Fighting for Consumer Protection & the Appraisal Industry

Amy M. Cert Res says:

Not just a little late to the party, but a lot late. Appraisers had their chance years ago, however they allowed themselves to do what they always do and that is think this “the appraiser profession will never go away. They need us. I lived through the crash and the crisis and this too shall pass”. Until it doesn’t. Then of course they bring in their political feelings and well we all know how that goes.

I applaud all those still trying to fight the fight, however I also am very reasonable and know that this split profession is getting closer to extinction than a new day.

There are too many organizations out there who are friends with others and will continue to supersede the independent appraisers. Just look at AI and NAA. Both only care about what’s best for them. NAA is made up of AMCS and appraisers. They play favorites and want people in charge that conform to their outside partner standards and well most of the leadership is AMC people. Just go to a conference by them and see just how they are buddies with FNMA/FREDDIE and others. I mean how many times can you have Lyle Radke at your events and have him babied? Then look at AI, who keeps pushing their own agenda and what’s best for their members who are amc owners and more.

So now we add another organization or a THINK TANK and they expect to change the appraisal world by going to meetings and talking to government agencies. I say good for you, however you will need more than your words and lots of $$ to change things. I think I saw something from someone in another forum that said “this new think tank will end the divide amongst appraisers”. Hmmm. Really? I want to drink what you are drinking and I also see this as a new way for many to try and stay relevant. Past failures create new opportunities. Try try again.

In the end. I wish things would and could change however, $$ and power will win. It will win even more so when the leadership is the same as in the past that has failed over and over.

There have been many efforts to talk to the CFPB, congress and more. We have seen our very own appraisers testify and well, most if not all dropped that ball when they had a perfect chance to make the points.

Here is the last point. No one cares about appraisers but appraisers.. It’s about the consumer and the public. When you make it about the appraiser and cry and whine, they don’t care. They aren’t here to protect us just like real estate appraisal boards.

I hope you all succeed and change things. Would be nice to see. I’m ready to retire and go enjoy my life.

Baggins says:

In the updated video clip image I posted above, which shall live in infamy, when Mr Perry was the only one to raise his hand when asked if there was a problem with racism in the appraisal industry, which I cleverly now updated to include everyone with their hands raised. I also included Joans spaghetti map of appraisal related regulatory authority as a reference to this complicated topic matter. Additionally I mentioned how regulatory structure never actually encompassed the amc industry properly, the amc industry coming in after all other regulatory structure development.

The persons whom wrote Dodd Frank included the C&R billing rule specifically for amc’s, with a $10k/$20k recurring daily fine provision, which was specifically meant to stop the expansion of the amc industry, to stop those companies from pilfering the appraisers fees and defrauding consumers in the process. After the CFPB’s safe harbor interpretation, references to the $10k/$20k daily recurring fines for amc’s was silently removed from Reg Z wording, as that became instantly irrelevant, since amc’s would no longer be subjected to rules which stated ‘they should compensate appraisers at a fee rate, as if no amc was involved.’ FTC vs Lousiana regulatory board which came years later illustrated the inadequacy of regulatory structure at hand, they actually ruled in favor of continued unrestricted unearned fee raking, unbeknownst to the consumer. The noble members of the Louisiana board were the only state agency to try and actually implement C&R rules, as they were originally intended to be implemented, exactly as first written, to correct the erroneous CFPB safe harbor interpretations.

To reference Mr Retired Appraiser as well, the amc lobbyist actions of bullying in a CFPB ‘safe harbor’ provision which changed the definition of C&R compliance also coincided with the event of reformation of HUD 1 forms, where the industry heads selected a new consumer disclosure form, among several possible choices.

Specifically the amc industry and partner lenders sent big deal lobbyists to persuade not to select the HUD 1 version which specifically included an amc billing line as it’s own unique line item, set apart from the appraisers compensation fee in a clearly separate disclosure line. That now abandoned form was developed under the notion that Reg Z C&R would be enforced and therefore amc’s would need to state upfront service charges which would be recorded on the new disclosure forms. Consumers nationally would have been made aware of the amc’s superfluous variable additional billing charges, and could have made better informed decisions. Instead we have an imbalanced state by state amc regulatory structure which is wholly inadequate, where in some states it’s legal for amc’s to silently tag on additional secretive fees, in other states they must disclose.

