AMC vs Public Interest – VaCAP Advocacy
Since the beginning, Federal Regulation of the industry was initiated to “protect the public. “ FIRREA, USPAP, HVCC, Dodd Frank and state licensing of appraisers and appraisal management companies were initiated with consumer protection as the goal. Customary and reasonable fees, mandated by Dodd Frank, are also to protect the consumer.
The Virginia Coalition of Appraiser Professionals supports customary and reasonable fees and believes in order to determine a customary and reasonable fee all things associated must be considered and incorporated into the determination. The below practices by AMC’s are not in the interest of protecting public trust and go against the purpose of the Dodd Frank Act and the Commonwealth of Virginia AMC Regulations to protect the public.
- Email Blast of orders with a “first to respond gets the order” approach. Often these email blasts are sent after normal business hours and on weekends with unrealistic fees and turn times.
Many AMC’s have developed their own mobile apps and/ or utilize text messaging for the sole purpose of facilitating a” first to respond gets the order.” Limited information is relayed to the appraiser and only a partial address and a fee is displayed. Relevant information, such as the due date and scope or work are omitted.
Both the email blasts and the text messaging systems do not allow an appraiser ample time to research the property to determine if they are qualified to perform the assignment. The assignments advertised through these systems are usually below customary and reasonable fees and often are sent outside of normal business hours. Often there is no opportunity to counter the offer, a fee or turn time. These systems are not in compliance with the Dodd Frank Legislation and are harmful, not only to the public, but to communities, neighborhoods and the appraisal profession.
The consumer is protected when the most competent and qualified appraiser completes the appraisal. Language should be included in the C& R Fee determination on how to choose the most competent and qualified appraiser. The practice of email blast / text messaging should be strictly prohibited. This business model seeks the lowest fee, the quickest turn time and does nothing to ensure the public is protected.
Documentation of the vetting of the appraiser should be kept with each assignment by the AMC and provided to the VREAB upon request and/ or audit.
- Appraisers should be given the opportunity to negotiate a C& R Fee without consequences. Many AMC’s penalize the appraiser if they ask for a higher fee or reassign the appraisal assignment.
Language should be included with the C& R Fee determination that strictly prohibits this practice and documentation of a higher fee request and documentation as to why it was accepted / not accepted by the AMC should be kept for each assignment. This information should be provided to the VREAB upon request or audit. Without proper vetting of the appraiser, the AMC is supporting a low fee / quick turn time model, which is not in compliance with the Dodd Frank Legislation or Virginia statue. Paying an appraiser less than what is needed to provide a quality report does not protect the public in any way.
- Complete engagement letters should be presented to the appraiser before an order can be accepted. How does the appraiser know if the fee is C&R if they don’t know what the engagement letter requires? Generic engagement letters that incorporate numerous lender guidelines should be eliminated. The appraiser should be provided this information without the need to access 3rd party sites, or click links within an email.
Additionally, some AMC’s state on the engagement letter, you cannot accept the assignment if you are on an exclusionary list. Isn’t this the role of the AMC to manage the appraisal process? How does this practice protect the public?
- Ample time for an appraiser to research a property must be given prior to acceptance of an assignment. Some AMC’s allow as little as 2 hours to respond when directly assigned to an appraiser. This is not realistic as often times, the appraiser is not in areas where they can access MLS and other data sources to research the property prior to acceptance.
Language should be included with the C& R Fees determination that strictly prohibits this practice. Accepting an assignment without the proper research is not in the interest of the protecting the public.
- Upload and / or Technology Fees should not be an appraiser expense. These charges range from anywhere from $5 to $35 and are not necessary. Additionally, fees associated with the same 3rd party are not consistent. For example, the technology / upload fee for ABC Portal varies depending on the AMC the report is being sent to.
How can this be a legitament fee? How is this fee in the best interest of the public?
Each appraiser has the ability to deliver an appraisal report in a safe, secure and compliant manor without the use of 3rd.party. The upload of an appraisal report is time consuming, and requires the record keeping and maintenance of user names and passwords. The use of 3rd party sites provides no benefit to the consumer or the appraiser. It only increases the cost to the public.
Any AMC or lender who requires an appraisal to be delivered through a 3rd party should do so at the expense of the AMC or lender, not the appraiser or borrower. This fee should be prohibited from being passed on to the borrower and appraiser as it does not provide any benefit to anyone other than the AMC or lender. Where are the protections and benefits to the public?
- Staff appraisers employed directly by an AMC are completing appraisals locally in direct competition with local fee appraisers. The role of an AMC is different than the role of an appraisal company / fee appraiser. The role of a fee appraiser is to provide an unbiased opinion of value to protect the public. The role of an AMC is to manage the appraisal process, not to perform the appraisal. Allowing an employee of the AMC to perform an appraisal is not in the interest of protecting the public. An AMC is hired by the lender and is not an unbiased participant, thus resulting in a conflict of interest.
In addition to the above AMC practices, VaCAP recommends the VREAB implement the following to protect the public interest:
- A re-evaluation of C& R fees should be done at a minimum of every two years. Appraisal fees were stagnant for many years. Periodic reviews to ensure appraisal fees remain customary and reasonable is necessary to protect the public.
- The definition of an AMC should be expanded to specifically include portals used by lenders directly. Many of these portals perform the same function as an AMC, only in electronic form. The intent of the Dodd Frank Legislation must be consistent to protect the public.
Per Dodd Frank, an AMC is defined as:
‘‘(11) APPRAISAL MANAGEMENT COMPANY.—The term ‘appraisal management company’ means, in connection with valuing properties collateralizing mortgage loans or mortgages incorporated into a securitization, any external third party authorized either by a creditor of a consumer credit transaction secured by a consumer’s principal dwelling or by an underwriter or other principal in the secondary mortgage markets, that oversees a network or panel of more than 15 certified or licensed appraisers in a State or 25 or more nationally within a given Year.”
Virginia Statue should be consistent with the Federal Statue which includes 3rd party portals.
- The VREAB should have a system in place to process complaints of non-customary and reasonable fees of unlicensed entities. Those entities conducting business in Virginia in accordance with Virginia Statue that are not licensed directly through DPOR must comply with all state statures. The VREAB should have a system in place to process complaints against those entities that are not required to be licensed by DPOR. The intent of all legislation is to protect the public interest and everyone must obey Virginia Statue to protect public trust.
VaCAP encourages all industry professionals that support the above initiatives to attend the special meeting of the Virginia Real Estate Appraisal Board on January 12, 2016, at 10:00 AM, 9960 Mayland Dr. Richmond, VA 23233. If you are unable to attend, VaCAP encourages the submission of commentary and documentation to the Virginia Real Estate Appraisal Board at the above address.
This press release is a summary of a letter sent to the VREAB on 01/07/2016 in request for commentary on customary and reasonable fees.