Insights from CFPB’s Public Comment Period
The comment period on the Consumer Financial Protection Bureau’s (CFPB) “Request for Information Regarding Fees Imposed in Residential Mortgage Transactions” concluded on August 2, 2024, with a total of 959 comments received. Upon reviewing some of these submissions, several noteworthy perspectives emerged regarding appraisal fees and the role of Appraisal Management Companies (AMCs).
The National Association of REALTORS® (NAR) highlighted the lack of transparency surrounding AMC fees, which are often bundled together with the actual appraisal fee on the Closing Disclosure (CD). This opaque structure prevents consumers from understanding the true cost of the appraisal service and hinders their ability to evaluate price discovery in the appraisal industry. The NAR urged the CFPB to mandate separate line items for the appraiser’s fee and the AMC’s fee on the CD, arguing that this would improve regulatory oversight, market efficiency, and consumer awareness.
The joint comment from the Appraisal Institute, American Society of Appraisers, American Society of Farm Managers and Rural Appraisers, and the MBREA delved deeper into the nature of the misrepresentation created by the bundling practice. They explained that the AMC business model involves “broadcasting” appraisal orders to numerous appraisers, seeking the lowest fee and fastest turnaround time, often with little regard for the appraiser’s competence or qualifications. The lower fees paid to the appraiser do not benefit the borrower, as the overall appraisal fee charged remains static, with the AMC retaining a larger portion of the stated fee. Furthermore, the quality control process has been outsourced to non-appraiser reviewers who lack access to local market data, leading to a decline in the thoroughness of appraisal reviews. The groups argued that this opaque and cost-driven system undermines the quality of appraisals and deprives consumers and lenders of the transparency they deserve.
Mortgage bankers’ associations from several states echoed these concerns, suggesting that itemizing the appraisal and AMC fees would enable lenders to better monitor the practices of the AMCs they hire and ensure that the borrower-paid fee is appropriately allocated.
The comment period also provided a platform for individual appraisers to share their perspectives, such as the detailed account from Pat Turner, President of the Virginia Coalition of Appraiser Professionals (VACAP). Turner’s firsthand experience as a long-time appraiser highlighted the “egregious” practices of AMCs, including their instructions to appraisers not to include their own invoices with the appraisal reports, which enables the AMCs to misrepresent the actual cost of the appraisal service to the consumer. Turner provided a specific example where the invoice to the borrower listed a $834 appraisal fee, while the appraiser was only paid $205, with the AMC, Clear Capital, retaining the difference.
Echoing these concerns, an anonymous independent fee appraiser provided a compelling account of the devastating impact the AMC business model has had on the appraisal profession, describing how the “unintended consequences” of the Dodd-Frank Act have decimated the livelihoods of independent appraisers and handed a “Golden Ticket” to AMCs to extract substantial portions of the appraisal fees, often without any disclosure to the consumer. This, the appraiser argued, has robbed them of their time, resources, and livelihood, while allowing AMCs to lobby Congress and limit the voice of independent appraisers. The appraiser’s plea for the restoration of the Truth in Lending Act (TILA) and the ability to reclaim their professional independence underscores the critical importance of addressing the systemic issues within the AMC industry.
Dallas Kiedrowski, Board of Director and Legislative Committee for the Appraisers Coalition of Washington (ACOW) also commented on the significant burden that AMCs place on consumers, often inflating the cost of obtaining a mortgage by hundreds of dollars through the additional fees associated with their involvement. Kiedrowski highlighted how the presence of AMCs has sometimes been linked to lower-quality appraisals, as they often select appraisers based on their willingness to accept lower fees, leading to rushed or less thorough evaluations that undermine the integrity of the property valuation process. Consumers are frequently unaware of the AMC’s involvement, further obscuring the true cost of the financial product and preventing them from making fully informed decisions. Kiedrowski also highlighted the lack of transparency surrounding the recently introduced “Value Acceptance” Property Data Reports (PDRs) by the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. While these PDRs are touted as a low-cost alternative to traditional appraisals, the fee breakdown reveals a significant profit margin for the AMCs involved, with up to 78% of the total fee paid by the consumer being retained by the AMC. This practice not only misleads consumers but also raises serious ethical concerns about the true value being provided and the exploitation of consumer trust.
