Price Fixing? Why is the FTC Involved at All?

VaCAP Board

VaCAP Board

Coalition of Appraisers in Virginia at Virginia Coalition of Appraiser Professionals
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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Price Fixing? Why is the FTC Involved at All? FTC vs Louisiana Hearing
FTC "Price Fixing" Allegations Hearing Update

On Thursday, Feb 22, 2018 there were oral arguments presented in the Federal Trade Commission building at 2 pm. The meeting adjourned just before 3:30 pm.

There were 55 to 65 people in attendance, which we were told is an extraordinarily larger crowd than typical. This is a very unique case.

On the FTC side there were two lawyers – one male, one female. On the Louisiana side there were four males at the head counsel table and three or four other attorneys.

I have never attended one of these hearings, so I really did not know what to expect. It turned out to be rather mundane. I really don’t wish for this to turn out to be a “he said, she said” type of thing, but in this instance it’s impossible not to do but just that.

The presenting attorney for LREAB was male. The FTC’s presenting attorney was female, as were both administrative law judges (ALJ).

Each side was given 30 minutes to present arguments with Louisiana given 5 minutes at the end for rebuttal.

All that we have read and heard as appraisers was presented by Louisiana. Louisiana (the defendant) argued they were acting in good faith to follow and initiate Dodd-Frank as well as the Federal Final Rule.

One vitally important point was made, as well – that was that any further demands by the FTC are unwarranted. Further, the make-up of the LREAB was not a majority of residential appraisers. Therefore, it is not a board of “market participants”.

One administrative law judge then brought up the NC dental case. She then asked why can’t fees be above customary and reasonable fees. He said they can be for complex assignments. He then mentioned the familiar term “a rush to the bottom” for fees as well as experience, and Dodd Frank recognized that fact.

Right at the start she said this case is about "price fixing"…Then it was the FTC’s (the plaintiff) turn. Right at the start she said this case is about "price fixing". She argued Louisiana still has not put adequate changes in place.

This lawyer answered some of her own questions, and one answer really caught my attention – “looking at public comments is inadequate”. Think about that answer as an American living in a democracy. It was further stated that future active supervision by Louisiana appears inadequate. (Can Louisiana be trusted to run its own state?)

In the argument for the motion for dismissal, the FTC stated that future adequate oversight seem “unlikely”. She stated the board was made up of eight appraisers. She corrected herself and stated one was and had to be an AMC member/representative. She failed to mention the board voted 8 – 0 in favor of C & R fees. An administrative law judge asked who the actual market participants were. The ALJ’s answer was, “Do the regulants have a personal interest?”

Louisiana’s rebuttal pointed out two glaring inaccuracies:

  1. Are all government levels in Louisiana to be distrusted?
  2. The case is about price fixing.

This is not true. All statements made in Louisiana came straight out of Dodd Frank and the Federal Final Rules.

The LREAB attorney stated both AMC’s that were disciplined in Louisiana came forward and admitted to low fees and agreed to cease such activities going forward. iMortgage could not show support for the fees it paid during their investigation.

Then he closed his brief, took off his glasses, and leaned forward on the podium to speak face to face and heart to heart with the ALJ’s.

He stated that in 2006 Louisiana had to survive a disastrous hurricane. Then on the heels of that there was the mortgage meltdown of 2007 – 2008 in Louisiana and across the United States.

Then he gave the stomach punch. Dodd Frank was in direct response to dishonest appraisals caused by a race to the bottom for the cheapest fees paid to appraisers.

The ALJ’s took all under advisement.

It is interesting to consider some related facts and actions here.

The two AMC’s that were disciplined had accepted their outcomes. Then why is the FTC involved at all? Could it be another entity or entities have some concern regarding future actions, not only in Louisiana, but elsewhere, as well?

Consider this – Louisiana will have the opportunity to recover its legal fees if it can show there was no just cause for this case. Don’t forget, the original response from Louisiana was, “There is no case”.

