When Customary Fees Become Unreasonable

[DiverMike]

Banks contract with AMC's to perform a service to manage the process of obtaining an appraisal so the lender can make a lending decision. The lender feels that service is worth the fee they pay. Appraisers are paid out of the fee paid to the AMC. There is nothing illegal about that business model; it happens all the time with general contractors and sub-contractors. The lender saves money by not having to staff a department dedicated to handling the loan process. Since it costs the bank less to contract out to AMC, the fee paid to the AMC would be considered reasonable. The service provided by the AMC would be considered necessary because if the AMC didn't do it, the lender would have to. It is a function that must be performed and that function has a cost. Since the lender is paying less than it would cost them to perform the same function, the fee to the AMC would be considered reasonable. And since the appraisers have a choice to accept, reject or counter the fee offered by the AMC, the AMC is doing nothing wrong by trying to maximize profits...it's what businesses do. These are the arguments that would be presented to a governing authority, and I would bet they would stand up without question. Although, we won't know until the issue is brought before said authority if ever.

" Since it costs the bank less to contract out to AMC, the fee paid to the AMC would be considered reasonable"

Nothing in Dodd Frank says the fee is to be considered only reasonable from the lenders perspective. Since the only choice of the appraiser is to accept or decline a dictated fee over which they have had no assignment specific input or negotiation on, it is hardly "reasonable" by any definition. With TRID, where the quote is made by the loan officer looking at a chart of what the bank unilaterally "pays" for BOTH AMC and appraisal fee without regard to the complexity of the SPECIFIC assignment; NOTHING is reasonable. That it's happening all throughout America and apparently in England as well, strongly suggests that appraisal fee skimming and price fixing is the universal banking model of the current decade. Respectfully, I think we are adequately prepared to address such reasonable questions and postulation's from regulators and legislators alike.

Its a fun (& highly informative for me) debate, but I also have a purpose. Would those in agreement kindly either email me at Mike@mfford.com or through janBellas@appraisersguild.org so that we can start documenting support? Those in oppositions views are also welcome. You point out many valid concerns. This is DRAFT proposal and subject to review and revision. Don't be surprised or angry if Jan sends you and invitation to join, & an invoice in case you want to.

 

[DiverMike]

Banks contract with AMC's to perform a service to manage the process of obtaining an appraisal so the lender can make a lending decision. The lender feels that service is worth the fee they pay. Appraisers are paid out of the fee paid to the AMC. There is nothing illegal about that business model; it happens all the time with general contractors and sub-contractors. The lender saves money by not having to staff a department dedicated to handling the loan process. Since it costs the bank less to contract out to AMC, the fee paid to the AMC would be considered reasonable. The service provided by the AMC would be considered necessary because if the AMC didn't do it, the lender would have to. It is a function that must be performed and that function has a cost. Since the lender is paying less than it would cost them to perform the same function, the fee to the AMC would be considered reasonable. And since the appraisers have a choice to accept, reject or counter the fee offered by the AMC, the AMC is doing nothing wrong by trying to maximize profits...it's what businesses do. These are the arguments that would be presented to a governing authority, and I would bet they would stand up without question. Although, we won't know until the issue is brought before said authority if ever.

" Since it costs the bank less to contract out to AMC, the fee paid to the AMC would be considered reasonable"

Nothing in Dodd Frank says the fee is to be considered only reasonable from the lenders perspective. Since the only choice of the appraiser is to accept or decline a dictated fee over which they have had no assignment specific input or negotiation on, it is hardly "reasonable" by any definition. With TRID, where the quote is made by the loan officer looking at a chart of what the bank unilaterally "pays" for BOTH AMC and appraisal fee without regard to the complexity of the SPECIFIC assignment; NOTHING is reasonable. That it's happening all throughout America and apparently in England as well, strongly suggests that appraisal fee skimming and price fixing is the universal banking model of the current decade. Respectfully, I think we are adequately prepared to address such reasonable questions and postulation's from regulators and legislators alike.