Lastly, the comment from Montezuma Mortgage LLC, a small brokerage, offered a unique perspective from the mortgage industry. The broker expressed deep concerns about the practices of AMCs, which they believe undermine the value provided by appraisers and represent a misuse of consumer trust. The broker’s commitment to ethical practices and their responsibility to shop for the best deals for their clients has led them to question the necessity and exploitative nature of the AMC involvement in the appraisal process, further reinforcing the need for regulatory action to protect consumers and restore faith in the appraisal profession.
These comments highlight the growing consensus that the opaque fee structures and practices of AMCs are not only confusing for consumers but also undermines the integrity of the appraisal process and the fair compensation of appraisers. As the CFPB considers potential actions to address “junk fees” in mortgage transactions, the transparency and accountability of AMCs will likely be a key area of focus.
- Outrage Over Connect by ValueLink’s New Monthly “Junk Fee” - November 27, 2024
- ARCC Discussion Exposes GSEs Agenda to Reduce Appraisal “Friction” - November 22, 2024
- FHFA’s Appraisal Waivers Expansion - October 29, 2024
And what will be done to help both homeowners and appraisers? Ding ding ding…we have a winner!
Correct Answer: NOTHING
Are you not aware of what is going on? Are you not aware that there actually may be some good that comes from all of this? The CFPB was given a ton of data and proof of what is and has been going on. There is also more going on behind the scenes. It pays to keep up to date.
The same proof they have had since their worthless organization was created a decade ago?
The only thing that actually surprised me this time around, as they struggle to explain their existence, is that they did not provide appraisers with a list of words that could not be used.
It is a case of the wolves guarding the chicken coop. Most appraisers are cowardly. Not confident. The Heritage Foundation hates Experts. Judges, presidents, congressmen, never congresswoman, neither suit the nationalist agenda to fulfill Project 2025. Just bid to everyone your high fee, take your time to do a proper job. Don’t take any Fannie or Freddie or HUD assignments until we have gone on strike. Watch them use algorithms and crash the economy. Then they will be kissing up again. Are you willing? Only organized work stoppage will freak out the banks and we will get our respect back!
“Don’t take any Fannie or Freddie or HUD assignments until we have gone on strike”
I’ve been saying this for years- if every appraiser quit taking AMC orders or anything HUD/Fannie/Freddie for 1 month they’d be forced to the table to listen to us. It’s a big ask financially for many of us but needs to be done.
Too many ‘skippy’ appraisers taking full 1004s for $275 and 24 hour turn times killing the profession and our fellow appraisers. Stand your ground, know your worth, get paid and treated like a professional.
I’ve been reading those exact same words for 40+ years. You know, back in the 1980’s appraisers had a chance to create a professional organization similar to the CPA organization. I forgot what the exact situation was. But, everybody wanted to create their own organization or didn’t want to belong to any organization or whatever and guess what? Here we ******* are. It was during the so called union busting days under Ronny. The appraisers back then said “It’ll never happen to us. We’re too important.” Well, guess what? Here we ******* are.
You sound young. Nothing wrong with be young and hopeful. I wish you luck.
Sorry, there are things going on behind the scenes. Data collection has been going on for well over a year. Progress is being made. Has the potential to make a huge impact. Stay tuned. Director Chopra is trying to take the bull by the horns on this.
The AMC system, as originally intended to function, has become corrupted. Appraisal costs to the borrower have increased while fees to the appraisers has at best, remained stagnant and in many cases lowered. My understanding, when all this began, was the AMC meant to be an unbiased third party in the process between the lender and the appraiser.
Appraisers would submit information to join the AMC panel, post their work areas, fee schedules, proper documentation etc. they become part of an assignment process based on the area in which the property to be appraised was. Fees were to be customary and reasonable for the area. This has become a joke.