There appears to be no real “there” there, in my opinion.

In closing, it is important to report that VaCAP had four members at the hearing. John Russell of the ASA attended with us. Also, Brian Rodgers of the Appraisal Institute was in attendance.

This is my personal observation of the proceedings that took place at the FTC hearing.

Pat Turner
Certified Residential Appraiser

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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32 Responses

  1. Retired Appraiser Retired Appraiser says:

    Yeah Baby!

    Price Fixing has been the name of the game since May of 2009 when AMCs took over the industry and told you what they were willing to pay.  It really took some serious balls to accuse Louisiana of doing what AMCs have been engaged in for nearly two decades.

    Do let us know when the trial for price fixing by AMCs takes place.

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  2. Pattie P. says:

    The FTC is barking up the wrong tree and need to go after CoreLogic, REVAA, Bank of America, Wells Fargo, Andrew Cuomo, and the GSE’S. 

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  3. BigAl says:

    One has to wonder if the FTC Commissioners haven’t been bribed to promote the position of the very people restraining fees and fair competition.

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  4. wontobey says:

    Thanks for the update Pat.

    If you want to screw anything, give it to the federal government to fix.

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    • Respectfully, not a pragmatic view. Also not especially applicable or accurate here. A minority of FTC commissioners appointed under a prior administration – quite possibly not even enough for a quorum took up the LA case at the urging of special interests that don’t want to pay C&R fees.

      It may very well be necessary for us to ask the feds to take over full control of all licensing under FIRREA. Because if there is anyone that can screw up implementation of federal laws (such as FIRREA and Dodd Frank) FASTER and more thoroughly than the feds, it is the 50 U.S. States and 4 of the 7 Territories only 4 of which are large enough to have appraisals or appraisal laws making 54 different versions of local (state) implementing laws.

      WTO, what we currently have are federal laws interpreted by a private organization (TAF) that is subject to the whims and special interests of sponsors that include the likes of Corelogic and lending interests that serve on its Board of Trustees and Sponsors committees.

      TAF in turn reinterprets USPAP every two years like clockwork whether it needs it or not. It further arbitrarily decides when and how to exclude otherwise qualified members of the public from the profession (presently unstated inferences being it was only non degreed people that perform bad appraisals – never the designated or college educated – get ready, new scapegoats will be needed very soon!).

      Further, this PRIVATE TAF organization coordinates with a PRIVATE lobbying group (AARO) comprised of state regulators to develop or promote spurious rationales for side stepping USPAP in their own investigations.

      The end result is a regulatory system where states are actually rewarded for coercing consent agreements from appraisers, rather than properly investigating the issues. Most appraisers do not have the resources to fight them. Most E&O companies CHOOSE not to fight them (easier to offer you $2,500 toward your $25,000; $50,000 or even $150,000 legal defense costs).

      We’ve seen what it takes to even try to get one single state to adopt meaningful AMC or DF enforcement laws…and what then happens. Notice FTC did not file suit against the United States Congress that passed Dodd Frank? Think about that.

      In the end, the only governmental agency that CAN resolve ALL the problems appraisers have in remaining unbiased professionals IS the Federal Government. I’d nominate the ASC, but there are other alternatives as well…such as HUD.

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      • Honest Appraiser says:

        Thanks so much Pat

        Is anyone at the FTC considering the GROSS profits that the AMCs are making by raising costs to consumers and then skimming as much as they can from the Independent Appraiser with bully tactics and “technology” fees. All this while shopping for 2 weeks without disclosure to the consumer??? All while Appraisers are screaming to be heard.

        It boggles my mind that the AMC’s are making $Billions while being the direct Instigator of the so-called Appraiser Shortage. There is a shortage… of Appraisers TIME and RESOURCES.

        I used to work with 4 Appraisers and 2 staff people – now it’s just me and a 10 year old car.

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        • Baggins Baggins says:

          Magic 8 ball was shown a photo of amc lobbyists outnumbering appraisers and the answer to your question is currently visible in the viewing window.

