Evolution of C&R fees – Alter Your Thinking
Appraisers reluctant to force actual C&R fees on AMC clients…
I’ve spent the last two days reviewing the ‘new Rule’ involving the registration of AMCs, which has – buried within it by reference – information relating to Customary and Reasonable Fees for appraisal reports. I’m grateful to an appraiser acquaintance in Pennsylvania for her assistance.
Below is a 4 page document that shows the mentions of “C&R Fees” – and how those apply to AMCs.
You may forward this to anyone else, or may use this information in any article or publication disseminated to appraisers, lenders, AMCs, other clients or interested parties, providing that I and the other appraiser shown on page 4 are credited.
The fact is, appraisers have been taken advantage of since AMCs became industry players more than two decades ago, and more so when the HVCC was implemented, after which the Dodd-Frank law was passed, and then with the Interim Final Rule put out by the Federal Reserve Board – which allowed two ‘provisions’ to determine if fees were C&R.
The fact also is that nothing in the law or rules intended that a compilation of AMC fees paid would be the basis for determining C&R fees in any geographic area. However, appraisers (and appraisal organizations and associations) have been reluctant to force actual C&R fees on AMC clients due to fear of losing business. Net result has been a severe degradation of earnings for individual appraisers who accept assignments from AMCs. That has forced many out of the business.
The ‘new Rule’ does not yet have an Effective Date; that will be 60 days after publication in the Federal Register (date unknown). Then States without current AMC registration laws will have 3 years to get those in place. The Rule will apply immediately for those States which already have AMC registration laws in place. However, it’s left up to the States to enforce provisions in the Rule.
It’s time for appraisers, and the associated lenders and their AMCs, to acknowledge that C&R is fair and expected when appraisal assignments are distributed. The new ‘Rule’ mandates it.
Because AMC fees paid cannot be used to determine C&R for any geographic area, it’s time for regional appraisers to evaluate what fair fees are for various appraisal services in their areas. And then don’t back down, as has been done up to now.
C&R fees can be determined by examining appraisal fees paid by non-AMC clients – such as lenders with their own appraisal placement departments, fees collected for private, non-lending assignments, and perhaps by what the VA pays (which is a flat fee based on geographic areas). It means the appraiser should collect an appropriate fee for the service rendered directly, and should not have to share a significant portion of that fee with anyone else just so the appraiser is kept ‘on a panel’ of appraisers.
By the way, a ‘portal’ used for receiving and uploading assignments and reports is not considered to be an AMC for the purpose of the new ‘Rule’, because a ‘portal’ does not meet the definition of an AMC.
It’s time for lenders and their associated AMC’s to realize that keeping (or stealing) a portion of the appraiser’s C&R fee is unlawful. It’s time for a “Cost Plus” business model to be fully established when a lender chooses to employ AMC agents to handle appraisal management. That means if $750 is charged to the borrower for the appraisal, and the appraiser’s C&R fee is $550-600, the balance can be paid to the agent for their work. These are just examples and not meant to suggest any particular charge or fee.
Important point: all AMCs are regulated with this new Rule, even those that are wholly owned departments within and controlled by a lender. The difference is States won’t regulate those directly and cannot force those to register with the State; instead they will be regulated by the particular agency who regulates the lender, but that agency will employ the standards in the new Rule. Any entity which performs activity shown in the AMC definition is considered to be an AMC, and must be registered.
Final point: you are worth what you charge for your service. You are NOT worth what you accept when that fee is lower than C&R for your area. Appraisers need to pull their heads out of the trench and demand to be paid what is determined to be a fair fee (what you charge) for a particular service. The time to do it is now. The new ‘Rule’ provides the backbone needed.