Most state agencies took the position it was the lenders responsibility to provide oversight of the amc, as the amc companies activities fell under the purview of regulatory oversight for lenders. Most state based amc regulation was focused around timely compensation to appraisers rather than fair compensation. Nevermind the scale of david vs goliath, as it’s basically impossible for an individual appraiser whom was subjected to amc pressures to bring successful challenges to the lenders purposeful disregard of the harms their selected amc causes consumers and appraiser vendors alike.

Instead we ended up with improperly co mingled billing, and the CFPB safe harbor interpretation which allowed the amc industries rapid proliferation and fee pilfering to continue. An activity which if engaged in by any number of other licensed individuals would clearly represent violations of ‘junk fee billing’ and ‘unearned fee raking’ provisions already present in existing guidance and regulation.

Even the Federal Register had special wording that amc companies were not to select appraisers by fee, but rather should select appraisers based on experience and best interests of consumers and such, issued in a similar time frame. However, the allure of unregulated junk fee billing was too great for the amc industry to resist, which is why the entire body of these companies all either kept their unearned fee raking model or finally switched to the unearned fee raking maximized profit model.

You can not find a single amc company out there, nearly two decades after amc companies began proliferating, which clearly bills separately for their ‘management’ service. The primary goal of this improperly co mingled billing is to drive appraisers compensation down, drive consumers costs higher, and pocket the difference. In turn, the amc industry used this variable excess compensation to create a myriad of ancillary services and tools which places consumers in even more harm, also meant to substitute the appraisers presence entirely. Coming to fruition now in the form of ‘modernized forms’, ‘certifications for avm valuation estimates’, ‘property data collectors’, and PAREA programs which provide provisions to skip apprentice and field training in favor of inadequate virtual training to be an appraiser. In turn allowing rapid licensing of employees of amc companies to become appraisers, whom will not be subjected to similar rules as independent fee appraisers. Also special bonus, PAREA arguably has constitutional violations on selecting PAREA participants based on affirmative action type principals, which the supreme court just struck down in education specifically. The appraisal industry has remained frozen in time, most appraisal companies unable to expand, hire, or train, as all that potential energy went to the amc industry instead.

For those appraisers whom did capture amc work, there is a long standing argument the reduced compensation did effect work quality, as well as creating systemic training deficiencies for new appraisers whom were brought up in the amc world. Mr Ford from the AGA group as seen to the left of this post, covered that topic, analyzing a GSE White Paper written on the matter, which was basically an industry cover up to shelter the amc industry from accountability. We were able to infer from the data there however, that only one out of four licensed appraisers submitted appraisals to the CU data base, while working with an amc company, and that half of all licensed appraisers no longer submit reports to the CU database. As the amc industry then continued to brag about record setting business growth to the appraiser community whom they took those opportunities away from in the first place.

Several of the amc’s cleverly maintained consistent billing and consistent appraiser compensation with some of their major volume clients, so when audited, they could claim there was no such imbalanced compensation activity happening, even though it was beyond obvious the amc industry at large had moved to this bidding variable fee raking model. Every single licensed appraiser in America at some point dealt with amc bidding requests.

Appraisers decried the unfair nature of this daily, and roughly half of all licensed appraisers left the field of mortgage lending as a direct result of the regulatory structures inability to reign in these corrupt amc business practices. Tens and tens of thousands of appraisers quit overnight, on repeated occasions. There was a letter writing request at the Federal Reserve over this matter and if I recall correctly, that publicly available body of appraiser objection letters numbered in the thousands of appraiser responses, nearly all containing similar pleas that the amc industry would decimate the best of the valuation services members and eventually cause a shortage of appraisers.