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  5. Hooligan says:

    OH REALLY ??

    The Federal Trade Commission (FTC) is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act. Its principal mission is the promotion of consumer protection and the elimination and prevention of anticompetitive business practices, such as coercive monopoly

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    • Bill Johnson says:

      Either directly (they own the AMC), or indirectly (their buddies own the AMC), the current AMC system is a secondary profit stream where as they get to keep the spread. The borrower is not being protected when they must blindly entrust the lender to spend their appraisal fee on the best qualified professional available. The borrower is a pawn in the eye of the lender.

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      • Baggins Baggins says:

        Bill, we’re talking identical language, but in different terms. Please see my post below and I hope you’ll adopt a more legalese language because I feel that will be better received by the various rule makers. 10 years I have been on with that idea, and finally have an accurate legal description of the events at hand. Everyone is on about amc’s, many direct outfits are testing these operational patterns as well. If we focus only on amc’s, the ailments will merely shift from one location to another with even less oversight. The fix will remain in place because the appraisal fee continues to be shared and therefore the distributors have a personal interest rather than simply passing market rate costs to the consumers. Distributor staff are rarely if ever actual appraisers and not subject to the same oversight as us licensed individuals are. If possible I patronize with lenders whom have consistent fixed minimum fees I can rely on regardless of volume, and also have a senior licensed appraiser actually running the daily operations. The best distributors employ far fewer tech people, and let the appraiser in charge actually run things.

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  6. Xpert says:

    If FTC “works to promote competition and protect and educate consumers”, then how about first providing the consumer with a fully disclosed appraisal & amc fees. The public is being fleeced by the non-disclosure of fees. How about going after AMCs who take away our competitive pricing.

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    • Hooligan says:

      Exactly. Such a double standard!

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      • Baggins Baggins says:

        RE: The now infamous but discarded HUD1 alternative proposed form the CFPB failed to select, which did indeed show the separation of fees. They all knew one day there would be a call to audit amc’s nationally, that’s why lobbying was so heavy on that one item of going concern.

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  7. JM2C says:

    FTC = REVAA’s hired muscle!

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  8. misguided says:

    There is NO competition when AMC’s are involved. I support LA and am against the FTC and their misguided attempt. Thanks for the update.

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  9. Dave Towne says:

    Pat…thank you for your report.  Was there any indication stated as to when a decision in the matter will be rendered?

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  10. Coach says:

    FTC needs to focus on consumers harmed by AMCs’ increasing appraisal costs with no disclosure. What about stopping AMC monopolies & abuse of appraisers & public trust?

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    • Baggins Baggins says:

      The regulatory mechanisms of government currently no longer function adequately in a broad swath of fields from money to tech to medicine. Read the map. It’s up to us now. We regular citizen consumers drive the free markets with each and every patronage choice and consumer spending action, down to the dime, nickle, and penny. Participants in this industry mainly harmed themselves, capitulating to unacceptable assignment condition terms on a regular basis. They have no one to blame but themselves. Oh government, save me from my indebted lifestyle, my inability to say no, my inadequate financial position, please make these companies pay me more! Sound familiar? Appraisers postured like fast food workers with hands out and no other options, and they received in return, a regular employee position.

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  11. Pat says:

    I am hoping we go to full trial. Let it ALL out in the sunshine

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  12. Marion says:

    Thank you Pat, and everyone for bringing this out into the light of day.