Larger AMCs began blasting quote requests to multiple appraisers, seeking the lowest bids, while charging higher fees to the borrower and apparently pocketing the difference. They try to disguise this by asking for quotes for fee and turn time.
When this all started, I quoted my standard fees, and if possible, a one or two day turn time. Never got the orders. I no longer bid.
Now, one of the worst offenders, Class Valuations, who I used to do a decent bit of business with, but stopped when everything became a quote request with them, have hired staff appraisers. They are no longer an AMC as far as I am concerned. They are competition. And they are also in a position to put undo pressure on their appraisers to make value.
Where have the government regulators, if they exist, been in all this?
The so-called regulators have been our Achilles heel since the beginning. They were our only chance not having our independence abused by the AMCs. But it came evident immediately that all of the state boards were easily bullied by the AMC attorneys and lobby. Meanwhile REVAA set up shop in DC and started throwing their money around while the independent appraiser has been dog paddling trying not to drown in the rapids.
It was corrupt from the get go, regardless of what they said it was. For a moment back about fifteen years ago I even thought they might make a positive difference. I gave that idea up pretty quickly.
“Reasonable and customary” is communism. I mean, show me a reasonable and customary house and or market. I think that maybe they used to exist. Not any longer where I live. And, the moment you agree to “R & C” they’re going to send you on a job that takes you ten times longer than a normal job and expect you to do it for R & C.
You realize that lack of fee disclosure is against TILA don’t you?? This should be and ALWAYS should have been a fee plus AMC cost to lender. There should be a C&R fee minimum set and we should ALWAYS have the right to quote higher for complex properties – THEN they can go shopping.
I tell all borrowers that whatever they were charged by the lender and or AMC that I only get about 25% to 50% of that. You should see their eyes pop. I don’t know what the lenders and AMC’s tell borrowers. I’m almost out of this chicken race anyway and frankly don’t care much one way or another. Although I’ve been in this a long time, I’m retraining to GTFO of anything that requires a state license. But, good luck.
The government regulators are in the same place they were in the 1980’s prior to that bust … doing the bidding of the lending industry.
Whats taken so long? The AMC leetch has been on this gravy train for a decade and a half.
About time
Excellent news!!
Hmm. Wonder what happened that it finally made the mortgage bankers realize what’s going on? After all they are required to be monitoring their choice of AMC’s in the first place. Why haven’t they been doing their jobs all of these years?
Because the benefited from it. Something tipped the scales.
Kickbax
They are LIARS!
Banks and mortgage companies pre set the fee to be paid to the AMC. THEY know the fee to be charged at the time the Good Faith Estimate is issued.
That happens BEFORE the AMC is selected from the lenders pre approved list.
The lender won’t choose an AMC that has not agreed to the fee allowed to be charged as SET BY THE LENDER.
Donna, when the discussion is predefined toward tangential issues, what’s the point?
To argue whether a solution to something that isn’t the real issue, will be beneficial?
Banks and mortgage companies are competitive. That even extends to behind the scenes price fixing in advance of any AMC becoming involved.
Donna. The appraiser author Jeremy Bagott writes many articles detailing conflicts of interests and how regulators fail to do their jobs. Find his articles on twitter feed and all appraisers should subscribe to his news feed which is delivered directly to your email. He provides detailed accurate research for many such issues. Obviously policy is for sale. Lobbyists.
Thank you. I am fully aware of Jeremy’s work. ! I was being sarcastic. I know what is going on. So many issues, and hoping they ALL get brought to light, and blown out of the water.
How sad is it that they only received 959 responses (which includes responses from agents, lenders, AI, other organizations, etc. Appraisers need to step up
I DID step up and got an email from CFPB a week ago saying in essence, “uh, we may not have received your comment, so please re-send”. I spent alot of time making that comment so WTF. I do not trust these quasi-government agencies.
You must have said something smart 😉
Kim DeFilippis unfortunately tech issues happen. You also have the Other source to send it to as well.
Thank you for trying, and please keep it up!