Any appraiser having dealt with these pressures can relate to the end result of the amc industries applied pressures on appraisers; ‘What is your fee and turn time?’ They routinely call fifty or more appraisers for every single order request, in order to maximize their fee raking profits. Appraisers known to always provide the lowest fee (the most thing of value to the amc, to be the preferred selectee, aka the largest bribe) are gifted with direct assignment, and the lions share of work orders.

The response which placed any given appraiser into immediate appraiser non grata status was simple (aka blacklisting); ‘ What did you charge the consumer for the appraisal service? Because that should be my appraisal fee.’ Hence my long standing rebuttal; ‘Distinctly different fees for distinctly different services’, separated billing. Or as they used to say, get the amc’s hands out of the cookie jar.

This allowance for amc companies to take variable fee raking from the total appraisal fee resulted in an entire generation of appraisers receiving the upper hand with massively imbalanced work flow, incredible business expansion, as the rest of their otherwise worthy and equivalent peer appraisers lost fair access to those work flow opportunities. Those other appraisers whom lost out, the ones whom understood this ethical violation and departure from the management rule that we should not ‘provide a thing of value’ to be the preferred assignment selectee. Understanding this was an untenable and unethical engagement, which we should therefore refuse out of general principal and adherence to ethical standards.

Despite the cosmic cobra effect and systematic bi annual re writing of the supposed ethics book for this industry, and continued pleas from tens of thousands of remaining appraisers, no powers that be were willing to face up to the idea that it was a violation of ‘the management rule’ for an appraiser to provide a discounted fee, in order to be the preferred selectee. ‘It’s only a discount, not a bribe.’ ‘Then why doesn’t the consumer save any money!?’ At a minimum, an indisputable fact that amc’s do not benefit consumers with any cost savings. Yet the amc industries apparent primary focus is carving out lower vendor fees. The lending community and GSE heads now parrots the cost savings line in unison as supposed justification to eliminate appraisers entirely, ignoring that the appraisal services fee is actually an improperly combined fee from multiple companies, an individual appraiser, and a corporate amc entity.

Clearly an appraisers fee reduction from the amc companies point of view, is nothing short of a bribe to receive ‘the lions share’ of work orders, ahead of otherwise equivalently if not better qualified peer appraisers. Evidence of this imbalance surfaces routinely, I believe it surfaced recently on this blog, with the story of the one appraiser company receiving millions in compensation from a single amc, and the next most compensated appraiser firm received only a fraction comparatively. That is not fair distribution and there was nothing that special about their service to warrant the imbalance, except those appraisers had the lowest fee, by which the amc profited more, and consumers never saved a dime. Tried to find the article, too far back, had an image disclosure of the one appraisers having been compensated millions of dollars via some court discovery.

Or you could just look up ‘The Appraiser Coach’ for lessons on how to claim unfair advantage over more deserving appraisers in this industry and skate away scott free with their entire workload, drive your competition straight out of business, aka restraint of trade practices in a free market setting. Despite that activity being clearly illegal in many other unrelated industries. If a person in government called for biding on contracts in this manner, then selected the lowest cost vendor, then charged the maximum service charge amount to the budget as if vendors never provided lower cost services, and kept the difference as undisclosed personal profit, they’d be guilty of embezzlement and be hauled straight away in shackles and handcuffs to a federal prison.

The appraisal industries general recognition of this became quite simple; Survive by refusing to work with mortgage lending and GSE’s, because amc companies dominate over 80% of all work in these fields. There is no shortage of appraisers, only a shortage of appraisers willing to play ball for amc’s.

There was no need for appraisal modernization and industry retooling efforts in the first place. There would have been a near instant recovery of the appraiser vendor populace and their ability to serve the lender community, if not for the amc companies lasting presence. Roughly 40,000 appraisers would instantly return to mortgage lending, if Reg Z on C&R compensation was actually enforced as originally intended. Rather, when the CFPB safe harbor rule was implemented, the appraisal industry shed a hundred thousand licensees whom built their business solely around mortgage lending work. A substantial portion of a well qualified, experienced, and educated professional workforce, vanished in an instant. Over the next decade and a half, appraiser populace went from nearly 200,000, down to 80,000. Half of the 80,000 whom remain today refuse GSE work due to amcs. Of the half that are willing to complete GSE work, half of them refuse amc work.

