the lender nothing; the borrower cut a check for $500 to the lender. Do you really think if a lender had to pay a cost of $200 from their own funds for the AMC service, the lender would pay that much? I bet a lender might pay $75 for processing a regular appraisal order by an AMC, and if they had to pay more, they would form their own panel.
BTWI does not care if a lender passes on an AMC hard cost to a borrower. I just think it is dead wrong for the AMC compensation to come off the back of an appraiser from the split of an appraisal fee ( (govt HUD bundled fee allows it )
When I refer to the efficiency of the marketplace I am not referring to the AMC process itself. I am referring to the marketplace which brings buyers and sellers of goods or services together.
Appraisers selling their services to local MBs (or direct engagement lenders) by cold calling or faxing or individual contact is an
inefficient mode of marketing, but it does result in higher fees because those clients are dealing with the more limited number of competing appraisers - sometimes those clients "Close" their panels altogether and patronize appraisers based on the personal relationship.
Selling wholesale to an AMC is where we get into industrial scale vendor lists and where the economy of scale kicks in. An E-bay bid system "accept this assignment now to stop the bidding) would be even more efficient in terms of what it takes to bring the buyer and seller together. The hypersensitive marketplace will result on more volatility. Fees can increase of decrease on the daily business depending on how many assignments are coming in vs how many appraisers are competing. Mercury x 10.
The door-to-door vegetable seller (labor intensive, prices are higher)
Veggie booth at the local Farmer's Market
Wholesale to the local bodega
Wholesale to the distribution center
Wholesaler buys the entire crop prior to harvest
Investors trade veggie futures electronically on the stock exchange; they never even see an appraisal. That's what some of these suits have been trying to bring in.
Each of these are examples of less efficient to more efficient marketplaces. That's what I was referring to. I wasn't inferring some moral judgement on how the increased efficiency at the AMC/lender relationship operates. I'm not whitewashing or gaslighting anything. This is what they're doing, and their motivation for doing so is to squeeze the most blood they can out of the turnip; the appraiser is just one element of that turnip.
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