Its a fun (& highly informative for me) debate, but I also have a purpose. Would those in agreement kindly either email me at Mike@mfford.com or through janBellas@appraisersguild.org so that we can start documenting support? Those in oppositions views are also welcome. You point out many valid concerns. This is DRAFT proposal and subject to review and revision. Don't be surprised or angry if Jan sends you and invitation to join, & an invoice in case you want to.

For the same reasons they did not go after them in
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015?

Because they know which side of their bread is buttered, and the retirement plan that keeps on giving is the revolving door to the other side of the table, with, I might add, taking with them a nice government pension and benefits to boot.

.

Spartan, PCV Murcor is among other things one of the official FDIC portfolio review appraisers that go in when a ban is taken over. I assure you they turn over fraudulent and or deficient appraisals to authorities (I have no relationship with them anymore-used to do C&I work for them though when I first left the feds and was rebuilding my business). LOTS of people are getting prosecuted; losing licenses or being sued by bottom feeders. If you are talking about high level corporate officers at lenders, you have a point. DoJ prefers heavy fines in lieu of criminal punishment. Look at BofA; coerced into "buying" countrywide, they then got hit with all the legal liabilities from LandSafe!

Terel-"savings' are almost NEVER passed on to the consumer. They are absorbed in 'junk fees' or as separate profit centers for the banks. They may have No ONE in their appraisal departments, but they STILL charge for appraisal review or processing. If the appraisal fee to borrower was $750; they got $250 of it; AMC go $500 and appraiser MAY have received $250. With clamping down on junk fees they have high incentive to skim as much as they can from combined "appraisal fee".

 

[Meandering]

Banks compete with each other and closing costs are lowered when the appraiser is paid less. Otherwise, the bank can take a toke off the fee themselves while pretending they have no control over the appraisal fee.

Ya know I loves ya BUT!

I have to call BS here.

Fees to borrowers are lower when AMCs accept less. Enter our buddy baby Brian.
AND,
Banks can take a toke for themselves. Really,

Title 12: Banks and Banking
PART 226—TRUTH IN LENDING (REGULATION Z)
Subpart A—General

§226.4 Finance charge.
(a) Definition. The finance charge is the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction.

(1) Charges by third parties. The finance charge includes fees and amounts charged by someone other than the creditor, unless otherwise excluded under this section, if the creditor:

(i) Requires the use of a third party as a condition of or an incident to the extension of credit, even if the consumer can choose the third party; or

(ii) Retains a portion of the third-party charge, to the extent of the portion retained.

(2) Special rule; closing agent charges. Fees charged by a third party that conducts the loan closing (such as a settlement agent, attorney, or escrow or title company) are finance charges only if the creditor—

(i) Requires the particular services for which the consumer is charged;

(ii) Requires the imposition of the charge; or

(iii) Retains a portion of the third-party charge, to the extent of the portion retained.

(b) Examples of finance charges. The finance charge includes the following types of charges, except for charges specifically excluded by paragraphs (c) through (e) of this section:

(1) Interest, time price differential, and any amount payable under an add-on or discount system of additional charges.

(2) Service, transaction, activity, and carrying charges, including any charge imposed on a checking or other transaction account to the extent that the charge exceeds the charge for a similar account without a credit feature.

(3) Points, loan fees, assumption fees, finder's fees, and similar charges.

(4) Appraisal, investigation, and credit report fees.

(c) Charges excluded from the finance charge. The following charges are not finance charges:

(iv) Property appraisal fees or fees for inspections to assess the value or condition of the property if the service is performed prior to closing, including fees related to pest-infestation or flood-hazard determinations.

http://www.ecfr.gov/cgi-bin/text-id...ede5e2c46&mc=true&node=se12.3.226_14&rgn=div8

Cats think shoeboxes are coffins...so? More laws does not equate to more enforcement.

RIGHT!
IT'S CLASS ACTION TIME!


.

 

[DiverMike]

Banks compete with each other and closing costs are lowered when the appraiser is paid less. Otherwise, the bank can take a toke off the fee themselves while pretending they have no control over the appraisal fee.
Cats think shoeboxes are coffins...so? More laws does not equate to more enforcement.

