TRID Impact on Appraisal Fees
The Consumer Finance Protection Bureau (CFPB) has mandated new residential mortgage application and disclosure procedures, which take effect Oct. 3, 2015.
Here’s a link to a brief article about this.
When a consumer applies to a mortgage lender, the lender requests certain information from the consumer before the clock starts ticking in terms of ‘timing requirements’ on the consumer’s application. When the application is considered “complete”, the lender has 3 business days to provide the consumer with the Loan Estimate document.
What’s of concern among lenders and appraisers is the speculated inability to change appraisal fees, which is disclosed at the beginning of the process, if complex issues involving the property are discovered AFTER assignment acceptance by the appraiser.
From the link above, these are the items that a consumer must provide to the lender for the application to be considered “complete”:
- monthly income;
- social security number;
- property address;
- estimated value of property; and
- requested loan amount.
A very simple solution to the ‘no changing appraisal fees’ is for the lender to not initially request the consumer provide item #5, until the appraiser has ample time to review property characteristics and provide a fee bid back to the lender. NOTE: this is not the same as asking the appraiser to provide a preliminary value estimate – as we used to do pre-HVCC under threat by loan officers, brokers, AMCs, etc.
However, as simple as this seems, it’s doubtful that lenders (and their AMCs) will do this for fear of losing the potential borrower, and due to the additional days of delay in processing the loan application.
So appraisers are basically trapped. The new situation is very similar to the VA process where one fee is paid for all non-REO properties, despite complexity issues.
It’s time to get your appraisal fees up with every client you do business with. Yes, you may lose a bit of business initially, but will make it up in the long run because many appraisers are leaving the business.
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Not sure I see this as an issue, unless an appraiser is automatically accepting bids or assignments before researching them. We need to take a little time to research the property and assignment before accosting the fee and turn time. I doubt that more than once every 4 or 5 years have I accepted an assignment, then found significant complexities afterwards that would warrant a fee increase.
A bigger issue might be the “borrower’s estimate of value” issue. Many clients use a value scale for their appraisal fees. We cannot base a fee on a value, but lenders and other clients can. It does not take long for loan agents to figure out that they can tell a borrower to “estimate” that his $1 million property is worth $500,000 in order to get him a lower appraisal fee.
Often, when it is brought up to the client that the fee is based on an unrealistically low estimate, they will say, “well, it all evens out because the next borrower will probably estimate unrealistically high.”
One more reason to research our assignments before accepting them.
This was posted years ago and I still agree, Matt.
Matt, how can you say you don’t see an issue? With TRID implementation, the lender is not asking you to do an hours worth of research so that you can request a warranted higher fee, but rather they are setting a flat fee and telling you to take it or leave it regardless of the complexities. The lender is trying to obtain business from the borrower and is motivated to keep all costs to a minimum including the appraisal fee. Lenders have shown NO concern that the average split appraisal fee of today (80% via AMC’s) is equal to wages from 20 years ago, so why would they change with TRID? In setting a standard fee now, they are not taking into account the higher entry standards into the profession, higher business expenses, the increased scope of work and NOW will not consider appraiser input prior to setting a nonnegotiable appraisal fee. If the borrower is shopping for a loan, and lender AAA correctly identifies the property as complex and bumps the appraisal fee up $200, will lender BBB have a better chance to obtain the loan if they did not adjust the appraisal fee up (lower total fees)? What motivation will the lender have to raise the total cost of the loan (higher appraisal fee) when it could hurt their bottom line? As useless as Dodd/Frank is, it at least established that an appraiser could request higher fees based on property complexity, but if the fees are going to be preset by way of the new regulation, I believe this is an issue. You can forget telling the lender the property is complex because it is a 5,000 sf detached condominium with an accessory unit that is located Ocean/Bay front. What specific state, county, city, neighborhood, PUD/condo project, property characteristic data is going to be available to the lender to establish the appraisal fee in advance? Will the lender be able to compute the higher liability to the appraiser when there is a lower % down payment, pending litigation within the development, an investor flip with a seemingly overnight increase in value of 20 to 50%? With the home address known by the lender but the specific appraiser unknown at the time the documents are presented to the borrower, how will the lender know the travel distance to the property for the appraiser? As a business, does the appraiser get to bill for added expenses (travel)? In more isolated areas with round trips often in the 100 to 150 mile range, is the appraiser simply going to eat the costs? When complex property characteristics are unknown (undisclosed guest quarters, illegal conversions, etc.), will we be asked to compete the assignment at the same fee? With appraisal fees locked in, will asking for a complexity fees post inspection create bad blood toward the appraiser (responsible for delays) and create undo pressure not to disclose complexities in the future? With AMC’s working with multiple lenders that have significantly varying scope of work requirements between clients, with their set appraisal fee policy, will the appraiser have the option to counter offer? Again, Dodd/Frank does give this ammunition (varying scope of work) to the appraiser to ask for higher fees, but with a flat fee is the appraiser out of luck? With TRID and a flat appraisal fee established in advance, lenders are AGAIN asking us to do more for the same fee.
Dear fellow Appraisers and blog readers.
I just received this UNSOLICITTED request for a bid on a COMPLETELY “unreasonable” (I crossed out asinine because I thought that may too inflammatory) appraisal request.
I am sharing it with all as it is exemplary of the nature of ALL the unsolicited bid requests these specific people & company apparently blast out to me, if not all appraisers they ever heard of. My reply to the email is at the top of the message sent to me. I have NO CLIENT relationship with this company. I do NOT consider myself to be bound by their email handing instructions on the bottom. My feeling is that their idiocy should be shared with all. Besides, I very clearly WAS the intended recipient and can do whatever I want with it.
