Lender Must Pay AMC Fee Proposal!

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.
VaCAP Board

Latest posts by VaCAP Board (see all)

Fee Charged by the AMC Must Be Paid by the Lender

Appraisal fee charged to consumer must not include AMC fee

This is huge. The New Jersey Department of Banking is proposing to change the current regulations of mortgage lenders. The change will require the maximum fee charged to the borrower for appraisal services is no more than the actual fee the appraiser is paid. In other words, any fee charged by the AMC must be paid by the lender. We all need to support New Jersey in this action. This is about Consumer Protection!

Please note this did not initiate from appraisers, this came from the New Jersey Department of Banking.

Passages from the article by Robert M Jaworski below:

… On June 5, 2017, the New Jersey Department of Banking and Insurance (“Department”) published a proposal to repeal a regulation first adopted in 2002 and readopted every 5 years thereafter. See 49 N.J. Reg. 1273-1274. That regulation, N.J.A.C. 3:1-16.2(a)3, required the Department to conduct and publish in the New Jersey Register an annual survey of third party appraisal fees (the “Annual Survey”). The purpose of the Annual Survey was to enable the Department to determine the current “usual, customary and reasonable” fee (“Customary Fee”) that lenders would be permitted to charge their borrowers for the cost of an appraisal, whether “performed and delivered in-house” or obtained from an appraisal management company (“AMC”). The regulation states that for in-house appraisals, “the fee shall approximate the [Customary Fee] for comparable appraisals by third-party appraisers based on the [Annual Survey]”; and for appraisals obtained from AMCs, “the fee shall not exceed the amount charged by the [AMC] and shall approximate the [Customary Fee] for comparable appraisals by third party appraisers based on the [Annual Survey].”

The part of the regulation that addressed appraisals obtained from AMC was prompted by the Department’s desire to protect consumers from lenders who try to pass along inappropriate costs in appraisal fees. The “inappropriate costs” of concern to the Department were what it perceived to be extra fees that AMCs (which were often owned by lenders) would charge lenders over and above the fees the AMCs paid to the independent third party appraisers they hired to perform the appraisals and prepare the appraisal reports. (AMCs generally manage the appraisal process for lenders. They select and hire appraisers, negotiate their fees, review the reports they prepare and submit those reports to the lenders in the form the lender requires.)

The Department has now changed its mind. It explains, in the Summary section of the proposal, that its prior concerns about AMCs “have subsided” and that the Annual Survey “could effectively represent an unwarranted restraint on a free market for appraisal charges, … have a negative impact on the business community, and … constitute an unneeded and burdensome regulatory requirement imposed upon lenders.”

However, despite that the Department’s concerns about AMCs have apparently subsided, its proposal appears to adversely impact AMCs and lenders that choose to use them. The proposal states that lenders may only recover from the borrower “the direct cost of the fee charged by a duly credentialed real estate appraiser for an appraisal in connection with a mortgage loan application.” Whether or not so intended, this provision can be read to limit the amount of an AMC’s fee that a lender may pass through to the borrower to the amount the AMC actually pays to the third-party appraiser it hires to perform the appraisal…

Proposed Amendment


Effective December 16, 2002, the Department amended N.J.A.C. 3:1-16.2(a)3 to its current form. The Department was responding to marketplace developments and related consumer protection concerns at that time. Appraisal services were then increasingly obtained from in-house resources at the lenders, or from appraisal management companies (AMCs), often affiliated with lenders, rather than from the traditional third-party appraiser community. Concerns were raised that borrowers were being charged for the cost of appraisals, plus the added cost of in-house or AMC services. In the 2002 amendments, the Department undertook to guard consumers against such added charges by establishing a “usual, customary and reasonable fee” standard for the direct cost of an appraisal. Thus, the 2002 amendments provided for the Department to conduct an annual “survey” of third party appraisal fees charged by lenders to determine current “usual, customary and reasonable” fees that would be the benchmark for permissible fee amounts published in the New Jersey Register. Furthermore, the 2002 amendments provided that “[i]f the appraisal is performed and delivered in-house, the fee shall approximate the usual, customary and reasonable fee for comparable appraisals by third party appraisers” established pursuant to the survey. Similarly, the 2002 amendments provided that, “[i]f the appraisal is performed by a third party appraiser and delivered by an [AMC], the fee shall not exceed the amount charged by the [AMC] and shall approximate the usual, customary and reasonable fee for comparable appraisals by third party appraisers” established pursuant to the survey.

