Cap on AMC Fees
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- Bias in Automated Valuation Models - February 28, 2022
Cap on AMC fees & Compensation Disclosure…
VaCAP was informed of Senate Bill 655 introduced on January 10, 2018 in the General Assembly by Senator McPike. The bill limits the amount an AMC can charge a consumer for their services at 20% and also requires the AMC to disclose the amount charged for their services.
We do not know who is behind this bill, but we thank Senator McPike for introducing it. We will share more information as we obtain it.
See the bill here or below.
BILL to amend the Code of Virginia by adding a section numbered 54.1-2022.2, relating to appraisal management companies; cap on fees; disclosure.
Be it enacted by the General Assembly of Virginia:
1. That the Code of Virginia is amended by adding a section numbered 54.1-2022.2 as follows:
§ 54.1-2022.2. Appraisal management company compensation; disclosure.
- A. The amount added by an appraisal management company to the cost of an appraisal conducted by an independent appraiser contracted by the appraisal management company shall be limited to 20 percent.
- B. The appraisal management company shall fully disclose to the client the actual fee that is charged for the services provided by the appraisal management company
Way to go VaCAP!!
If this passes, amcs will no longer shop for the cheapest appraiser since their fee would be based on a percentage of the appraiser’s fee. Maybe then they’ll start contracting the most competent and experienced appraisers.
Everyone should support this bill!
I’m sure that is the logic but what happens if the fee is the same; AMC tells lenders ok, we will accept 20% for the borrower and another 10% from you (or difference between a base and new “Bank Appraisal Administrative fees”?) Bank then collects rather than the AMC?
Im glad to see the effort and wish nothing but success in this, but its something that I don’t think will take banks and their AMCs long to circumvent. Actually, they already have. Collect $650 for appraisal and fees, order hybrid for $100 and (BANK) keeps balance – from which bank could pay AMC pretty much the same as they have been getting all along. As proposed the Bill only addresses fee added by appraisal company to amount collected.
I don’t think either the language or the intent will be enforceable, but I’d love to be wrong!
Better late than never…it only took 9 years to get a bill on the floor. Call me a pessimist but I’d bet the farm on this bill failing. In fact I’d bet 100 farms on it failing. The only way it will pass is if ALL 140 MEMBERS choose to defy the banking industry and opt for ending their careers in the legislature.
There ain’t no good AMC unless it’s a dead AMC
For years I had faith in legislative process until I actually sat down and watched endless hours of floor debates state and national. If the whip gives this more than an audible call that lasts more than 5 seconds, I’d be surprised. The whip his or her self usually stalls out anything which compromises the interests of their corporate handlers. If we want a return to fair process, audible vote calling must be abolished in favor of technical detail, regardless of time drain. The honest truth is there are simply too many proposals constantly brought to the floor. If this was running alongside a 1 new law, 2 old laws removed, that would be preferable to feel good about supporting this type of effort.
I don’t want to criticize anyone however this is a poorly worded bill. They should have been more specific. It should have been more like this, AMC’s can only charge an additional fee of no more than 20% of the fee paid to the appraiser. They should also make this fee a separate item and it must be paid by the Lender to the AMC, not added on to the cost to the borrower. They should also require that the lender pay the appraiser directly. The AMC doesn’t provide any service to the appraiser or the borrower, they provide a service to the lender which has been negotiated between the lender and the AMC and therefore the lender should pay this fee. One of the problems today is that the AMC has control over the payments to the appraisers which give them to much power over the appraiser and the appraisal process and they are NOT an intended user of the appraiser report.
John, agree with most of what you say except for lender paying the appraiser. It is the AMC that collects the payment from the borrower. They do this before the order is placed. Adding an additional disbursement point to the process would only make the process of appraisers getting paid in a timely fashion even more difficult.
Thirty days for AMC to pay bank and then another 30 days for bank to pay appraiser…except that they don’t start the clock running until they have cleared the appraisal for payment, which doesn’t happen til all their stips are favorably addressed?
I don’t accept the idea that an AMC or anyone gets to hold appraiser payments hostage. One of the reasons appraisers used to collect at the door was to prevent cancellations and non payments if they didn’t like the appraisal result when it came in. We used to respond to appraisal inquiries as a matter of professionalism back then. Not as a condition of getting paid.
AMCs are paid before the appraisal is ordered. We should also be paid at the time an order is confirmed. As the current system operates, ‘our’ is actually being used to fund AMC overhead and executive salaries. WE don’t get paid until some other appraisers fee down the road is collected and then sent to us.
THAT system is wrong. How many hundreds of thousands in appraisal fees have been lost in the past when AMCs go bankrupt? Why do we continue to support a system that promotes this? From most of your post I suspect we are of similar mind on the way AMCs control our payments.
REVAA and others will oppose the bill. Likely it will go to court since it is a more direct manner of controlling fees allowed to be paid than Louisiana’s C&R enforcement. While I believe in my heart that LA is on solid ground; this one is not so clear to me. I LIKE the idea of an AMC cap… I just dont think it is likely to hold up to legal challenges.
Don’t get me wrong. Virginia is among the best when it comes to passing beneficial legislation for appraisers. I hope this passes and is sustainable.
Many years ago I was on and on about this exact thing. When the amc is dealing with fixed rake percentages, their desire to raise billing will benefit both parties, eliminating a lot of abuses. Alternatively their fixed rake proportion will also provide disincentive for driving down fees. What idiot in their right mind would drive their own fee down on purpose? One does not have to engage in much intellectual consideration to understand what type of appraiser seeks to engage with amc’s on purpose. All things eventually find balance. The laws of differential proportions applies to financial, although I’m sure there is some less scientific more confusing analytical term for that in the financial sector. We’ve been on fractional billing, that’s just not going to fly any longer.
EMERGENCY BILL CORRECTION AND REVISION NEEDED: This needs to apply to all distributors of appraisal orders, not just amc’s. Many companies have found clever ways to avoid amc licensing, yet mirror the amc’s operational approaches. The door to abuse is still open unless this applies to all distributors, amc or not, in all aspects of mortgage lending as well as default management and asset management. This needs to apply across the board from reo to origination, there and back again, amc specific definition not withstanding. Learn to read the map of current distributor trends. Q