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  13. Baggins Baggins says:

    If the distribution departments, amc or direct or otherwise, would only bill for their services separately. Their fees should not be included in the appraisal fee, they do not provide appraisals! Price fixing is the name of the game and there is an ethical twist in there. If you discount ahead of the next appraiser, you have provided a financial incentive to be the preferred selectee, enticing violations of FDIC guidance regarding lenders selecting appraisers on skill, not fee and turn time. If you’re waiting for the government to sort this out you’ll be waiting forever. As long as appraisers can act this way without repercussion, billing differently based on opportunity with individual clients, this will continue. The same appraiser doing ‘volume’ for an amc at half rate turns around and then considers the direct 500+ fee a reward, and puts in the same amount of work for twice the fee. It is appraisers own lack of ethics in billing and client relationships which has allowed this to happen. Some appraisers found so much success in undercutting their peers and defrauding consumers for the benefit of management companies, they wrote books and hosted seminars on how to do it yourself.  Be bold be daring, state the obvious; The complete amount of the appraisal fee must go to the appraiser in order to eliminate the financial incentive to shop the fees without returning cost savings to borrowing consumers. I thought we were supposed to be non advocates.

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    • Price Fixing starts by banks and AMCs BEFORE the applicant ever speaks to the loan officer!

      They sought a national one size fits all price and AMC model. Coester used to brag that he was the first to provide it through his MS. It used to be $450-$500. Now it’s $600-$650 thanks largely to VaCAP and coincident market forces.

      The problem is that THIS is the fee quoted by Loan Officers before the TRID is ever filled out and signed. Well before any AMC sends out a ‘bid’ request (which is pure illusion since the fees are already set), or assigns the order.

      FTC needs to investigate the Bankers League and all the other lobbying and trade groups affiliated with Banking and Mortgage Banking groups in America that magically developed this $600 to $650 ‘range’ of “market” rates for appraisals. Until cost plus pricing is developed there can be no competitive market driven appraisal pricing. ALL appraisers do now is bid within the predetermined range already established by the bank and AMC.

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      • Honest Appraiser says:

        AMC’s are baking their brains every night trying to figure out how to keep that $600 fee without actually having to pay an Appraiser for the work. And they are succeeding I’m afraid at keeping most of it – and WITHOUT DISCLOSURE!! Is there an Attorney in the house??? I feel violated.

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      • Baggins Baggins says:

        It’s important to stress why companies no longer request appraisers fee schedules, and why they no longer abide community set free market fees. The litmus test towards a customary and reasonable fee is; A fee that the majority of your panel appraisers will accept without need for negotiation or re assignment. The fact they have to shop for fees is an outright indicator they are not paying C&R. TRID took an old methodology and applied it in a new realm of operations where there were new parties involved.

        Nationally the fees are adequate, absent unnecessary middle management with hands in the jar. Attorneys perhaps are unaware of the magnitude of their potential payout if they would get into this fight. Dodd Frank Reg Z C&R, 10k first instance, 20k daily fine every instance there after. About a million instances or more already… What’s the legal rake on that class action? Please sign me up, where do I sign?

        New venture; Propose this to the nations premier class action law firm? This was proposed 10 years ago but it did not make financial sense. These companies have grown unchecked and have raked over half of the valuation industries operational income and taken it for their own, applying corporate profits at levels never seen before in honest business realms. There is so much money to be made with class action, honestly I don’t understand why lawyers are diddling around with employee wage cases when C&R 10k/20k could represent a ten billion dollar case by now.

        Are you guys understanding why now that these companies have grown so big, they have accelerated plans to remove appraisers? They must move swiftly because this is their most vulnerable point. The storm is coming. Post a help wanted add in an attorney mag; The entire real estate valuation industry of licensed appraisers requests your presence to purse what is likely a 10b dollar class action against a limited array of tech focused middle management companies. Per dodd frank reg z, 10k/20k fine rules, per instance, approximately 1m instances or more. Easy, post it. Make it so. Get things moving.