The Department has determined that its concerns about appraisal management company charges have subsided. In fact, the Department has approved the pass-through to a borrower of a reasonable AMC fee as a separate third-party fee deemed permissible pursuant to the process afforded under N.J.A.C. 3:1-16.2(a)7xv. In addition, there is a concern that the survey could effectively represent an unwarranted restraint on a free market for appraisal charges, may have a negative impact on the business community, and may now constitute an unneeded and burdensome regulatory requirement imposed upon lenders. Thus, the Department is concerned that the survey effectively imposes a cap on these fees, while not significantly protecting borrowers.

appraisal fee charged to a consumer must total no more than the amount charged by the 3rd-party appraisersThe Department, therefore, proposes to amend the existing paragraph (a)3 to eliminate the survey and the “usual, customary and reasonable” fee pricing regulatory concept that it serves. The Department proposes to adopt a simpler requirement that an appraisal fee charged to a consumer must total no more than the amount charged by the third-party appraisers.

In addition, the Department notes that with the vast majority of loan applications only one appraisal is needed. Also noted is the fact unusual circumstances may develop in conjunction with individual residential real estate properties that necessitate a second appraisal. The Department, therefore, proposes to include a process for the lender to charge a consumer for a second appraisal in connection with the same loan when certain criteria are met. Proposed criteria for charging a consumer such a second appraisal fee would include a change of circumstances materially affecting the value of the property to be used as collateral for the loan, a delay between the first appraisal and the scheduled closing not caused by the lender, and any applicable Federal regulations.

The Department’s notice of proposal provides for a comment period of 60 days and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, is excepted from the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

Social Impact

The proposed amendment would impact residential first mortgage lenders and their customers. They will assist the Department in protecting consumers from mortgage lenders who may try to pass along inappropriate costs to consumers in amounts charged for appraisals, or to charge for a second appraisal that does not benefit the borrower. Thus, it will have a positive social impact on the residential first mortgage industry and New Jersey residential mortgage consumers.

Economic Impact

The Department does not anticipate any significant economic impact on residential mortgage lenders as a result of the proposed amendment. Only appropriate appraisal fees will be passed along to residential first mortgage consumers. Lenders will save the time and expense of complying with the fee ranges generated by the Department’s current appraisal fee survey, which is being eliminated as part of the proposed amendment…

Proposed Amendment: N.J.A.C. 3:1-16.2 below

Image credit flickr - Shawn Allen
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.

You may also like...

78 Responses

  1. John J says:

    Way to go New Jersey! This proposal solves so many problems. Consumers are protected from being over charged; there is no incentive for lenders to use AMC’s any more because I seriously doubt any lender will pay the AMC fee on each appraisal ordered; customary and reasonable fees becomes a non issue as there is no longer an incentive of the AMC to lowball fees to appraisers. I see this as a multiple win for consumers and appraisers!  We all need to share this with our states and follow New Jersey’s lead!

    22

    0
    • Baggins - appraiser ninja Baggins - appraiser ninja says:

      Hopenosis for brunch? This has been the argument since pre hvcc; If the amc’s are worth it the lenders should pay for their services, not the appraisers. These efforts will remain stalled out for the national scene until we get confirmation if dodd frank remains in effect.

      4

      0
  2. Pat Turner says:

    I second the motion!

    17

    1
    • Pat my friend, lets not get distracted by the dangling shiny baubles.

