When Customary Fees Become Unreasonable

[Meandering]

The LAW says we are to be compensated at a "customary & reasonable" rate.

Yes it does, but the law doesn't specify what C & R is. Why is that? The writers of DF don't give two poops about appraisers. They wanted to create a massive new bureaucratic agency that had no oversight to regulate the banks and that's exactly what happened. They left thousands of pages of regulation to be written at a later date, including what C & R is. Why did they do that? Because, even the writers of DF knew they couldn't possibly determine what a C & R fee is for all the different real estate markets, all the different types of appraisals, all the different types of businesses that provide appraisal services...etc.

Actually,
NO!
Let's not rewrite history to support our own opinions. The facts are laid out in all the documentation.

At the time the Dodd Frank was written, C&R was defined/had been defined by HUD, as what the borrower pays. You can find that in the mortgagee letter 97-? (97-28 comes to mind, or 47 but you'd have to check them)

With the HVCC, the appraisal fee was dictated by the lenders and the AMC had to split that with appraisers. Because by then the appraisal fee was considered to be a Third Party Fee that could not be more than customary & resonable

The purpose of including the C&R in the Dodd Frank, was to get the AMCs out of the appraiser's pockets, and NOT to fee split.

The lending lobby suddenly decided that "what the buyer pays" was not sufficient for them to profit from and that's why they insisted on the inclusion of the Fed Board's interpretation of what C&R should be, and is how we wound up with the mandate for the IFR. The writters of Dodd Frank recognized that the banks had/have a stake in making profit in this area, so included that no matter how C&R was interpreted by the IFR, what AMCs pay could not be included in the interpretation. That was good, because as you see in the IFR it presents some fuzzy language that has been used all along as Presumption 1, recent rates. However, the IFR is an interpretation of the law, and can not blantanly violate the law, which says what an AMC pays can not be used in establishing C&R.

But the closet tough guys, just went along for the ride, propagandized by the supposed "outrage" over recent rates, and everyone just ignored the law until the CFPB came on line, then mysteriously AMCs raised what they paid appraisers from the dispicable HVCC by $50 or $100 per report, and that quelled any fear the lemmings would rise up looking for that back money.

Now with the states coming online to enforce the law, the AMCs are nervous, and many may of raised what they pay appraisers another $25 or $50 per report to quell the lemmings, but then Virginia fired this first shot heard round the world. We can see this placating of appraisers through small fee increases become demarcated along the lines of AMC headquater domicilies, as those that are USA indigineous raised some fees to appraisers, or allowed for some more extended "negoitation" dog and pony show over fees, while USA foreign corporations are holding fast and not raising fees or renegoitating fees, want to guess why? Do you want to consider that a state law can not trump a federal law, and their are federal laws in place for interenational trade? Has anyone not an AMC or bank considered that?

Anyway, don't rewrite history, because none of this requires an opinoin. It is all black and white within the laws, it is not a choice to support or not support because laws are required to be followed. Your only choice is to report violations of the law, or not, but if you chose to not report, remember that C&R is required for GSE work, by law, without regard to wether or not you agree, and in those states that have adopted USPAP into law, your competency rule is then part of state law that says:

3. recognition of, and compliance with, laws and regulations that apply to the appraiser or to the
assignment.

If you know of appraisers that accept less than C&R they are not in compliance with the law applicable to the assignment that requires C&R be paid to them, at a minimum.

If you don't know how C&R is determined, you can, at a minimum, default to the VA schedule.

.

 

[Terrel L. Shields]

Its a sophist argument. Dodd Frank ALREADY set a requirement for "C&R".

Meaningless gesture since the AMCs set their own C & R and no method for calculating same exists. I think as numbers dwindle that the whip hand may change and if history is a guide all they have to do to keep appraisal fees down is to offer volume in exchange. It worked pre-crisis didn't it? When appraisers were in high demand promises of volume meant thousands of appraisers were working for less than the fees that had been established in the late 90s.

