HUD and the AMC
Mortgagee letter on choosing FHA appraiser, AMC &/or 3rd party fees…
Does HUD have a Better Understanding of the Role of AMCs?
Recently an old HUD/ FHA mortgagee letter has resurfaced. The mortgagee letter, 2009-28 has to do with choosing a FHA approved Roster Appraiser and Appraisal Management Company and / or Third Party Organization Fees. This mortgagee letter specifically states
“the fee for the actual completion of an FHA appraisal may not include a fee for management of the appraisal process any activity other than the performance of the appraisal.”
This mortgagee letter was written prior to the Final Rules and VaCAP reached out to the HUD Resource Center to determine if the mortgagee letter was still in effect or had been updated. From a conversation with the representative, we learned there have been a number of complaints received by HUD for extremely high appraisal fees when an AMC is involved. These complaints are coming from FHA borrowers. At the present time, no action has been taken; be assured, this is being monitored.
As we are all well aware, the mortgagee letters have been combined, sliced, diced and tossed into Handbook 4000.1. Here is what the Resource Center provided from 4000.1. FHA no longer states the appraisal fee must be separate from the AMC fee. It states:
“The Mortgagee must ensure that all fees charged to the borrower comply with all applicable federal, state and local laws and disclosure requirements”
Read the full text of what the Resource Center provided below, but here are some highlights from the information:
- “The Mortgagee may engage an appraisal management company for the services of obtaining an appraisal”
– Does this mean staff appraisers of the AMC are not allowed?
- “The Mortgagee may not pay the AMC and other third-party contractors fees in excess of what is customary and reasonable for such services in the market area where the property being appraised is located.”
– Who is paying the AMC? Borrower or Lender?
– Who is enforcing customary & reasonable fees to the AMCs?
- “Any management fees must be for the actual services related to the ordering process, or review of appraisal for FHA financing”
– Does this also mean no AMC staff appraiser can complete the appraisal report?
- The Mortgagee must evaluate the appraiser’s education, training and actual field experience to determine whether the appraiser has sufficient qualifications to perform the appraisal before assignment.
– How does blasting orders to multiple appraisers satisfy this?
Direct from HUD Resource Center/ Handbook 4000.1
Does FHA establish or regulate the appraisal fee or appraisal fee due dates?
The appraiser and the Mortgagee or Mortgagee-designated third party will negotiate the appraisal fees and due date. FHA does not establish appraisal fees or due dates. The Mortgagee must ensure that it does not:
- compensate the appraiser at a rate that is not commensurate in the market area of the property being appraised with the assignment type, complexity and scope of work required for the appraisal services performed;
- withhold or threaten to withhold timely payment or partial payment for an appraisal report;
- prohibit the Appraiser from recording the fee paid for the performance of the appraisal in the appraisal report;
- condition the ordering of an appraisal report or the payment of an appraisal fee, salary, or bonus on the opinion, conclusion or valuation to be reached, or on a preliminary value estimate requested from an appraiser
The Mortgagee may engage an Appraisal Management Company (AMC) to perform services related to the obtaining of an appraisal. The Mortgagee remains responsible for the acts of its AMC or third-party contractors. The Mortgagee may not pay the AMC and other third-party contractors fees in excess of what is customary and reasonableAny management fees must be for actual services related to the ordering process, or review of appraisal for FHA financing.
The Mortgagee must ensure that all fees charged to the borrower comply with all applicable federal, state and local laws and disclosure requirements.
For additional information see Handbook 4000.1 I.B.1.d.iv; II.A.1.a.iii.(B)(6)(c); II.A.6.a.x.
What are the Mortgagee’s responsibilities when selecting the appraiser?
The Mortgagee must order an appraisal from an appraiser who is listed on the FHA Appraiser Roster and is qualified and knowledgeable in the specific market area in which the property is located.
The Mortgagee must evaluate the appraiser’s education, training and actual field experience to determine whether the appraiser has sufficient qualifications to perform the appraisal before assignment.
The Mortgagee may not discriminate on the basis of race, color, religion, national origin, sex, age, disability, or actual or perceived sexual orientation and gender identity in the selection of an appraiser.
The Mortgagee may engage an Appraisal Management Company (AMC) to perform services related to obtaining an appraisal. The Mortgagee remains responsible for the acts of its AMC or third-party contractors.
The Mortgagee may not allow the appraiser to be selected, retained, managed, or compensated by a mortgage broker or any member of a Mortgagee’s staff who is compensated on a commission basis tied to the successful completion of a mortgage or who is not independent of the Mortgagee’s mortgage production staff or processes.
For additional information see Handbook 4000.1 II.A.1.a.iii.(B)(6).
DISCLAIMER: All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.