Pretty disappointing considering there’s how many – 70k licensed appraisers?
Appraisers are afraid of retribution.
Amc’s have been taking large portions of the fees and making borrowers think it’s the appraisers, which is total bs
Yay, I’m honored my comments gained some attention for your article!! Let’s all pray that someone at CFPB is listening and has a heart and a brain. Signed Anonymous
The 2008 mortgage meltdown gave us AMC’S, and only now are they aware of this problem? Nothing is going to be done now and nothing in the future. Take the “Racist/Discrimination” lies being told now, our big representatives of these appraiser institutions are doing nothing about this travesty either but just appeasing HUD etc… They have destroyed the appraisal industry and this is all going to come back and bite the government and the consumer in the butt just like the 2008-2009 fiasco. Give it about 2 years, mark my words!!! Another crash is coming!!!!
Yes, we all know this. The general consumer know it, but the don’t know how bad it will be and what was the actual cause. They can catch up on Big Short 2…
I found it interesting that the Appraisal Foundation immediately jumped on the BLM bandwagon and is leading the charge for us to be SJW’s, righting perceived economic wrongs, instead of appraisers. What are we supposed to do when appraising for equity conflicts with GSE guidelines, which it is guaranteed to do?
“What are we supposed to do when appraising for equity conflicts with GSE guidelines, which it is guaranteed to do?”
I like this statement. I’m going to post this on LinkedIn for all to enjoy.
Now that TPTB have been ‘read in’ to the appraisal AMC model and its problems, can we burn the whole thing down and start over?
I doubt it. I mean they just made the great decision to allow the users and producers of AVM’s (complete by AI and FNMA) are to be regulated by…. themselves. I don’t have any good faith these same people will be able to make a competent decision on these matters.
Eric, that’s why the CFPB issued the final rule on AVM modeling. Get ready to Rm9sbG93ZXJz. Meet your new new new boss.
If one wants to start over with something that works all they need to do is read this original copy of the Federal Register, instituting regulations in the lending field for regulated appraisers. How sensible rule making had looked before all the watering down and dilution, rising demins, automating away, cost cutting, outsourcing, dozens of illegal uspap guidance rewrites. This is where the cosmic cobra was born.
https://archives.federalregister.gov/issue_slice/1990/7/5/27758-27773.pdf
As long as there are AMC’s there will be corrupt AMC’s with a very few number good ones that will be paying appraisers what is reasonable & customary… I pick & choose which AMC’s I want to accept assignments from, it’s never for their “quoted” fee, I specialize in oddball & rural properties, going where most appraiser’s don’t want to, I don’t mind driving for an assignment, my fee takes into consideration travel time as well as desk time .If they don’t want to pay it, find someone cheaper. I’m slowly transitioning into non-AMC work, it takes time but I’m heading in that direction. BTW; Clear Capital, Class Valuation are among the absolute WORST.
During the refi boom, most of my work was very difficult rural work where I’d commonly drive 300-400 miles inspecting the property and taking comp photos. I got a few really good fees during that time. But, now it’s back to “normal”. They want to pay the same for a long distance rural appraisal as they do for a house next door. Thus, I don’t bid them. It’s a waste of time. They’re a waste of time. I see some of the properties coming back and back again, sometimes from different lenders … wasting $thousands trying to save $tens.
This is like a time machine and fortune teller all in one. It’s a lot to read, and i didn’t realize then my nicely formatted document would be “re-formatted” to the FED specs. Yes, I also know there’s a there that should have been a their; things happen when you may have an above average “passion” about the topic. FYI, 14-years later, I’m not any less pissed, but that’s for another day.
https://www.federalreserve.gov/SECRS/2011/January/20110106/R-1394/R-1394_122510_58941_578175619525_1.pdf
Excellent Brad. I suspect you reviewed that link I posted from the federal reserve board with all those comments appraisers posted all those years ago. How interesting to read the letters from then, and realize almost every worst possible case scenario for amc middle management companies did come true. I’ll look forward to reading your previous letter, am printing that out now. Thank you.
