When Customary Fees Become Unreasonable

[Eli]

It ain't right because we have different licenses. But, the stuff has already hit the fan. Within 3 years, there will be some more major power shifts and new laws to protect the consumer and public more from antitrust legislation violations.

The state of LA may be leading the way.

 

[Eli]

Now would be a good time for diver mike and others to get in on the new laws coming. The old ones are in place. Let's move on.

 

[J Grant]

The real abuse as far as $ occurs in the blended fee provistion of the HUD, where it specifies teh contributory value of the secondary fee ( such as appraisal management) should be proportionate to the value of the primary fee ( appraisal). So if an ordering division of lender or AMC keeps $200 for management, and pays an appraiser $250, and the bank keeps $50 for overage, and consumer was charged $500, were the added on secondary fees proportionate in value to the primary service ( appraisal)? How hard is that to figure out...an appraisal is needed to close, not a managed appraisal.

If a third party spends one hour of time managing an appraisal (ordering it, doing a QC review, uploading it to client, payroll etc), and their hour of time used mainly low skilled people (staff, phone clerks etc), and the appraisal took 6 hours of time using a higher skill set with full liability, is the amount contributed by each party distributed in the fees according to value of the services?
That would be an issue worth exploring and most appraisers are too exhausted fighting for a mere $25 increase to realize that the fee distrubion on the HUD is where the problem lies.

This is why AMC;s or lender divisions call appraisers thier "partners" in every correspondance...to imply partnerhsip and parity of value of service, to pave the way for them being able to claim their contribuory value in the blended apprarisal fee on the HUD was equivalent to the primary appraisal service.

Put a cap on the amount they can charge as the secondary service on blended fee imo would be a cleaner way to address the issue .

 

[bnmappraisal]

I think full disclosure and a breakout of fees would be fine.
But what exactly does it accomplish (I'm not being sarcastic)?

What is the outcome (other than transparency and disclosure which is a good thing) that will be achieved?

It accomplishes nothing as the general public really has no idea what we do or the AMC does. For all they know the work of the AMC is a lot more than what we do.

I think my answer pertains to both of your posts.

Since I do strictly RES, I run into this often. I honestly think it's misleading to the borrower for them to think the fee they pay for the appraisal (i.e. $500) all goes to the appraiser! We're supposed to NOT be misleading in our reports, but I also think this pertains to the fee as well.

When they get mad about a value "killing the deal" they think "That SOB got $500 and ..." It shouldn't matter what the fee is, but still. I think if they knew that the fee they pay is not what the appraiser is getting paid, I think would keep transparency in the whole process. And, maybe, give the borrower someone else to be mad at; namely the AMC, since they would know some of their hard earned money went to someone else too.

When I tell homeowner's that the fee they paid for the appraisal does not all go to me, they are usually shocked. I tell them I am being paid my fee, but many do voice the fact that they do not think that is fair. I think more homeowner's would have similar feelings if they knew this. I also think more would understand/appreciate the process a little better, which already is typically confusing to many.

 

[J Grant]

good point about it being misleading, and why is the transparency disclose at end of process for buyer ( in the appraisal , if it is mandated in certain states) and not disclosed up front at application time when borrower pays?

What teh breakdown of disclosure will accomplish is the amount each party gets, which brings us back to the HUD statement and contributory value language in the HUD about how the contributory value of the added fee ( appraisl management ) has to be proportionate to its contributory value to the primary service ( appraisal)

Of more concern to the public trust is beyond what borrower pays, is how there is an incentive to choose appriser by fee in order to maximize amount that does not go to appraiser to provide profit for others. The public trust references the secondary market and by extension tax payers who are being misled about how and why appraisers are selected, and may be getting less reliable appraisals due to that .

Does anyone have that verbiage from a HUD statement or handbook...sorry I am behind on jobs and have no time to search the internet to find it.

 

[Meandering]

good point about it being misleading, and why is the transparency disclose at end of process for buyer ( in the appraisal , if it is mandated in certain states) and not disclosed up front at application time when borrower pays?

What teh breakdown of disclosure will accomplish is the amount each party gets, which brings us back to the HUD statement and contributory value language in the HUD about how the contributory value of the added fee ( appraisl management ) has to be proportionate to its contributory value to the primary service ( appraisal)

Of more concern to the public trust is beyond what borrower pays, is how there is an incentive to choose appriser by fee in order to maximize amount that does not go to appraiser to provide profit for others. The public trust references the secondary market and by extension tax payers who are being misled about how and why appraisers are selected, and may be getting less reliable appraisals due to that .

Does anyone have that verbiage from a HUD statement or handbook...sorry I am behind on jobs and have no time to search the internet to find it.

Thank you J,

I'm going to paraphrase this in a letter I am writing.

Great insight.
.

 

[J Grant]

M, thank you for your efforts.

Are you able to find that section of the HUD I am referring to to be posted here? if not that's okay takes time to dig all up

 

[Meandering]

Not sure exactly what you are needing but you should see it from here:
http://www.consumerfinance.gov/regulatory-implementation/tila-respa/

 

[J Grant]

http://portal.HUD.gov/hudportal/HUD?src=/program_offices/housing/ramh/res/sc3secta

 any management fees charged by an AMC or other third party must be for actual services related to ordering, processing or reviewing of appraisals performed for FHA financing, and  AMC and other third party fees must not exceed what is customary and reasonable for such services provided in the market area of the property being appraised.

I did find this doing a quick search a FHA HUD document, it was not exactly what I was looking for but it is something....if management fees must be per above for actual services, how can we know what they are without a breakdown of where the money goes?

If the actual service of reviewing is an automated checklist or cheap outsourced QC review that costs $25, and it costs another $25 to order remotely over a web and deliver it, add on another $25 for bookeeping /payroll, what other actual services were provided fro frm an extra $125 go if the AMC fee is $200? (as an example)

 

[Meandering]

AMC fees must be C&R and since they do NO additional work between an appraisal for a property in a subdivision, ocean front, or in the slums, they should have one set fee, and it doesn't matter if you take $300 for the report or I take $200, there is no additional work for them.

Time spent per report??? maybe a 1/2 hour. probably worth only $30 to $60 an hour to cover any employee expenses and profits. What's the salary at an AMC for QC? $7.25 to $13.00 an hour?