When Customary Fees Become Unreasonable

[DiverMike]

I will review the proposal this weekend...overall I am in favor, as it is minimum national fees for lender res work only...apparisers are free to set their own fees for all the other kinds of work out there. The only res lending appraisers being paid well on a consistent basis for the majority of assignments is the VA panel, because they do have set minimum fees.

I presume the idea is for minimum fees, and I presume they are not meant to apply to complex res work, commercial work or, non lender work .

You are 100% correct. Additionally, the proposal is intended to be a DEFAULT SFR (COULD include 2-4) proposal where the validity of "Institutional Studies" is at question. It would, or Could be a safe haven amount for legal defense as well. I think you will find once you've read the whole thing (can ignore most charts except last one-they are for reference IF desired), that there is even flexibility intended for those concerned about getting trainess back on board. My personal preference would be a geographic regional pricing guide, but I already know TRID and current bank to AMC fees would negate that. Ultimately the HIGHER-middle end of the minimum fees would have to charged if its applied nationally. A windfall for 33 states where federal locality pay is only 14%; parity for most of the others except New York City; San Jose, Hawaii and Alaska who get shorted by about 3% to 9%+-. SAME proposal can be analyzed state by state OR nationally. Only variance is in cost of living allowances from 14% to about 35%. This was calculated at 27.22% (Los Angeles-Riverside areas). No state has lower than a 14% on the federal system.

I postulate allowances for complex assignments, but the bottom line is ALL complex assignments should be individually quoted assignments. I'm just tired of seeing quotes for what should be $1,500 to $3,000 work, bid out at $525! ANYTHING requiring a certain license (certification level) as a LENDER requirement rather than an assignment requirement should be at LEAST at the fees I indicated-whether they are complex or not.

If we obtain consensus on minimum fair reasonable fees for "Non-complex, conforming loan limit FNMA transactions for non complex property ownership interest " appraisal assignments, I think we'd be doing GREAT! Toss in the FHAs at the higher indicated amounts, and Id consider it successful implementation of "reasonable" across ALL the relevant areas of concern. C&I was never considered an important part of this, though I postulated comparative hourly adjusted rates there too. Not perfect by any means-but better than status quo. BTW-thanks for taking the time to consider this.

 

[DiverMike]

I will review the proposal this weekend...overall I am in favor, as it is minimum national fees for lender res work only...apparisers are free to set their own fees for all the other kinds of work out there. The only res lending appraisers being paid well on a consistent basis for the majority of assignments is the VA panel, because they do have set minimum fees.

I presume the idea is for minimum fees, and I presume they are not meant to apply to complex res work, commercial work or, non lender work .

You are 100% correct. Additionally, the proposal is intended to be a DEFAULT SFR (COULD include 2-4) proposal where the validity of "Institutional Studies" is at question. It would, or Could be a safe haven amount for legal defense as well. I think you will find once you've read the whole thing (can ignore most charts except last one-they are for reference IF desired), that there is even flexibility intended for those concerned about getting trainess back on board. My personal preference would be a geographic regional pricing guide, but I already know TRID and current bank to AMC fees would negate that. Ultimately the HIGHER-middle end of the minimum fees would have to charged if its applied nationally. A windfall for 33 states where federal locality pay is only 14%; parity for most of the others except New York City; San Jose, Hawaii and Alaska who get shorted by about 3% to 9%+-. SAME proposal can be analyzed state by state OR nationally. Only variance is in cost of living allowances from 14% to about 35%. This was calculated at 27.22% (Los Angeles-Riverside areas). No state has lower than a 14% on the federal system.

I postulate allowances for complex assignments, but the bottom line is ALL complex assignments should be individually quoted assignments. I'm just tired of seeing quotes for what should be $1,500 to $3,000 work, bid out at $525! ANYTHING requiring a certain license (certification level) as a LENDER requirement rather than an assignment requirement should be at LEAST at the fees I indicated-whether they are complex or not.

If we obtain consensus on minimum fair reasonable fees for "Non-complex, conforming loan limit FNMA transactions for non complex property ownership interest " appraisal assignments, I think we'd be doing GREAT! Toss in the FHAs at the higher indicated amounts, and Id consider it successful implementation of "reasonable" across ALL the relevant areas of concern. C&I was never considered an important part of this, though I postulated comparative

I can appreciate the risk of being set-up (alla Donald Trump! ). I'm not trying to play "gotcha". If that is the case (Washington has set a minimum) that would be huge news. My specific interest would be to see how they set the rates. You've laid out your rationale in your first post; I was wondering how they came up with a figure if they've set a minimum.

hourly adjusted rates there too. Not perfect by any means-but better than status quo. BTW-thanks for taking the time to consider this.