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        • Bill Johnson says:

          I’ve been making the same argument for year Baggins, but I think your numbers are WaaaaaaY to low (# of cases). In fact, the fines are so big, that if applied per law, the entire banking industry would collapse, thus I truly believe the crime is too big to enforce in the eyes of the CFPB and others. If per their numbers by way of the collateral underwriter (CU), they’ve received over 23 million appraisals, and assuming 80% went through AMC’s, and thus the fees were not C&R, the numbers are alarming. In taking the 80%, you’re looking at 18,400,000 potential cases. I believe the $10,000 fine is per single occurrence, and applies daily until addressed. If you have a single violation from 8 years ago (2,920 days), the running fine would be $10,000 X 2,920 days or $29,200,000. On a side note, I’ve always found it funny when lenders claim the CFPB pulls fine numbers ($$) out of their ass, but yet when clearly defined, ($10,000 C&R daily fines), the CFPB has looked the other way.

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          • Baggins Baggins says:

            Holy Shinto!  Please provide your best base estimate with just the base fine, not daily, for total occurrences.  Seriously, someone should post a request in a legal magazine or round table type site.  We don’t have to take the entire industry down and the fines could be logically limited to the total business and personal asset liquidity of the offending parties.  Previously you may recall me advocating for fines based on income…  Also you might recall clever taglines like incentivize the problem.  Both are applicable more than ever right here right now today.  You guys know lawyers, get on the horn, pronto!  This is not just a passive blog post request, this needs to happen.  Let it happen, make the calls.

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  14. Baggins Baggins says:

    MAGA new meaning. Make Appraisal Great Again. I don’t know what most of the appraisers problems are around here, I have had only limited resistance to capturing a steady 450/500+ for many many years, now at 550/600+ again. My volume figures show a 4 fold increase and rising because I refuse quote fee orders and instead demand consistent minimums and direct assignment.

    The world is what we make of it and this long series of events pertaining to the rise of middle management is a direct result of poor understanding regarding the power of patronage and consumerism in free markets. The majority of members in this industry choose not to represent themselves in an effective manner. Appraisers need to tighten the belt and do what is necessary to achieve victory, and that means a personal boycott regardless of the consequences and what other appraisers are doing. Leads for days, all it takes is to land one. Try the HUD M&M guys, the FNMA direct REO panels, apply at the VA, get with a RELO company, scroll through the top 100 originating lenders list, consistently prioritize direct assignment orders so those lenders look better, ignore the grading nonsense and market, market, market. Easy.The amc powerhouse is an illusion based on intention of the appraisers themselves. If appraisers are waiting for someone to correct this engagement for them, they don’t understand the depth of the need to qualify acceptable engagement for each and every single individual order. Get mean, posture hardline. It’s really easy and takes less effort than playing mr nice guy. Thank you for reading the blogs. Lurk less, post more, network!

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  15. Baggs, I agree re volume of work 2-3 per week (IF I were still dong transaction work at all now). I’ve found it much easier to do non lending work at much higher fees and then still only do 2 or 3 a week. Which for me, would be a busy week. I think most experienced appraisers can do 3 to 4 good to GREAT appraisals per week. Fully USPAP compliant and done the way we were taught – not just the minimal acceptable boilerplate drivel that so many lenders seem to find acceptable today. I used to describe Henry S. Harrison “How to…” books as training wheels for new appraisers doing FNMA work. Many of us would do well to take another refresher look at what is expected in the blank spaces of the forms; and addendums.

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    • Baggins Baggins says:

      It’s all relative anyways so I’m on about human logic as the primary basis for analysis. It’s just, never use see addenda, never leave a line blank, and no more than one page of pre written.

      Funny jokes appraisers used to tell; I actually know less about this real estate market after reading this report. The report was so thin, a breeze took it off the desk and it went straight into the trash can. Appraise with the ghosts of a thousand underwriters and the full chain of illogical stipulations I previously received, lurking behind me.

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      • Shoe really is on other foot now. I don’t mind a bit about turning an AMC into state boards. RE coming back to us – not unlike the old Loan Officers we used to tell “no” to…3 to 6 months later they’d be back to say it was all a misunderstanding…or the more honest ones would say “You were right. We went with the guy that told us he could get it done, but we had even more trouble because he didn’t know what he was doing at all.”

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Price Fixing? Why is the FTC Involved at All?

by VaCAP Board time to read: 3 min