      They are also calling for elimination of all verbiage related to reasonable fees. So, bank quotes $650. AMC collects $650. AMC pays appraiser $650. AMC charges back or bills appraiser $300-$350 for marketing or some other spurious fee to collect the same amount that they always took.

      Appraiser either pays it or that is last order appraiser gets through them; AND they blacklist appraiser with other AMCs for non payment of fees.

      5

      0
      • Dan Drelich says:

        Mike,  C & R is covered under the new AMC legislation that has just been signed into law.  Also, this new rule making by DOBI only covers transactions by lenders that are licensed and supervised by DOBI.  Those transactions do not represent the majority of transactions that occur in the state.  However, this rule making will make it difficult for AMCs to operate by requiring them to have two separate payment systems.  We hope the AMCs will be forced into this one for all transactions just to keep their bookkeeping in order.  Your idea of following a fee schedule is only one of the allowable presumptions of Dodd-Frank.  The AMCs are not required to adhere to it and many will likely not.

        The answer to all of this is to welcome this new rule making and hope that AMCs and lender chose this path for all transactions in the state (ease of bookkeeping).

        The C & R problem will be addressed by the appraisal board through the new legislation.  First, NJ needs to gather the will to act.  This would require a complaint from an appraiser that an AMC/lender is not paying C & R.  Then, unlike what Louisiana did, NJ will need to require the offending AMC/Lender to show their methodology for paying “market fees” under the second Dodd-Frank presumption. This must include all appraisers who have accepted AND REJECTED orders, not just appraisers who have accepted at low fees.  A full sampling of all appraisers in the mix is part and parcel to an AMCs methodology……anything else is not legitimate.  With all appraisers included, the actual C & R should be considerably higher than what the lowballer’s are accepting. I believe our board will be “on board.”  Not sure that the Department of Consumer Affairs legal will take it on. When the time comes appraisers in the state will need to speak up.  There are quite a few of us who are willing and have stayed involved since the beginning.  And, by the way, The Guild was in the forefront of this and started the ball rolling at DOBI around 7 years ago.

        5

        0
        • Hi Dan, excellent response – thank you. Dan don’t misunderstand me, we DO conditionally support NJs efforts subject only to the concerns I cited. If yuo are comfortable those will be non issues, then that is great. Don’t underestimate AMCs ability to pay different rates to EVERY single appraiser; they already do that.

          Its the last paragraph I find to be encouraging. I’m forwarding your post to our NJ appraisers and suggesting they file complaints when legislation is done and in place (already?). I know they are turning down low fee work frequently. Thanks for clarification, and I mean this sincerely – best of luck to NJ.

          3

          0
  3. Thomas Birch says:

    This would stop the AMC from ripping off the consumer by charging them double what the appraisal fee should be!

    17

    0
  4. Lauren O says:

    This is fantastic! This legislation, if passed in NJ and adopted by other key states, could put lending institutions on the Appraiser side in fighting against the AMC requirements… It could eliminate the Corelogic Monopoly! We need to band together in support of this legislation and push for this in our own jurisdictions. Thank you, NJ, for getting the ball rolling to protect Appraisers and homeowners!

    17

    0
  5. A. M. Troll says:

    Not gonna happen ! We will no longer be able to rip off the borrower and the appraiser !! I’ll get Uncle Revva and the banking lobbyist to take care of this !

    2

    12
  6. Damian G says:

    Good work New Jersey!! If this legislation passes It WILL protect the public trust and will expose hidden fees from Appraisal management companies. The Appraisers are reporting their fees paid in the reports and they have been transparent. Are the AMC’s transparent with their fees?

    14

    0
  7. Seneca says:

    Yeah for the consumer. I guess. Banks will build the AMC fee into their closing costs somewhere. But I don’t see how this is going to help the appraiser. Proposal needs to be made that stops AMCs creating appraisal guidelines beyond that of the client. AMC scope creep needs to be rolled back.