Denis-likely by studies. While looking for Washington data, I found a pretty thorough Idaho study (over 100+ pages). Oddly enough it looks like respondents were 100%% lender staff with zero appraisers- Haven't studied whole thing yet. Email me at mike@mfford.com and I will send it to you. PLEASE don't use this system to email me. I don't know how to reply yet *g*

 

[Meandering]

Why is it so hard for people to understand the above?

Because it is incorrect.

Why did the clients suddenly offer lower fees post HVCC ( which according to your simplistic theory happened for no reason , it just happened because appraisers would accept it? Really? When fees paid by borrowers went up, clients pushed for lower payout to appraisers for THE FIRST TIME on a national scale in decades , for no reason at all? And appraisers accepted it, and it was appraiser acceptance of lower fees that led to lower fees? (

thank you J,

Appraiser accepted it because they had no choice.

HUD/FHA mortgagee Letter 2008-? (I'm thinking 48) said that the combination of the AMC and appraiser fee could not be MORE than the Customary and Reasonable Appraisal Fee, therefore the Fee Split was FORCED on appraisers by regulation.

It wasn't until after the Dodd Frank was signed into law that FHA rescinded that portion of the mortgage letter, but then they said that borrowers could not pay a management fee, and then did not enforce that, and then they rescinded that one and said the borrowers can pay a management fee.

Historically, prior to HVCC, clients had NO REASON to push for lower fees, because whatever the borrower paid for appraisal went to the appraiser. ( referencing res lender work, which is what this thread concerns)

Actually,
The AMCs that did exist prior to HVCC did pay the appraiser less than mortgage brokers, because the AMCs were still skimming fees then and mortgage brokers had no option to skim appraisal fees. Many appraisers were being paid at the door by the borrower directly.

Anyone who thinks this was just due to supply and demand or appraisers willingly en mass accepting low fees does not grasp that the driving factor behind lower fees which is the profit retention by third parties ( or profit flowing back to lender when they run their ordering division for benefit from fee splits)

Thank you J,

But unfortunately we won't change their minds, because they still believe they operate in a free market.


.

 

[DiverMike]

Because it is incorrect.



thank you J,

Appraiser accepted it because they had no choice.

HUD/FHA mortgagee Letter 2008-? (I'm thinking 48) said that the combination of the AMC and appraiser fee could not be MORE than the Customary and Reasonable Appraisal Fee, therefore the Fee Split was FORCED on appraisers by regulation.

It wasn't until after the Dodd Frank was signed into law that FHA rescinded that portion of the mortgage letter, but then they said that borrowers could not pay a management fee, and then did not enforce that, and then they rescinded that one and said the borrowers can pay a management fee.



Actually,
The AMCs that did exist prior to HVCC did pay the appraiser less than mortgage brokers, because the AMCs were still skimming fees then and mortgage brokers had no option to skim appraisal fees. Many appraisers were being paid at the door by the borrower directly.





Thank you J,

But unfortunately we won't change their minds, because they still believe they operate in a free market.


.

Actually so many of the posts are on the same page (sort of). The impact of AMCs pre HVCC was insignificant in the marketplace. LSI stopped being a serious player back in the early 1990's when they went from "reasonable-though slightly low" to ridiculous around 1993. Their original founders got mad and opened up a competing service called Appraisal Title Management (ATM) which started a price war between the two of them. Rels was never a serious player outside Wells Fargo once anyone checked with other appraisers that worked for them.

I got an email from a blog host/operator (NOT Wayne) a little while ago. She or He stated they used to get about $575 just outside Washington DC pre HVCC but almost immediately after that it was dropped down to $350...or don't work. I went through the same thing out in SoCal. My nothing special fee was $450. 25% of my SFR work though was from $1,000 to $3,000. HVCC all but eliminated the high end fees, and the low end was dominated by whatever Ocwen did. $350- then $325-then $300-then blast bid and anything from $200 to $275. I stopped doing work for them at $325; and went looking for a job with the feds.

Bottom line now- As lenders are (right now) asking for your TRID related "average" fee or in some cases "fixed fee" quotes for FNMA non complex, do you say $450 or do you say $585 to $685 and $767 for FHA? Make no mistake, whatever you say is what you are going to have to live with for the next five +- years. They are NOT going back to borrowers to ask for 'complex fee allowances' for minor or arguable issues. I'll "eat" the occasional "should have been $1,000" fee once in awhile if I am getting $685 the rest of the time. I Wont at $450. Guess they'll just cancel those on me and go on to the next appraiser if that happens.

I think one of the issues we also have to push for in the Minimum Fair /Reasonable Fee proposal is for appraisal orders to be identified as complex or non complex when ordered so we have a reasonable basis for arguing necessary complex fee increases when needed.

 

[DiverMike]

Because it is incorrect.



thank you J,

Appraiser accepted it because they had no choice.

