AMCs Are Not Part of The Appraisal Profession
Foreign entities do not get a voice in what legislation is introduced…
Let’s think about this with an open mind…
More states are introducing bills concerning AMC legislation, more specifically how AMCs will conduct business. Even states with existing AMC legislation are introducing stricter, more precise legislation. Why is this happening in all 55 jurisdictions?
States do not want to interfere in how a company or industry conducts business, but when practices are so abusive that it harms small businesses and consumers, they have little choice. States have the obligation to protect their citizens and businesses that contribute to the economic base of local communities as well as the state funding through taxation. States do not have an obligation to foreign entities, such as AMCs domiciled in another state. The privilege of conducting business in other states is just that, a privilege, not a right. State legislators are obligated to represent and protect their constituents; that is businesses and consumers in their state. It is the way this country was built and it is the way this country will continue.
AMCs have been around for a while and became popular when HVCC went into effect. Most, not all have created an adverse effect on the appraisal profession. Let me be clear, AMCs are not part of the appraisal profession. They are a self-made industry and the current model has no sustainability.
The most experienced, qualified and professional appraisers do not work with AMCs. Real estate agents are now vetting appraisers who call to schedule the appraisal. They are advising their clients of the dangers associated with certain lenders who use AMCs and certain AMCs themselves. Coalitions and other boots on the ground organizations are gaining strength. State disciplinary boards are seeing more complaints against AMCs. Lenders are re-establishing their relationships with independent appraisers and terminating relationships with AMCs as they are seeking quality appraisals. Investors want quality, accurate appraisals, not a checklist quality control program most AMCs use. Investor loan buy back is a big liability for every lender.
REVAA, The Real Estate Valuation Advocacy Association is well aware of the demise of the AMC business model. Why else would they spend time, energy, and money fighting each and every state who is attempting to protect their citizens and businesses? They are now attempting to hire staff appraisers to complete appraisal reports and have created the false perception there is a shortage of appraisers. This is for the sole purpose to promote their existence in the future. Why else would they be attempting to become appraisal firms? Public trust will erode even further if this happens.
Zach Dawson, Director of Collateral Strategy and Policy at Fannie Mae and Allan Hummel, Chief Appraiser, First American Mortgage Solutions, showed their own separate data and research indicating there is no shortage of appraisers on the Housing Wire webinar held on March 1, 2017. This mistruth is a fabrication of the AMCs to propel their plan to become appraisal firms; for no other purpose to prolong their demise. Listen to the webinar and see the data yourself.
REVAA is so engrossed in winning over state legislators, they have told some pretty impressive mistruths about their role and how they protect the consumer, the lender and the investor. Take a look at the letter to legislators in Oregon embedded at the end of the article.
In the letter, REVAA states, AMC’s follow the guidance of the Federal Truth in Lending Act in the payment of customary and reasonable fees. The letter specifically states fees vary based on seasonality, supply of appraisers, demand of residential appraisals, location and complexity.
Where is the truth in REVAA’s statement? Here is what the Federal Truth in Lending Act states about customary and reasonable fees.
AMCs are presumed to comply with this requirement by compensating fee appraisers in an amount that is reasonably related to recent rates paid for comparable appraisal services performed in the geographic market of the property being appraised. In determining this amount, AMCs must review the following factors and make any adjustments to recent rates paid in the relevant geographic market to ensure the compensation is reasonable:
- the type of property
- the scope of work
- the time in which the appraisal services are required to be performed
- fee appraiser’s qualifications
- fee appraisers experience and professional record
- fee appraisers work quality
AMCs must not engage in any anticompetitive acts in violation of state and federal law that affect the compensation paid to fee appraisers.
AMCs alternatively, are presumed to comply with this requirement by determining the amount of compensation paid to fee appraisers by relying on information about rates that:
- is based on objective third party information, including fee schedules, studies, and survey prepares by independent third parties, such as government agencies, academic institutions, and private research firms;
- is based on recent rates paid to a representative sample of providers of appraisal services in the geographic market of the property being appraised or the fee schedules of those providers; and
- in the case of fee schedules, studies or surveys, or the information derived therefrom, exclude compensation paid to fee appraisers for appraisals ordered by AMCs.
The letter also states AMCs were not included in the creation of HB 2501. Well they are not supposed to be included. Foreign entities do not get a voice in what legislation is introduced. Representatives of the citizens of Oregon get to decide what legislation is introduced. Perhaps, if REVAA and their members understood the role of the AMC, their purpose and relevance, or lack thereof, they would have more respect from those who have a high regard for the independent appraisal profession. REVAA would have more than the embarrassing 21 members they claim do over 80% of the mortgage volume of the country. Where is the data to substantiate that claim? Some of the members of REVAA listed on their website are the worst abusers of appraisers and the most harmful to the consumer.
Appraisers in Oregon are encouraged to sit down with their legislators and show them real facts with accurate, substantiated data.
Appraisers follow USPAP and are held to high standards of ethics. They are analytical by nature and report factual information. Those that wish to participate with appraisal profession need to be held accountable to the same standards. The evidence presented here shows a completely different story. Why would any professional, regardless of the industry, want to be associated with any company or organization that cannot differentiate fact from fiction?
The demise of the AMC is forthcoming, regardless of the efforts of the mere 21 members of REVAA. See who they are. If you do any work for any of these companies, you might want to rethink your professional associations.
By John J. Appraiser, Certified Real Estate Appraiser – author requested to remain anonymous