    14

    0
  8. DianaN. says:

    Excellent. I hope it passes and all other states do the same. The consumer and appraiser have been ripped off for to long by both the AMC’s and banks. The bank wants to make the loan, let them pay the fees.

    7

    0
  9. Raymond says:

    hmmm……well if adopted in NJ, maybe it will reveal to lenders and the public that the financial institutions really don’t need AMCs. The process can be done in-house at less costs.

    8

    0
  10. The AGA conditionally supports the new (proposed) rules in New Jersey with the following exception. We urge all readers of this memo to consider the consequences of the proposed actions.

    Elimination of all customary and reasonable fee requirements leaves New Jersey consumers and American taxpayers vulnerable to substandard appraisal work, and creates an environment where AMCs may simply charge the same fees they currently bill borrowers for ( typically in a range from $550 to $650); and then “charge back” or bill the appraiser direct for management services and panel fees so that net fees to the appraiser are still no more than they currently are, and the consumer is still left paying (indirectly) for costs above the actual appraisal.

    The AMCs would actually pay the appraiser the entire fee but then simply increase upload fees and other charges including a ‘marketing’ or panel fee to claw back the fees they take now. Elimination of the reasonable fee requirements would in all probability have unintended adverse consequences…unless of course that IS the intent all along.

    New Jersey can eliminate the annual survey costs by simply adopting either the AGA’s adjusted matrix of civil service derived fees (see link below) or the VA fees as minimums. The market itself would take care of capping fees at the higher ends. The Civil Service derived fees can automatically be adjusted annually by the same percentage of increase that federal civil service workers receive.

    We suggest as an alternative, that the state of New Jersey officially recognize that most credible appraisals (on average) take approximately 8 hours (in a general range from 6 to 12+- hours) to properly research, perform the field work, complete analysis and prepare USPAP compliant written appraisal reports; and that the fee minimum should be tied to either the adjusted published schedule we have prepared derived from federal civil service pays scales ( http://www.appraisersguild.org ) and submitted to various regulatory agencies; OR alternately the current VA fee minimum set for the New Jersey area.

    We believe the adjusted civil service derived data schedule provides the best (most fair & reasonable) hourly equivalents on all assignments. Where the appraiser agrees it should take only 6 hours the fee can be billed at a 6 hour rate tied to the license level and assignment required license level of the appraiser and the complexity of the individual assignment. On assignments where it is understood that a full day or even two or three days may be required, all parties will know the probable approximate total of hourly charges in advance.

    Whether you are an AGA member of not, we urge you to join with us in communicating the above information to the New Jersey banking authorities.

    Thank you.

    4

    0
    • John J says:

      Mike,  I believe you have misunderstood what New Jersey is trying to accomplish. They want to eliminate all fee schedules and make it a true market rate; one in which each appraiser determines the fees they charge. The fee schedule is the problem. Look what is happening in Louisiana. Customary and reasonable fees are impossible to enforce. Substituting one fee schedule for another simply does nothing to solve the problem. nor does it protect the consumer.

      5

      0
      • John, no misunderstanding at all. I merely look at what they say they  propose doing versus what you think they are attempting. I’ve seen and read far too much legislation that purports to do one thing but which really does something else completely.

        Remember the Affordable Care Act? Without getting into specifics of what HC should or shouldn’t be, the FACT is that it did not do what the wrapper claims it did.

        Until the FFIEC and other regulatory agencies revoke or remove the Final Rule and all requirements of TRID you and I cannot ‘negotiate’ a fee anyway.

        I am very aware of what’s being attempted by the two FTC commissioners in Louisiana and its my belief they will figuratively have their heads handed to them on a platter once the case goes to court. Their reasoning about applicability of a dental related teeth whitening services case to what exists in the appraisal world was spurious to begin with.

        Again, I support what NJ SAYS they are trying to do, and I’m merely offering what in my opinion is a better way of achieving it. Virginia adopted the VA fee; no FTC complaint there yet, is there?

