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.
- Insights from CFPB’s Public Comment Period - August 13, 2024
- Accurate Appraisal Underreporting - July 24, 2024
- Uncovering Flaws in FHA Appraisal & Loan Review Process - July 15, 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!
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.
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.
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?
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…
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.
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.
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
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.
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!