Mike - you've sure stirred some **** by starting this thread

The passion of the views expressed tells me we are on the right track. C&R IS an important issue among appraisers. The disputes only arise on whether anything SHOULD be done; and if so, what. An oddity in our profession, We LOVE to debate. It's central to who we are. Its also what keeps us from getting a lot more done. At some point we need to talk less, and DO more.

 

[DiverMike]

Ya know I loves ya BUT!

I have to call BS here.

Fees to borrowers are lower when AMCs accept less. Enter our buddy baby Brian.
AND,
Banks can take a toke for themselves. Really,

Title 12: Banks and Banking
PART 226—TRUTH IN LENDING (REGULATION Z)
Subpart A—General

§226.4 Finance charge.
(a) Definition. The finance charge is the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction.

(1) Charges by third parties. The finance charge includes fees and amounts charged by someone other than the creditor, unless otherwise excluded under this section, if the creditor:

(i) Requires the use of a third party as a condition of or an incident to the extension of credit, even if the consumer can choose the third party; or

(ii) Retains a portion of the third-party charge, to the extent of the portion retained.

(2) Special rule; closing agent charges. Fees charged by a third party that conducts the loan closing (such as a settlement agent, attorney, or escrow or title company) are finance charges only if the creditor—

(i) Requires the particular services for which the consumer is charged;

(ii) Requires the imposition of the charge; or

(iii) Retains a portion of the third-party charge, to the extent of the portion retained.

(b) Examples of finance charges. The finance charge includes the following types of charges, except for charges specifically excluded by paragraphs (c) through (e) of this section:

(1) Interest, time price differential, and any amount payable under an add-on or discount system of additional charges.

(2) Service, transaction, activity, and carrying charges, including any charge imposed on a checking or other transaction account to the extent that the charge exceeds the charge for a similar account without a credit feature.

(3) Points, loan fees, assumption fees, finder's fees, and similar charges.

(4) Appraisal, investigation, and credit report fees.

(c) Charges excluded from the finance charge. The following charges are not finance charges:

(iv) Property appraisal fees or fees for inspections to assess the value or condition of the property if the service is performed prior to closing, including fees related to pest-infestation or flood-hazard determinations.

http://www.ecfr.gov/cgi-bin/text-id...ede5e2c46&mc=true&node=se12.3.226_14&rgn=div8



RIGHT!
IT'S CLASS ACTION TIME!


.

Its been considered. These are the folks that just won the $36 million settlement from B of A for former LandSafe appraisers. They are "interested", but if any here work for Appraisal reconciliation firms or national appraisal review factories with required hours or production volume YOU would get them down right excited Even if you are a 1099 'contractor'. Particularly some of the bigger national firms that do this.

Eduard Meleshinsky

Associate Attorney

Bryan Schwartz Law

1330 Broadway, Suite 1630

Oakland, California 94612

Tel. (510) 444-9300

Fax (510) 444-9301

Email: eduard@bryanschwartzlaw.com

Website: www.BryanSchwartzLaw.com

 

[bnmappraisal]

While I agree with the assessments that most borrowers dont' care /just want the loan to close , THAT is very reason is why USPAP references the public trust. These buyers may not know what is good for them as far as appraisals, but the lender, regulagtors, secondary market and appraisers themselves are supposed to know and conduct themselves in such a way that protects the public trust.

The public trust is a general concept, but also includes individuals for each appraisal...the buyer, (who may be clueless or a jerk but still, their financial future can be impacted), an investor who will buy the loan, or the secondary market which insures the loan which means by extension the US taxpayer have a stake in the outcome.

With so much on the line and so much at stake, it is simply incredible that appraiser selection ,after all the regulations and losses from the housing market collapse, ends up being farmed out for profit and bid out flea market style, with selection often coming down to who will charge $20 less.

If it were fiction, nobody would believe it. An entire tome of regulations designed to prevent a repeat of the staggering losses from the housing market collapse , and appraisal ordering has become a flea market with the selection of an appraiser decided by telemarketers hired to call all day looking for low bids. Truly amazing.

