AI Continues to Support Separation of Fees
The Appraisal Institute and the American Society of Farm Managers and Rural Appraisers reiterated their support of separating appraisal and appraisal management company fees on mortgage disclosure forms June 20 in Congressional testimony.
The organizations originally voiced support when drafts of the Consumer Financial Protection Bureau’s proposed Consumer Disclosure Form were released in February.
AI and ASFMRA again expressed their support in written testimony on “Mortgage Disclosures: How Do We Cut Red Tape for Consumers and Small Businesses” before the House Committee on Financial Services’ Subcommittee on Insurance, Housing and Community Opportunity.
The organizations expressed support of clear disclosure of fees paid to appraisers and to an appraisal management company. “We see no consumer benefit with continuing to bundle two separate services, as is the current practice today,” the organizations wrote in their testimony.
The organizations suggested that actual appraisal services and administrative and processing services relating to the management of appraisal operations be separated and the AMC fee moved to the form’s “Origination” section, which is consistent with Section 1475 of the Dodd-Frank Act.
The current draft of the form lists the fee paid to the AMC under “Services You Cannot Shop For,” which also is the same field where the local appraisal company fee is listed.
AI and ASFMRA said that if CFPB opted not to include AMC fees in the “Origination” section, then the AMC fees should be listed directly below the line for the fee paid for the appraisal.
However, the organizations noted one potential complication in separating the fees: the “3 percent points and fees cap,” also established by Dodd-Frank and known as the “Merkley-Klobuchar Amendment.” This provision caps fees paid to banks to 3 percent of the loan amount. However, several large, national banks own appraisal management companies and when the appraisal management fees are bundled with appraisal fees on the consumer disclosure forms, the fees fall outside of the Merkley-Klobuchar Amendment. However, if they are separated on the form, the fees would fall within the 3 percent cap, constricting the amount available to other areas of the loan transaction.
AI and ASFMRA have urged the CFPB to exempt appraisal management company fees from the Merkley-Klobuchar Amendment in support of fully disclosing fees and payees to consumers.