        The federal civil service (OPM) has a well established system for setting government real estate appraisers salaries. Its doesn’t violate FTC rules. All I’m suggesting is that we adopt the SAME SYSTEM that recognizes certain tasks take a  minimum of a certain amount of time to complete properly.

        At a minimum NJ must add language to their proposal that would prevent any AMC or portal services from increasing upload, management or marketing fees from being charged back to the appraiser after the appraiser has been paid their full fee. Please note the language only prevents the BANK from recouping fees – not the AMC.

        Semantics is critical in legislation. IF it does not forbid an act then it is assumed any act not specifically forbidden must be ok.

        6

        0
  11. Retired Appraiser Retired Appraiser says:

    In the words of The Everly Brothers:

    Drea-ea-ea-ea-eam, dream, dream, dream
    Drea-ea-ea-ea-eam, dream, dream, dream

    Chance of things changing for the better:  0.00000%

    5

    0
  12. Retired Appraiser Retired Appraiser says:

    Keyword: “Proposed”

    5

    0
  13. Retired Appraiser Retired Appraiser says:

    Banks are currently making hundreds of millions to over a billion dollars per year via their AMC subsidiaries from their appraisal slave force.  Do you honestly believe the most powerful group in the country will allow that to change folks?

    “Dream On” ~ Aerosmith

    8

    0
    • Baggins - appraiser ninja Baggins - appraiser ninja says:

      Thanks for staying on topic dude.

      Yeah, the first thing that came to mind for me after reading this article was that NJ was self correcting the obvious deficiency regarding improperly co mingled appraiser and amc fees in the hud 1 form.

      5

      0
  14. Jack Of All Trades says:

    100% correct retired , there can be a last appraiser standing and the pimp AMC’s would still offer $65 desktop appraisals.

    9

    0
  15. Bart says:

    I think this will be more about lender owned AMC’s. Most lender owned AMC’s pay fair fees that I work for. I don’t think this will impact the majority of the bottom feeder AMC’s which are not lender owned who pay crap fees. May have a negative impact if this passes when the lender decides to remove their appraisal department and use outside AMC services.

    “Appraisal services were then increasingly obtained from in-house resources at the lenders, or from appraisal management companies (AMCs), often affiliated with lenders, rather than from the traditional third-party appraiser community. Concerns were raised that borrowers were being charged for the cost of appraisals, plus the added cost of in-house or AMC services.

    0

    0
    • Louis Camblor says:

      How many of you, that are appraisers, think that Dodd-Frank ruined your business? It certainly affected mine! It was a bitter pill to swallow to have my income cut in half, literally over night, and it was harder to accept the fact that my peers were the ones cutting my fees. The AMCs bullied everyone by shopping for the cheapest prices, and they got what they wanted by hiring the least experienced of us for fees that often paid less than minimum wage. It was, and is embarrassing.

      I will be very pleased, for all of us, if all states take the lead from NJ, and propose similar regulations. We deserve to be paid for our work, and it’s time for AMCs to stop riding our backs collecting fees for our product.

      2

      0
  16. Baggins Baggins says:

    Follow up please. Probably died in committee or something as the amc lobbyist had a quick chat with the chair and whip. In the halls of state government it’s much less organized than you’d see on tv in the halls of congress and senate. There is usually no moral guidance or ethical committee check to the majority of proposals. It’s a free for all in CO, many of the guys are paid to bring corporate sponsored bills up, and that’s literally all they do, besides crushing all bills sourced by the peoples themselves. Still in support of a blanket rule, 1 new law, 2 old laws must go. But what happened to this NJ proposal?

    1

    0

Leave a Reply to Louis Camblor Cancel reply

Your email address will not be published. Required fields are marked *

xml sitemap
AMC

Lender Must Pay AMC Fee Proposal!

by VaCAP Board time to read: 5 min
78