That makes no sense because the government is insuring deposits and long term mortgages. They can't freaking get out of it. I feel sorry for you.

The government has no business being in the lending business, especially from the lender side of the equation. If they want to help stimulate the housing economy, then send a check every month to the people BUYING, not the people SELLING loans.

Yes, in reality, no free market exists.

True enough but transparency in all transactions would dampen the impact of government intervention. The FED's artificially low interest rates are killed the retired and savers while propping up banks with zillion dollar CEOs.

Yes it does, but the law doesn't specify what C & R is. Why is that? The writers of DF don't give two poops about appraisers.

An unfortunate truism.

The pendulum is beginning to swing. However, a price floor (minimum fee) is not the answer. The price floor will become the price ceiling.

BINGO. WE HAVE A WINNER. Look at oil prices when Nixon imposed NEW OIL and OLD OIL price controls. What happened. "OLD" oil disappeared and production was shut in. And the companies simply re-drilled next to the "OLD" oilwell. Instant "NEW" oil. The companies went on to sell this at higher prices. OPEC in the mean time simply raised their prices and the regulated price of "NEW" oil rose accordingly. Despite Ted Kennedy rising on the Senate floor and railing at the President that we would see $80 a bbl oil, Ronald Reagan dumped the regulated price of oil and what happened? Within weeks oil prices peaked and fell to about $25 a bbl. from the "New oil" price of $40.

A national "floor" will become the new ceiling... no doubt.

 

[Eli]

I agree totally with Marion. Without the government, long term residential mortgage appraisers have about as much chance as I would with a hungry wolf and no weapons, or about as much chance as a snowball's chance in Hell.

 

[Eli]

Many have been brainwashed. There is no demand for what many of you are selling, because many banks don't want what you are selling. The government is who wants what you are selling, because the govt knows it is best for the public, and the government is insuring the banks and the gse's. DUH. Get your heads out of your tales. I am sick of some of ya'll.

 

[Meandering]

BINGO. WE HAVE A WINNER. A national "floor" will become the new ceiling... no doubt.

You are kidding right?


The ceiling is ALREADY SET, by what the borrower pays. What the borrower PAYS is dictated by the lender who is COMPETING with other lenders based on LOWER closing costs, which, include appraisal fees.

 

[hastalavista]

Many have been brainwashed... DUH. Get your heads out of your tales. I am sick of some of ya'll.

Give me a break.

 

[J Grant]

Dredging up the oil crisis from the 80's to support an unsubstantiated statement " the floor will become the new ceiling"...like they have anything in common (not)

In fear that a minimum which is better than what exists now might somehow become a "ceiling" , certain appraisers would rather work for under $300 for the next decade, waiting for that magical day when "supply and demand", or "the market" evens things out. They'd rather forego a few hundred k in income then accept a higher minimum then clients conspiring to drive fees down are paying now?

A minimum tends to lift the ceiling and lift other fees along with it. Appraisers are free to turn down lender work if they want, nobody is forcing a minimum fee on anyone.

If an AMC or lender division has $500 from a borrower paid fee to work with, and their goal is to retain as much profit from that fee as possible, they will shop work out to find $300 appraisers, for example, so that they can keep the $200 in profit ..even though they have expenses and deserve a profit for management, is the one hour they might spend on managing/processing an appraisal worth $200 an hour, vs the appraiser who spends 6 hours on the appraisal for a fee of $300 and earns $50 an hour?

If appraisers could organize to hire the right legal action around contributory values of secondary fee and primary fee ( primary being the appraisal) on the HUD statement, that might clear things up. That, or impose a national minimum modeled after VA, whatever overage a lender wants to pay an AMC they can do so.

If an AMC can convince a lender their service is worth $600 a report, go for it. But now, the only way AMC's (or lender owned division) can make as high an hourly rate as they do is to skim it out of borrower paid amount, leaving less for the appraiser.