HUD/FHA mortgagee Letter 2008-? (I'm thinking 48) said that the combination of the AMC and appraiser fee could not be MORE than the Customary and Reasonable Appraisal Fee, therefore the Fee Split was FORCED on appraisers by regulation.

It wasn't until after the Dodd Frank was signed into law that FHA rescinded that portion of the mortgage letter, but then they said that borrowers could not pay a management fee, and then did not enforce that, and then they rescinded that one and said the borrowers can pay a management fee.



Actually,
The AMCs that did exist prior to HVCC did pay the appraiser less than mortgage brokers, because the AMCs were still skimming fees then and mortgage brokers had no option to skim appraisal fees. Many appraisers were being paid at the door by the borrower directly.





Thank you J,

But unfortunately we won't change their minds, because they still believe they operate in a free market.


.

Actually so many of the posts are on the same page (sort of). The impact of AMCs pre HVCC was insignificant in the marketplace. LSI stopped being a serious player back in the early 1990's when they went from "reasonable-though slightly low" to ridiculous around 1993. Their original founders got mad and opened up a competing service called Appraisal Title Management (ATM) which started a price war between the two of them. Rels was never a serious player outside Wells Fargo once anyone checked with other appraisers that worked for them.

I got an email from a blog host/operator (NOT Wayne) a little while ago. She or He stated they used to get about $575 just outside Washington DC pre HVCC but almost immediately after that it was dropped down to $350...or don't work. I went through the same thing out in SoCal. My nothing special fee was $450. 25% of my SFR work though was from $1,000 to $3,000. HVCC all but eliminated the high end fees, and the low end was dominated by whatever Ocwen did. $350- then $325-then $300-then blast bid and anything from $200 to $275. I stopped doing work for them at $325; and went looking for a job with the feds.

Bottom line now- As lenders are (right now) asking for your TRID related "average" fee or in some cases "fixed fee" quotes for FNMA non complex, do you say $450 or do you say $585 to $685 and $767 for FHA? Make no mistake, whatever you say is what you are going to have to live with for the next five +- years. They are NOT going back to borrowers to ask for 'complex fee allowances' for minor or arguable issues. I'll "eat" the occasional "should have been $1,000" fee once in awhile if I am getting $685 the rest of the time. I Wont at $450. Guess they'll just cancel those on me and go on to the next appraiser if that happens.

I think one of the issues we also have to push for in the Minimum Fair /Reasonable Fee proposal is for appraisal orders to be identified as complex or non complex when ordered so we have a reasonable basis for arguing necessary complex fee increases when needed.

 

[SpartanAG]

I'm just tired of seeing quotes for what should be $1,500 to $3,000 work, bid out at $525! ANYTHING requiring a certain license (certification level) as a LENDER requirement rather than an assignment requirement should be at LEAST at the fees I indicated-whether they are complex or not.

I'm just tired of seeing quotes for what should be $1,500 to $3,000 work, bid out at $525!

The bidder has a right to bid whatever they want. The appraiser can either accept, reject or counter the bid. It is none of anyone else's business how other appraisers choose to run their business.

ANYTHING requiring a certain license (certification level) as a LENDER requirement rather than an assignment requirement should be at LEAST at the fees I indicated-whether they are complex or not.

What makes you more qualified than all the other appraisers out there when it comes to determining their fees? I would think each individual appraiser is in the best position to determine their own fees. I certainly don't want someone else dictating my fees.

The federal government has tried price-fixing numerous times in the past and it does not work. I encourage you to focus your time and energy on getting rid of some of this over-burdensome regulation and let the market work.

 

[SpartanAG]

I'll "eat" the occasional "should have been $1,000" fee once in awhile if I am getting $685 the rest of the time. I Wont at $450. Guess they'll just cancel those on me and go on to the next appraiser if that happens.

I'll "eat" the occasional "should have been $1,000" fee once in awhile if I am getting $685 the rest of the time.

I'm glad that we agree that setting a price floor will also set a price ceiling.

I Wont at $450. Guess they'll just cancel those on me and go on to the next appraiser if that happens.

I'm glad that we also agree that the market should be allowed to work without government price-fixing. You are free to choose to reject the $450 assignment. Now another appraiser with different business requirements has the opportunity to accept.

 

[J Grant]

I actually did some work for LSI pre HVCC, and if anyone wants to track the fee differences between when AMC's used to be service fulfillment on appraisal end to profit makers on apprasial end, LSI is a perfect example.

When I did some work for them pre HVCC, (mostly in late nineties /early 2000 era) mtg broker avg fees (in my area ) were around $300 , and LSI took a very small % of that, like 10% for their management...they were mainly a TITLE company (which is how most old school AMC's started) and appraisals were a side line for them , a service to the lender they did title work for.