Guess who is really choosing the appraiser and by extension charged with the public trust? A TELEMARKETER. A min wage person hired to call all day for the lowest bidder . When they find the low bidder, that phone person chooses the low bidder and awards the order. Who in their right mind could possibly think that leaving the selection up to telemarketers is a sound way to select appraisers ?

EXCELLENT post JG and so on target! Sad, but true.

This really is the majority of AMC protocol, in my opinion. There are some good ones out there who actually have appraiser's looking over our reports, but there are MANY out there who literally DO have a person looking over the report and/or assigning the order to us who LITERALLY the day/week before was telemarketing or making coffees or (fill in the blank!) I LITERALLY was the first (when I went to work for an AMC back in Pgh about 15 yrs ago, I literally was coming from a telemarketing job!) The friends I made at that job who are STILL in the AMC jobs, tell me not much has changed!

 

[OSU Beavers]

All of this could have been solved by splitting the "Appraisal Fee" line on the HUD-1 form into AMC and what was actually paid to the appraiser. Then there are the ****ers who charge an upload fee to YOUR credit card.

 

[Meandering]

Fellow appraisers, I've been working on a proposal for recommended national MINIMUM appraisal fees where GSEs are involved. The first draft can be read at the following link, OR at appraisersguild.org

please visit http://mfford.com/html/c___r_fees.htm

Apologies for using my personal site but logistical and time constraints made it necessary.

It is a draft proposal for minimum national appraiser fees. I appreciate some believe no one other than themselves should set fees, and I concur. Except, in the real world of today where someone (lenders and AMCs) are ALREADY SETTING your fees. If not directly, then through ruinous less than customary OR reasonable fee competition. If a consensus can be developed the AGA will be proposing / lobbying members of Congress and or regulatory agency leaders for adoption of this schedule as a default where disputes arise; OR where individual states have not yet established clear cut, non ambiguous definitive methods for determining "customary & reasonable appraiser fees."

Im interested in your meaningful, constructive feedback as well as any comment & discussion here.

For those that insist ONLY regional fees are practical, this same system works for the lowest to highest regions of America. Subtract 13% for low cost areas; add up to 9%+- for highest cost areas.

Operating premises were:

1. AMCs are here to stay. Liked or hated, they are part of the chain now.

2. LENDERS want AMCs to offer one size fits all pricing. This MAY come close to doing so barring complex assignments. Even there, an inferred hourly equivalent is suggested.

3. If WE don't set "reasonable" minimums for ourselves, then others will do it for us (or to us). Presently the total fees offered to AMCs by lenders are below the MINIMUM recommended national fee.

4. Framework allows for and includes inducements for trainees or less than certified appraisers-who have been largely excluded or ignored by AMCs in recent years.

In addition to posting here, PLEASE also email comments to JanBellas@appraisersguild.org or to myself at mike@mfford.com . Feel free to call if any questions (714) 366 9404.

We are going to start reaching out to state coalitions and other appraiser peers groups. We hope to incorporate helpful comments or views in that effort. In the meantime our parent union is already being contacted to see how we can best proceed.

Thank you for taking the time to read and respond. Mike Ford, AGA; OPEIU/AFL-CIO

DiverMike,

I think that your letter, is totally ignoring, why all such similar appraiser orientated lobbying efforts have failed at the CFPB.

If we ignore the entire scenario of;
Impacts to Borrower
Impacts to Lenders
Impacts to the Overall Economy
Existing laws including RESPA, TILA and FIRREA

Your letter will just come off as the whining of a special interest group, which is easily dismissed due to lack of political power, and lobbying efforts, greater than the forces this letter opposes.

A serious redirection of thought is needed before this letter is sent; least it wind up in the trash can with the similar attempts that have preceded it.

Please more deeply consider incorporating the impacts to the other interested parties, in the beginning of the letter as part of the purpose, before sending this one.

Thanks for your efforts and the efforts of your organization.

.

.

 

[J Grant]

Marion has a very good point. I also don't know if this goal is realistic ...a worthy goal but how will sending off a letter, no matter how well written, accomplish it?