When a lender chooses to utilize an appraisal management company, they purposefully deny themselves access to three quarters of the licensed appraiser community. A lenders cries of inadequate appraiser servicing is a self imposed illusionary hardship. Because they only want to work with pliable appraisers. Amc’s, the long arm of predatory lending interests. However this assists appraisers in more easily identifying ethically adherent lenders; they do not use amc services.

This is beyond a clear example of restraint of trade practices, that amc’s have caused 75% of all remaining active appraisers to boycott their services. This is industry racketeering as persons within government collude with persons within lending and the amc industry, to purposefully drive out qualified licensed professionals, with the intent of replacing us with automation which is absolutely inferior and will cause great consumer harm. As Jeremy Bagott wrote; ‘Exploiting gutted mortgage underwriting.’ Wizardry.

Appraisers like myself are the last of a dying breed; focused solely on mortgage lending and default management, but refusing to work with amc companies. We maintain the position our goals are service to the public by way of regulated government institutions involved with mortgage lending. You know, in support of the American dream of home ownership?

We held the line and shifted many a lender away from the amc model, but this was a moving target and difficult goal, as we continue to operate under systematically applied pay to play systems and are subjected to daily restraint of trade practices. Many of us have spent far more time dealing with amc harassment and demanding they stop contacting us, then we ever spent in our brief try outs with these companies. Hardly any of the amc employees understand regulatory structure. Except for one single appraiser, the entirety of any given amc company employee set is unregulated, and unlicensed. They routinely run roughshod over any appraiser they work with, and similar treatment for any unfortunate consumer the lender places in front of them. See Yelp reviews of any given amc company for proof of their service quality from a consumers point of view. The amc companies are unrestrained by regulation. Appraisers whom work with amc companies are disposable heros.

This defies logic and normal reasoning to accept that regulations apply here, but not there, etc. That is in fact, a major part of the problem. For those not understanding why Dave’s post is so important here, it’s important to have a basic understanding that this exact reason of regulatory authority and the confusion there to, has allowed the appraisal management industry to basically branch out to limitless sectors within real estate and lending, and remain virtually unregulated. Reasons for these moves towards appraisal modernization is a mechanism to allow amc’s to operate without similar oversight as regulated licensed individuals. Total elimination of a very valid check and balance, the independent fee appraiser. This needs to end.

What was the point of even writing all these various regulatory guidance documents, if a new company type can simply move in and ignore every last rule and operate outside the scope of regulatory oversight? But that’s what the amc’s have done, and is exactly why these companies have a consistent predictable motivation to systematically replace the duties of all licensed individuals, claiming that market share for themselves instead. They will not stop with appraisal related items. They’ve already branched into inspection, sketching, software development, forms development, order management systems, data retention systems, now commercial, etc, etc.

One of these days we’ll have to sit down and have a heart to heart conversation about how most appraisers feel about appraisal management companies, and specifically why we feel that way. Personally, at the end, nothing happening, my lenders went under, the end is near. But if I were to apply to amc’s, I could still be completing one appraisal or more every single day. All that would take is for me to play ball and steal that work away from the other amc appraisers, by way of providing a greater incentive to the amc to send me the work order, by way of a lower fee. I would simply have to abide the amc companies requested terms that I keep my compensation secret from the consumer. Some may call that a predatory engagement strategy, to take from others rather than earning the position through merit, so we therefore prioritize fair dealings and ethic first. Human decisions which are subsequently driving another 20,000 appraisers out of business soon as ‘appraisal modernization’ becomes broadly implemented. Modernization! Equity!
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https://appraisersblogs.com/canadian-banks-will-exploit-gutted-u-s-mortgage-underwriting