 

[bnmappraisal]

If an AMC or lender division has $500 from a borrower paid fee to work with, and their goal is to retain as much profit from that fee as possible, they will shop work out to find $300 appraisers, for example, so that they can keep the $200 in profit ..even though they have expenses and deserve a profit for management, is the one hour they might spend on managing/processing an appraisal worth $200 an hour, vs the appraiser who spends 6 hours on the appraisal for a fee of $300 and earns $50 an hour?

JG, this isn't directed at you personally at all... I just think you brought up something that I wanted to address...

I am not a big fan of AMC's - hence why, as someone posted one time in a thread back a few months ago (and I wish I could remember who it was), that I don't capitalize "AMC" anymore - but I think we sometimes forget that they are a business as well. When we hear/see that they are making i.e. $200 off appraiser's from a $500 fee, I think we forget the business end of it. As we know, when we make our fee (be it $300, $350, $500, whatever!) we don't actually make that in our pockets. We have to pay taxes, insurance, cars, paper, etc.

AMC's typically have WAY more overhead than we do, including employees, 401k's, benefits, office space, etc. As I said, I'm not trying to advocate for them by any means whatsoever. And I think it's disgusting that the majority of them skim it off of us appraisers instead of doing the cost plus model. But as many have pointed out, and I agree with, most lenders don't want to add to their already "high" appraisal fee to pay the AMC's. I believe the lenders feel "here's what we'll pay for an appraisal. you guys figure out who takes what cut" (meaning between the AMC & appraiser)

 

[J Grant]

AMC's have far more overhead than an individual appraiser, but its spread among many orders. I do not see AMC's as the enemy, I work for some and admire a few that are well run and some are run better, and pay better, than cheap lender panels which btw model themselves now after the worst of the AMC's, keeping appraiser generated profit in house.

The problem is the system, which as you says gets one lump fee from the borrower, then leaves it up to a lender or AMC to divide it up. Under that system, the less the appraiser gets, the more others get to keep, creating a strong incentive to drive fees down which did not exist before.

Appraiser fees have taken huge hits under this system and a minimum, or VA type panel arrangement is a means to redress it. AMC's deserve a profit for the service they provide, but the lender should pay for that service. Let AMC's charge for their service separate from our fees, whatever $ they can command doing that.

Right now appraisers are subsidizing free AMC service to lenders...the AMC does not charge anything to their customer ( we subsidize the "free" service via fee splits.) That is contrary to how virtually every other business operates and this unique way of doing business puts appraisers into a disadvantageous position very few other professions face.

 

[Terrel L. Shields]

Dredging up the oil crisis from the 80's to support an unsubstantiated statement " the floor will become the new ceiling"...like they have anything in common (not)

They have a lot in common. When Nixon took the US out of the Bretton Woods agreement and we went off the gold standard, the result was that Arab oil denominated in dollars became cheapened. $2 oil - already low by benchmarks of the 1950s and 60s lost even more buying power. The Yon Kippur war was the excuse that triggered the oil embargo and the result in the US was raging inflation. 18% interest rates on homes. I know. I had to sue a guy when he bought a house at 18% only to see his condo not sell because of the interest rate hike. Suddenly he was underwater and could not pay me what he owed me. He ended up losing both plus his wife and died a few years ago in Denver as a goldsmith in a jewelry store.

Anytime the government starts monkeying with the economy or setting prices and wages (like Nixon did) then market forces are distorted. Gold and oil created the inflation in the 1970s. It was only tamped down by Volcker but that left the S & Ls - whose interest rates were regulated - basically unable to make a profit. That led to the S & L crisis and FIRREA which created our little fiefdom - which turned out guess who became the peasants?

If we have real serious C & R and someone sets these "minimum" prices, guess what will be offered for the next 20 years...that one price. To get more you will have to do what you have to do now. Claw and beg and plead and that differs from the current system how?

Give me a break.

agreed

because the govt knows it is best for the public,

Put a sock in it.