Could the CFPB Eliminate AMCs?

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VaCAP Board
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Could the CFPB Eliminate AMCs? End of AMCs Fast & Cheap Mentality?

Will this be detrimental to appraisal management companies that operate under the fast and cheap mentality?… Let’s face it, the appraisal management company will not survive with quality appraisals at a reasonable and fair fee…

The Consumer Financial Protection Bureau is seeking public comments on the proposed rules for a Qualified Mortgage. The proposed rules require the lender to season the mortgage for 36 months before they can sell it to Fannie or Freddie. What that means is the lender will own that loan for 3 years.

Fast forward if the new rule goes into effect… The lender will be more conservative, more proactive and scrutinize each and every aspect of the loan package during underwriting. The appraisal will be no different. More questions, more explanations, more scrutiny. Will this be detrimental to appraisal management companies that operate under the fast and cheap mentality? You bet it will! The lenders will not outsource appraisal ordering as they will soon realize exactly how these “independent third parties” operate and the low quality appraisals many passed along to the lender does not protect them. Lenders will demand quality appraisals as they have 100% skin in the game for 3 years. Let’s face it, the appraisal management company will not survive with quality appraisals at a reasonable and fair fee.

As of this writing 12 comments have been received on the the proposed rule. Most are from lenders against the proposed rule. Here is another opportunity appraisers have to voice their opinions. Please do not let this opportunity to improve our profession go by with your voice not being heard. September 8, 2020 is the last day to comment. We encourage each of you to comment on the rules as they could impact our day to day operations.

Read the proposal and place your comments here on or before September 8, 2020.

VaCAP Board

VaCAP Board

Coalition of individual appraisers working together to unite, promote and protect the collective interests of all appraisal professionals in Virginia; to promote needed changes in laws, rules, regulations, policies and standards affecting all appraisers in Virginia; to observe and report the actions of regulatory, legislative, oversight, and standards-setting entities of the Commonwealth.

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10 Responses

  1. Avatar don says:

    Back the way it twaz. Appraiser’s were most important in the 1950’s thru the 80’s. The Lender made the loan, and then resold it six months to a year or so later. Banks and mortgage lenders prospered during those times. Wall streets only participation was limited because of the reputation of R.E. credit. Local lenders knew good from bad borrowers, however these products were not big enough, hence government subsidized growth.

    Real Estate had always been a local thing, some arena’s prospered, some slowed, some re-planed and some failed.

    local bankers-lenders knew, and maybe told their appraisers

    2
    • Avatar don says:

      Our society, our government, our professions and may more are tied to keeping home ownership and probably-maybe expanding it to over 65% of the populace owning their own homes. Home ownership IS a great incentive to better citizenship.

      Many Presidents and their legislatures have encouraged it, as evidenced by the FHA, VA, and the Farm home loan programs.

      Have the populace tired of those inspired government programs????

      1
      • Avatar E J says:

        Let’s go back to “stated income” and non verification of funds & employment verification. 2008 again. If you can breathe, your approved.

        2
  2. Avatar Seneca says:

    Talk about slowing down the housing market. Also, wishful thinking that this will hurt the AMCs. Banks don’t have time to find an appraiser in every city in every state. AMC panel lists are a convenience for lenders. Author’s evidence that the AMCs only produce low quality appraisals?

    1
    • Baggins Baggins says:

      The burden of proof is on amc’s to prove they are worth anything or do help the process. 10 years later they have still been unable to justify their own independent billing, and still have not found broad majority acceptance among the licensed appraiser community. The amc’s have a financial incentive to reduce the appraisers fee for variable amc profit, while simultaneously pushing the consumer price higher and/or never returning cost savings from reduced cost of appraisal services to consumers. That’s why 3 out of 4 appraisers nationally refuse to provide service for amc’s.

      The management rule, one must not provide a thing of value. FDIC rules on appraiser selection confirms this principal, one must not provide a thing of value to be the preferred vendor assigned an appraisal order. Appraisers whom discount for amc’s which do not utilize cost plus are clearly providing a thing of value to amc’s, and they are rewarded with the lions share of work assignments. The amc model with co mingled billing promotes excessive outsourcing, fewer professional trainees, entices the use of runners, promoting automation on every turn. For any amc argument, first clearly first distinguish and prove if the amc bills for their services separately or has co mingled billing with the appraiser. Without someone else to dump risk onto, such practices would never have been broadspread in the first place. If a mortgage banker engaged in such billing practices where they charged consumers much more than the actual service was billed for by the provider, it would be a clear violation of junk fee rules and could land them in prison. Ethics in appraisal billing, too inconvenient for some to consider.

      3
  3. Avatar E J says:

    Good idea. Make the banks have some skin in the game. Could care less about the AMC’s, I’ve about run them all off anyway.

    2
  4. Avatar John M Pratt says:

    I did not see a link to download the complete proposal or how to respond with my comments

    1
    • Baggins Baggins says:

      It’s probably your browser or cross platform something or another. Here is the link from above.

      https://www.regulations.gov/document?D=CFPB-2020-0020-0001

      That’s a lot to go through… How are they going to season anything when they lend on a fractional reserve basis, keeping the volume going because of the immediate saleable opportunity the gse’s provide? Seeing them have to hold the notes for 3 years would appear to be a game changer on multiple fronts.

      3

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Could the CFPB Eliminate AMCs?

by VaCAP Board time to read: 1 min
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