Post HVCC things changed overnight with them. Suddenly, they got super aggressive about their fees, dropping them to $200 to $225, and not assigning work if you did not accept it at that rate. I refused to work at those fees so let my credentials lapse with them. I have no idea what they are paying now, maybe a bit more, but the point is, nearly every AMC modeled themselves on the LSI model post HVCC, when suddenly appraisal management changed into a profit venture and not just fulfillment on the side of title work. From that model, some lenders formed their own in house ordering depts modeled after an AMC, gouging fees and paying as little as possible to the appraiser.

Over time, yes with whatever pushback appraisers can muster, the fees have risen in some from some of the worst payers but they are still below in many cases what these same companies or lenders were paying pre HVCC. Anyone attributing such a drastic revision of the business model to simple supply and demand , or that appraisers willingly accepted low fees is completely denying the impact of the ability of major entities to maniuplate fees by witholding work to appraisers who charge more, even $20 more . While many appraisers did resist it, some could not, shame on the few who willingly caved but most caved only when faced with BK/losing their house, etc.

There are excpetions of course and some clients took the high road and did not fee gouge, but this is to address teh problems of a broad segement of the lending business model post HVCC (and ability of large entiteis to use staff appraisers to keep fees down to their panel plays a part as well)

While one can rightly say it is appraisers fault for accepting lower fees, few appraisers willingly accepted the lower fees...most were backed into it over a period of years after trying to hold out for better fees and burning through their savings/reserves.

To be clear, this is not merely an AMC issue as some lenders own their division modeled on fee gouging, and pay appraisers worse than some independent AMC's that pay appraisers well, or at least relatively well considering the business model they have to adhere to to compete.

The proposal for a minimum fee is to counteract the tremendous market power of consolidated ordering and lenders who own or control AMC work .

Which would relieve appraisers of having to be at war every day with their own clients, among other benefits, such as to stop rewarding volume of work to low bidders who might rush through jobs or take shortcuts to produce volume.

A minimum fee for lender govt backed loans/ res mtge work would be for that segment only, and not be in play for any other appraisal work . Appraisers could charge whatever they want, minimum or maximum for all other work, and even for res lending work, this would be a minimum for standard jobs and not a maximum, exceptions could be for complex, rural etc

 

[SpartanAG]

I understand that I'm not going to change the minds of people who have already decided where they stand and I'm not trying to. I'm just trying to facilitate a healthy debt so the undecided can have a chance to decide.

I do have a suggestion:

• Instead of going straight to the federal government to implement this minimum fee increase, why not try it out in a state or two first. Mike, you are in California so that would be a logical place to start. J Grant seems very excited about this idea and Florida is an appraiser heavy state, that would be a pretty good east coast test bed.

• It will most likely be easier to get through at the state level. Appraisers are regulated by their states, so state politicians will be more receptive to this as it directly effects their constituents.

• If the minimum fee increase has a positive effect, it will be readily adopted by other states or even the feds.

• If it has a negative effect, that effect will be limited to only the states that implemented the increase.

• I also suggest adding in a sunset provision to the law or regulation. That way, if there is a negative effect, the law/regulation will go away on its own without having to go through the fight of getting it repealed. If it has a positive effect, it is easy to get a vote to extend the law/regulation.

 

[J Grant]

Since the min fee would apply to federally related transactions , and the big players are national based lenders, it makes sense to make it a national level minimum rather than have to battle the same issue out 50 times in 50 different states, leaving it up to local politicians with varying influence or views and tying the issue up for years in many cases.

 

[J Grant]

What makes you more qualified than all the other appraisers out there when it comes to determining their fees? I would think each individual appraiser is in the best position to determine their own fees. I certainly don't want someone else dictating my fees.

The problem in res lending work is that someone has already dictated your fee..the big lenders, who won't assign if you charge more than $300, for example ( and that is high for some of them). They dictate by refusing to assign work. Sure, you can sign up for them at "your" fee of $400, or $500, or $375, etc but if you get NO WORK, what good is the fact that nobody can dictate your fee? Anyone who is a st cert general has no idea how the limitations res license impacts , the fact that there is very limited to virtually non existent on any scale alternative work/client options available. (I personally don't accept the low fees but I do accept middle to higher fees ...and not taking the low fee work has cost me 50k in savings during lean times, I have no savings now due to not having "my fee" , which is very reasonable, rejected by the big box entities, and my experience is very similar for many res license appraisers )

The min fee level in now way would dictate your fees in any other work so not sure what the issue is.

The federal government has tried price-fixing numerous times in the past and it does not work. I encourage you to focus your time and energy on getting rid of some of this over-burdensome regulation and let the market work.

The market is working, this is thee result. This is the market we are in, not a fantasy free market with no or few regulations.

Appraisers have zero chance in over turning Dodd Frank, or the rest of the myriad of regulations. When the prior admin deregulated, the sad fact is that the predators and fraudsters took over with catastrophic results, so de regulating is not going to be on the table, if ever, with fed backed transactions.