Dang Brad. You had me at; amc’s are the devil. Ha! You called it. What a great letter, you might have wrote that yesterday and nobody could tell the difference between then and now, conditions are still almost exactly the same as you described. Everything came to pass. We’ve been living in a time bubble ever since. The regulators can’t stop the collusion and racketeering, because they’re now a part of the show. The revolving door at the entrance to the DC swamp keeps on spinning. We will remain mystified how anyone could take the regulatory people seriously anymore when they have failed to accomplish even the most watered down basic interpretation of their public service requirements.
Everyone else with a minute, read that letter BGSBRAD posted. Written fourteen years ago, and almost every single conclusion is still valid today. Amc’s have always from day one found subtle ways to signal they are advocates of the lender. That’s their primary marketing pitch towards lenders. Examples are plentiful plastered all over their websites as they all repeat in unison; save time and money on appraisal service costs. What they’re really saying is we’ll share the unearned fee kickback with you if you select us. Amc’s never stopped engaging in a criminal enterprise, they simply pivoted to something even more profitable.
Banks legally can own 20% of a AMC, they own that part of their own AMC so the fox is watching the hen house. All they want to do is make the deal work, screw the appraised value they do not care just make money.
I love it when I read someone who has caught on to reality. Thank you.
Unfortunately, the good AMCs that do things right by the borrower and the appraiser struggle mightily getting work from lenders so they don’t have the volume to help appraisers actually stay afloat.
I will keep my rose-colored glasses on in hopes that the ship rights itself sooner rather than later!
Consolidated amc’s have formed a monopoly for most of the mortgage lending industry. For amc’s whom sought to do the right thing, they were subjected to restraint of trade practices alongside. The amc’s whom tried to be fair could not compete if they charged market rates and compensated appraisers fairly at the same time. The entire amc industry fell to either a bid out lowest fee model or a set fee scale which was clearly far below C&R. A complete audit of the entire amc industry over the past decade is now in order and long overdue. Per FRB’s own guidelines, when a lender engages an amc, the amc is an agent of the lender, and the full weight of oversight and accountability falls back to the lender.
Important reasons there are limitations to free market competition in the amc space also revolve around ancillary services amc’s now provide, but never used to provide when the regulatory guidance for amc’s was formed and substantiated. The amc’s take sizeable portions of the appraisers fee to scale up for non appraisal but still lending related services. Then they are likely to be undercutting the competition in those other service spaces to capture even larger market shares.
The amc’s are likely manipulating these other processes as well. There was substantial effort over decades to reign in lending where losses were charged to the citizen, and profits were held by the lenders. Housing destabilization and credit access issues, along with liquidity concerns, over and over again. The lackluster amc regulatory framework provided a unique opportunity to scoot so many stringently regulated service needs over to the amc as an effective side step to regulatory intent and oversight.
A critical flaw in amc regulatory oversight is not limiting their scope of operations to just ‘managing appraisals’. The amc industry successfully sidestepped the intent of Dodd Frank Reg Z on C&R, learned over time they could pressure, threaten, intimidate, and blacklist anyone whom resisted their new modeling. Now many companies which started as amc’s actually put more effort into non appraisal projects. The amc’s even pretend to be the authority on the appraisal industry, representing at TAF and PAVE, despite the majority of appraisers refusing to work with amc’s. Enter the amc industries supportive call for more automation, fewer independent appraisers with reduced responsibilities, more outsourced services, supporting avm’s and waivers, developing tools for lenders to use those alternatives, ramping of staff appraisers.
When an appraiser loses an amc, the appraiser does not just lose one lender. The appraiser loses all lenders that amc works with. And as lenders may work with multiple amc’s whom may share do not use lists with each other, appraisers can become automatically blacklisted across a broad spectrum of many lenders, and even other amc’s, if the amc or their employees are upset with the appraisers service.
There is supposed to be at least one licensed controlling appraiser at every single amc to prevent this activity and ensure a more ethical process. But just like a staff appraiser, when an appraiser is employed by an interested party, independence is made vulnerable.