I would welcome the opportunity to discuss it with their senior management. I am awestruck that it supposedly originated from their “Valuations Manager”. Seriously?
Should I have bid something in the range of $20,000 to $50,000? I mean, I would not do this assignment under any offered circumstances & conditions; but these terms do not appear to be from an AMC with a hint of what’s realistic and what is not. Am I passing up easy money?
Could I subcontract the work to another State AG? Perhaps one that is endowed with super human powers? Or alternatively to ten difference appraisers collaborating? You know, with the ability to thoroughly research the property at 5:40 PM on a Friday; schedule a Saturday or Sunday appointment; inspect the property; analyze any existing leases & confirm the rights of ownership that exist and which are to be conveyed; analyze the pending sale contract; research the listing and exposure history of the subject research market data for current lease rates, closed sale comparables, analyze and reconcile all relevant data including current (local) market conditions which based on relatively recent experience on the same street suggest that almost the entire street in that city is within a Special Plan land use area; identify highest and best use, develop land value opinion and replacement cost data, and apply sales comparison and income analysis techniques, reconcile data and provide them with a “Complete narrative appraisal report preferably in a summary report format”…whatever that is?
My sincerest hope is that someone from one of the lenders that use this firm reads this blog and the email sent to me; and comprehends how unprofessionally and incompetently the assignments are passed out to the appraisers.
PERFECT example of what passes for reasonable and customary turn time. Right?
Where is the question of appraiser competency addressed by the AMC? Where is the question about what MY opinion is of the time required to complete the assignment competently and in accordance with USPAP? As far as I can see the ONLY two requirements are an ability to do the work overnight, and then possibly to be the lowest fee quoted for that one day commercial turn time appraisal service. I have never worked for them in the past, so unless my blog comments have endeared me to them somehow, I don’t even know how they considered me for this.
Can anyone tell me if Arizona regulates it’s AMCs? Would this order inquiry fall within what they deem to be “reasonable” expectations, or the expected due diligence they require of AMCs?
Or, am I just being unfair and picking on this poor innocent little old AMC? Has anyone else out there ever done work for this AMC? Is this typical of how they operate?
[My reply was]:
“I wish you the sincerest best of luck.
From: Marcus Mask (Phx) [mailto:MMask@lrescorp.com]
Sent: Friday, September 11, 2015 4:44 PM
Subject: Quote – Appraisal Order: [Redacted by MFord] Beverly Blvd, Whittier, CA
We have a commercial property in Whittier, CA that we need an appraisal for and need it on a rush. It is a purchase for $515,000 that needs to close on Friday the 18th.
Property: [REDACTED BY MFORD] Beverly Blvd, Whittier, CA 90601
Please provide the cost for a Full Narrative Appraisal, preferably in a Summary Report Format, and hopefully the appraiser can get out there this weekend and provide the report on Monday?
3033 N 44th Street Ste 190
Phoenix, AZ 85018
O 714.520.5737 x269 | F 714.520.5499
firstname.lastname@example.org | http://www.lres.com
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Yet one more reason why an appraisers guild became necessary. Contact JanBellas@appraisersguild.org to join or call me direct for any questions you may have Mike Ford (714) 366 9404.
Maybe I should have simply replied “KMA”
In this particular case I believe that “KMMFA” would be more suitable. Thanks for sharing another appraiser abuse example Mike.
Reminds me of just before getting out of Boot Camp. Our Drill Instructors [NEVER “DI”s] had to reteach us before we all went home on leave that one could ask for the salt to be passed WITHOUT using my initials before ‘salt’.
Hey if you guys want a HUGE laugh, go to the LRES site and have them email their “white paper” to you! Imagine THEIR regulatory compliance folks must take USPAP every few years! Of course there is no mention about whether ANY of them ALSO have to be an appraiser that would understand the practical APPLICATION of USPAP.
Well, I guess its ok. I mean they have a law professor on staff. Isn’t that the same thing?
Fellow appraisers, please visit http://mfford.com/html/c___r_fees.htm
Apologies for using my personal site but logistical and time constraints made it necessary.
It is to read a draft proposal for minimum national appraiser fees. I appreciate some believe no one other than themselves should set fees, and I concur. Except, in the real world of today where someone (lenders and AMCs) are ALREADY SETTING your fees. If not directly, then through ruinous less than customary OR reasonable fee competition.
Im interested in your meaningful, constructive feedback as well as comment & discussion here.
For those that insist ONLY regional fees are practical, this same system works for the lowest to highest regions of America. Subtract 13% for low cost areas; add up to 9%+- for higher cost areas.
Operating premises were:
1. AMCs are here to stay. Liked or hated, they are part of the chain now.
2. LENDERS want AMCs to offer one size fits all pricing. This MAY come close to doing so baring complex assignments. Even there, an inferred hourly equivalent is suggested.
3. If WE don’t set “reasonable” minimums for ourselves, then others will do it for us (or to us).
4. Framework allows for and includes inducements for trainees or less than certified appraisers-who have been largely excluded or ignored by AMCs in recent years.
In addition to posting here, PLEASE also email comments to JanBellas@appraisersguild.org
We are going to start reaching out to state coalitions and other appraiser peers groups. We hope to incorporate helpful comments or views in that effort. In the meantime our parent union is already being contacted to see how we can best proceed.
Thank you for taking the time to read and respond. Mike Ford, AGA; OPEIU/AFL-CIO