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An AMC’s idea of an a fair FHA appraisal fee goes like this;
Standard fee of $250.00+50.00 FHA fee for additional inspection requirements. Total fee to appraiser=$300.00
Total Fee AMC/FHA fee charged to borrower=$750.00
Borrower wonders why they are getting screwed and thinks appraiser is greedy, while the AMC will not disclose fee paid to the appraiser and will not allow the appraiser to include an invoice. (WOW THIS IS A GREAT SYSTEM!)
AMC pockets $450.000 for doing ABSOLUTELY NOTHING while laughing to the bank!
It is criminal what they have allowed !!! We get email and calls all the time from AMC’s looking for a cheaper, faster appraiser, The email reads….”we have a new client and want to impress them”……Sound familiar ???
Sometimes almost 2 hours away !!!
The question that really has not been asked, nor answered is “Why are the lenders not being held accountable for the actions of their agent, the AMC?” HUD, Dodd- Frank, the Final Rules and most states clearly state the lender is responsible for the action of the AMC. Where has HUD been in enforcement?
Wait and see, both shoes are about to drop! Enough time has passed that the loans that have appraisals ordered through AMCs are starting to go bad. When the investors and insurers of the loans start digging into the loan files, the appraisals will be targeted. This will open up the liability of the AMC! After all, the AMC is responsible for ordering and reviewing the appraisal report. Qualifications of the appraiser will be in question, how the appraisal was assigned, even the “revision requests” will all be exposed.
Just image for a moment, in a court of law, a Judge asks the owner of the AMC the qualifications of the person who reviewed the appraisal. Their response “They got a good reference from Taco Bell ” Do we need to say more?
Thanks for supporting VaCAP.
Dear VaCap your own quote pretty well answers all the questions you asked.
“The Mortgagee must ensure that all fees charged to the borrower comply with all applicable federal, state and local laws and disclosure requirements”
In the AMC’s world view clearly the certified appraiser meets all the HUD requirements for education, training and licensing level or he would not be on the HUD/FHA approved roster. Evaluation of qualifications done! Requirements met.
The Fed (including Dodd-Frank) put ALL of the burden for compliance on the mortgagee or lender. Enforcement of that (and all other state and federal laws and regulations) are put in the voluntary hands of the individual states.
The states in turn then reinterpret USPAP to suit their specific enforcement or revenue goals. At least up to 24% of them may do so according to information derived from the Isaac Peck (WorkingRE) article of early 2016 do.
The ONE thing that both FIRREA and subsequent State Appraisal Laws all claim is their top priority “To Protect the Public Interest & Trust in the Appraisal Process”, is the most important and glaring failure ever to arise out of the S&L Bailout; TARP and or Quantitative Easing I, II and or III.
The ONLY thing taxpayers demanded was “Protect us from ongoing, repeat failures from the same root causes happening every 15 to 20 years!”
…and apparently THAT is what legislators and regulators heard. The next scheduled failure has been accelerated to 10-15 years and should hit between 2019 and 2024. Worrying time is reduced by a full five years!
Until federal legislators are willing to write an enforceable Bill to be passed into Law that follows a specific carefully and clearly explained, unambiguous requirement with similarly clear FEDERAL ENFORCEMENT legislation American Taxpayers will continue to be the private piggy banks of special interests.
Protected by the likes of the Oregon, California, Texas, Maryland, Illinois, or Minnesota Real Estate Appraiser Boards. Y’all remember Oregon and its contention that on-time report delivery was a USPAP requirement? Or the other 11 states they consulted with for that egregiously incorrect consensus?
It’s doubtful the positive regulatory efforts of Virginia; North Carolina and a remotely distant third Louisiana will be enough to preserve taxpayer and consumer interests.
To date, no amc’s have been able to justify variable fees through infinitely micro managed per fee quote fee requests. Some amc’s shop over 50 appraisers per individual order assignment by lender required contract. The specifics are in another letter regarding earned and unearned fees. This is the work around. The amc simply tallies up all this time and effort and then presto, earned fee achieved. There are specific HUD letters for MM service contractors to this regard as well, simply ignored as they utilize amc’s. Until such time as HUD updates the minimum payout to over 500 as a national standard, as they previously did in the late 80’s or early 90’s with the ‘350 minimum memo’, there will be no relief. It’s each on his own, individual appraisers vs powerful groups of amc’s whom have made a business out of anti competitive practices. Anyone have a copy of that old hud letter mandating a minimum payment? It used to float around the AF all the time but I could not locate it today.
Just keep typing, save your money, pay off that house !!!
3/4 of us will be retired by the time any of these “new” assistants have 5 years under their belt.
I just received an email link to a Metro-West (AMC) CEO article purporting to foresee ho wall the ‘new’ residential and commercial appraiser trainees will become qualified. Apparently through companies like their own where someone will invest the required 2-3 years THEY believe it takes to make competent commercial appraiser.
I guess the efforts of AI Members to monopolize 1-4 unit AMCs has come full circle. Can’t wait til we see commercial appraisers with 20+ years experience complaining about $700 to $1,500 AMC splits. Oh wait, THATS already here!