As if the mortgage lenders and the AMC’s are two different things … LMAO!
I’m old enough to remember when, if you had a disagreement with a lender, you could talk about it, have a fistfight or just walk away. Sometimes they’d get over it and you could kiss and make up. Most of the time they didn’t, but that was OK because they were going to go back to selling used cars soon enough anyway. Now, every little thing is a petty existential cosmic drama where nobody wins and you have to worry about some Fed alphabet type showing up at your door because you said “master bedroom” or “school district” or “good condition” or “walking distance” or “church” or “nice neighborhood”. What a world.
Back when there was two way accountability between one licensed person (the mortgage broker), and another licensed person (the appraiser). There was no need for avm’s or third party services, property data collectors, or any of that. Because the local appraiser would provide a realistic comp search to the broker, and the entire lending deal would be formed around those reasonable peramiters. Appraisers had several extra few weeks to complete because our requests were generated at the beginning of the process, not near the end. We had a firm say in the checks and balances process and functioned as effective consumer protection mechanisms involved with GSE lending. All that was ever necessary to correct runaway predatory lenders was not HVCC or separation from mortgage loan product, it was an appraisers pressure hotline meant for only appraisers, where we could report lender or lender agent pressure. If an appraiser was unhappy with an individual brokers ethic or approach, the appraiser could call the licensed lender in the chair next to them instead. There was more fair distribution of work and actual recognition of appraiser qualifications. Lenders would survey panel appraisers every year for their fees. Then the lender would take the average middle fee and that would be the standard fee all panel appraisers enjoyed. When amc’s say; ‘we let the appraisers enter their own fee’. That is codeword for; You’ll have to bribe the amc with the lowest possible fee, in order to be the preferred appraiser. And all the work will go to these discount appraisers, everyone else will be cut out.
The amc’s have institutionalized so many discriminatory practices. There is no legitimate reason to conceal appraisers fees from consumers, yet every single amc demands this of appraisers. There is no legitimate reason to have appraisers sign indemnity agreements with amc’s, as the amc is an agent of the lender and the responsibility for appraisal program oversight falls to the lender, and so does the liability except for rare cases of legitimate bonafide appraisal development, which quality underwriting is supposed to safeguard against anyways. There is no legitimate reason for amc’s tor amc’s to ask each appraiser to fill in their fee individually, if the amc’ is not using that data to determine a fair fee which the MAJORITY of all appraisers on their panel will accept. As is obvious by the way the majority of all appraisers left the lending industry because of the mis use of fee data. As mentioned other posters, functional business relationships require at a minimum, a living wage and consistent fee. The entire amc industry and lenders whom work with them could simply turn to the VA fee tables for well researched established minimum fees. They choose not to. ‘Appraisal modernization’! FHFA is also complicit with their pressuring of GSE executives to use less human appraisers, conditioning top execs and policy makers income and compensation based on their provable intent and ability to drive independent appraisers out of the mortgage lending space.
AMC are corrupt. They take more than 50% of the fee paid by the consumer. Regulation of the AMC is paramount. Full disclosure on Fees should be transparent so the consumer knows what they are paying for. The current AMC model is a race to the bottom with the lowest bid winning, yet the consumer pays full fee appraisers.
NY State requires full disclosure; disclose what the appraiser gets paid, disclose what the AMC retains. When this first became a requirement the AMC’s went crazy, some still do, threatening not to send me any assignments if I include an invoice, my software picks up on the word INVOICE so I change it up by using an addendum page titled Payment Information…still full disclosure without the automated review picking up on the wicked wicked invoice. States have the power to require at least full disclosure of fees. Worse than that are the PDC’s who pass themselves off as appraisers, that’s a topic for another day.
Every instance of such behavior should be sent documented to your state board. The regulators at every level are asleep at the wheel. All any of them ever needed to do is issue audits, request company policy documents, or step in there with an actual appraiser to document the ongoing illegal behavior. Out in the open for decades.