https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual_tila-exam-procedures_2021-10.pdf
(control +F) to bring up the find tool. Search; ‘Customary’. then Appraisal. then Inspection.
Regulation Z seeks to ensure that real estate appraisers, and others preparing valuations, are free to use their independent professional judgment in assigning home values without influence or pressure from those with interests in the transactions. Regulation Z also seeks to ensure that appraisers receive customary and reasonable payments for their services. Regulation Z’s valuation rules apply to creditors and settlement services providers for consumer credit /
My question is are amc’s still in compliance with these rules, having so much stake in all these ancillary services they now provide in addition to just managing appraisers out of the picture? Are those exemptions noted still applicable if basically the amc company now provides the valuation service themselves through avm’s, partner affiliates, and employee appraisers?

More specifically, Regulation Z:
Prohibits appraisers and appraisal management companies hired by lenders from having financial or other interests in the properties or the credit transactions;
Requires the payment of customary and reasonable compensation to appraisers who are not employees of the creditors or of the appraisal management companies hired by the creditors.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) amended TILA to include several provisions that protect the integrity of the appraisal process when a consumer’s home is securing the loan. The rule also requires that appraisers receive customary and reasonable payments for their services. The appraiser and loan originator compensation requirements had a mandatory compliance date of April 6, 2011.

https://www.consumerfinance.gov/rules-policy/regulations/1026/interp-42/#42-f-1-Interp

They gutted the original spirit of the C&R rule. I’ve scoured the data bases for the $10k/$20k amc fine language but can no longer find references to this. Biggers wrote a piece before this happened which mentioned the fines, and appraisers still maintained hope to reign in the amc industry. Attached. If you were an Alamode subscriber, search for Dave Biggers emails in your 2010 emails for the full letter. I posted several waybackmachine Alamode articles as well in previous posts from earlier this year, and you can also find those quite easily and look through them yourself if desired.

Thanks David Samnick for posting this brief, but inspiring article. At this point we’re just rehashing the same regulatory shortcomings, the same appraisal management racketeering evidence. Unless some miracle client shows up or more companies turn course and go back to ordering full appraisals, the end is near for every single independent fee appraiser whom has thus far relied on GSE work. There would be enough GSE requests to go around and sustain all of us right now, benefit consumers with our services, if not for all the changes. By imperial decree, GSE heads in coordination with a corrupted co opted group of appraisal organizations whom are managed by everyone except working appraisers, have retired our positions. Retired Appraiser and the other hundred thousand appraisers who walked away were right, there is no saving this industry. American consumers will ultimately pay a much dearer price than we have. But at least we tried to hold on to traditional checks and balances and consumer protection principals. Who knows, maybe these interests will defeat themselves, having finally achieved their goals. Perhaps one day we could look forward to a total abolishment of the GSE programs and see a return to sensible lending where risk management is not shouldered by the taxpayers. Thanks for reading on The Appraisers Blogs. Cheers.

Dave says:

supply and demand – free money is gone which provided huge appraisal fees, 6-7% money is called huge slow down and the rush is OVER. I’m sure I am not the only one who realizes this. Hope you put some of those huge profits away.

Maria says:

I am getting surveys from AMCs if I am willing to do hybrids. I tried, did 5 reports. It was a mistake. I will not do more. WE ALL NEED TO SAY NO. It is the way our fees will be locked on minimum wage level, while we take all the responsibility and everything comes with.

Dave says:

Maria, I applaud you for your honesty and specificity. While you were able to charge on average $350, to your point this is half of what you should be charging for a traditional appraisal, doing the same work, assuming far more risk exposure and in the end they win and we lose. They got the product for half price today with the goal of paying 25% as time goes on. Without Lyle Radke, Fannie would not be pushing this dumb down approach in the financial services industry. I hope our colleagues would jump in and point out that current work is heavily loaded with refinance and 97% loans often with high seller kickback to closing costs. With an increase in risk, comes an increase in mortgage failures, The lender’s client (NOT OURS) are no longer “I can pay cash and roll it later”. Current economic news clearly reports issues with banks stability NOW not tomorrow. Be vigilant and continue your quality work and all will be fine!