Perhaps a more realistic goal would be to suggest a national minimum fee but that since getting that passed as legistlative action could be years in the making, that the CHFB use the minimum fee established by VA (original C &R), as the basis for auditing AMC's and lenders and suggest they adhere to it, since presently with no standard minimum as the guide there are unintended consequences putting sound appraisers selection and the public trust at jeopardy (explained below).

Such a letter, minus the proposal for a national minimal legislated fee, could then be sent to state boards, state attorney generals, the FDIC, etc.

Though I personally support the idea of a min fee legislated, you can see from the response you got here how polarizing that idea is. So if it is polarizing here among appraisers, that is a preview of the reception it will get in the outside agencies/ community.

I think rather than the tremendous uphill and probably unwinnable ideal of a legislated national fee, that all state boards, agencies, the FDIC , the CHFB get a letter, and then publish it on a website , to consider the VA fee that C and R was originally intended to be based on as a minimum in terms of enforcement and a standard minimum for C and R, since the C and R as is now is violating the statute and intent of the law.

And then explain how the current situation puts the public trust and secondary market in jeopardy..how appraiser selection has devolved into a telemarketer type operation with low paid staff dialing for low bids, and then using that as the decision to award work . (when the regs state fee is not supposed to be used as primary selector). Then explain how assigning by low bids means a large volume of work is farmed out to fee mill chains such as Forsythe and Metro West as well as the less competent or experienced may end up with a volume of work while more competent appraises are priced out , even though their serv ice is more than covered by what borrower pays. That the present fee structures means some of the more highly qualified are being forced out or abandoning res lender work.

Reinforce that when low fee bidders take on huge volume, it means they have little time to devote to each report, resulting in rushed work with lack of due diligence. Make sure readers understand this min fee is meant for what is considered non complex orders, the regular assignments that make up bulk of residential lending orders. And that it would be especially useful now that the TRID is in place.

 

[Eli]

Marion has a very good point. I also don't know if this goal is realistic ...a worthy goal but how will sending off a letter, no matter how well written, accomplish it?

Perhaps a more realistic goal would be to suggest a national minimum fee but that since getting that passed as legistlative action could be years in the making, that the CHFB use the minimum fee established by VA (original C &R), as the basis for auditing AMC's and lenders and suggest they adhere to it, since presently with no standard minimum as the guide there are unintended consequences putting sound appraisers selection and the public trust at jeopardy (explained below).

Such a letter, minus the proposal for a national minimal legislated fee, could then be sent to state boards, state attorney generals, the FDIC, etc.

Though I personally support the idea of a min fee legislated, you can see from the response you got here how polarizing that idea is. So if it is polarizing here among appraisers, that is a preview of the reception it will get in the outside agencies/ community.

I think rather than the tremendous uphill and probably unwinnable ideal of a legislated national fee, that all state boards, agencies, the FDIC , the CHFB get a letter, and then publish it on a website , to consider the VA fee that C and R was originally intended to be based on as a minimum in terms of enforcement and a standard minimum for C and R, since the C and R as is now is violating the statute and intent of the law.

And then explain how the current situation puts the public trust and secondary market in jeopardy..how appraiser selection has devolved into a telemarketer type operation with low paid staff dialing for low bids, and then using that as the decision to award work . (when the regs state fee is not supposed to be used as primary selector). Then explain how assigning by low bids means a large volume of work is farmed out to fee mill chains such as Forsythe and Metro West as well as the less competent or experienced may end up with a volume of work while more competent appraises are priced out , even though their serv ice is more than covered by what borrower pays. That the present fee structures means some of the more highly qualified are being forced out or abandoning res lender work.

Reinforce that when low fee bidders take on huge volume, it means they have little time to devote to each report, resulting in rushed work with lack of due diligence. Make sure readers understand this min fee is meant for what is considered non complex orders, the regular assignments that make up bulk of residential lending orders. And that it would be especially useful now that the TRID is in place.

Good points, and add that better oversight of "management" must be mandatory so that the breaking of laws and regs by "management" can be hindered substantially. And I agree with you that the "public" has to be the main focus on everything from fees and their disclosure to better oversight of management and the administration of their duties in accordance with laws and regs.