NY AMC Law Sends Shockwaves
Back on April 19th, I wrote about the New York AMC law in my Housing Notes newsletter. After years of AMCs chipping away at the public trust, the New York AMC law was designed to protect the consumer.
The bill summary was:
Last week, AppraisersBlogs ran it as a standalone post and I got a lot of feedback. To be clear, the bill was signed into law by Governor Andrew Cuomo at the end of last year and became effective 120 days later which is today (April 27, 2019).
Here is the NYS “AMC Law” as a PDF or in plain text on the landing page of the law.
The NY State Coalition of Appraisers (NYCAP), led by my friend and appraiser Becky Jones who along with other unnamed heroes worked hard to help make this possible, wants you to know that this law was not a last-second, fly by night effort as being characterized by The Real Estate Valuation Advocacy Association (REVAA) – the trade group that represents the bulk of the AMC industry in the U.S. – inferring this law was flimsy and easily overturnable.
No, it isn’t. It’s been a long road and achieved unanimous consensus during the process.
When the draft of the bill was approved by the NYS Board of Real Estate Appraisal, Carol DiSanto who is the Vice Chair, walked it across the street to The New York State Association of REALTORS (NYSAR). In effect, REALTORS of New York State were made fully aware as the “draft” became part of NYSAR record at their next business meeting. Becky Jones sat on the Legislative steering committee at NYSAR and informed them about the bill. They had no objections to the bill before submission to the state legislature.
A similar proposal was introduced by the New York Department of State in 2015. Senate Bill S9080 was introduced two years ago during the 2017-2018 legislative session, signed into law on December 27, 2018 and became effective today. The voting was unanimous in favor by the rules committee of both houses and the body of both houses.
Here are the vote tallies (the same in both the NYS Senate and Assembly):
And here was the timeline:
A couple of AMCs we work with for some private banking groups sent emails to us yesterday:
- If you’re not an appraiser, then you want to read this. It is a 2011 take that still holds up on the AMC industry from American Banker’s Bankthink column (I’ve written a column there before on another subject): Appraisal Management Companies Create More Problems Than They Solve
- When the realization sunk in that this was a new law, not a proposed bill, attendees began to text me from the joint committee meeting of The Appraisal Foundation. I got the play by play when the news was shared. It sent shockwaves through the AMC-types because, in my view, it effectively destroyed their ability to hide how much they are gouging the consumer and how little the appraiser gets from the actual “appraisal fee” (typically less than half). Seriously, the value-add provided by AMCs to the appraisal process in the delivery of actual appraisals might be 5%, but no chance in hell it is 75%. This is why we need consumer protection in the mortgage business.
- I’ve been told by several colleagues that they’ve heard one of the main AMC concerns is whether New York interpreted the original law correctly to arrive at this form of law regarding AMCs. From my perspective, it’s like not buying a house because one of the gutters is missing a few screws to hold it in place. The criticism seems like a weird attempt at fogging since this law is protective of USPAP and the public trust, something that has been forgotten in the attempt to “modernize” the appraisal industry. But I’m no lawyer so I’ll look for clarification on their logic. But consider this:
Remember that the word "modern" or "modernize" is code for AVMs, settling for less accuracy and getting rid of the #appraiser – @ClearCapital debuts its new modern appraisal program @MPAMagazineUS https://t.co/CTyZQ8sH6H
— Jonathan Miller (@jonathanmiller) April 23, 2019
- REVAA’s biggest concern about the law was specifically the disclosure to the consumer as to what part of the fee goes to the appraiser. Not only does the appraiser get to state the fee, but the AMC fee must also be disclosed. This was upsetting to REVAA director Mark Shiffman presumably because the consumer would finally see that most appraisers get half or less than half of the appraisal fee the consumer thinks they are paying for the appraiser. REVAA has fought hard to hide this from the consumer, pushing back on prior attempts to disclose the breakdown, and finally, New York State has effectively brought to light this predatory practice. Transparency is good for the consumer and for the appraiser. Should a consumer be aware that the check they wrote at the time of mortgage application specifically for an “Appraisal Fee” be used to pay the appraiser less than half of it with the remainder to a wildly inefficient third-party institutional middleman they know nothing about?
- The NYC AMC law will likely damage the evaluation platform that the Appraisal Institute has been advocating so intensely in state legislatures without disclosure to their own members yet diminishes the meaning of an appraisal certification to the consumer. It is interesting to see that AI National hasn’t taken a position on this new groundbreaking law, like yesterday. They’ve been progressive in their quick denouncement of other important issues, like appraisal waivers, so the lack of denouncement against AMCs is curious.
- This new law only applies to appraisals ordered through AMCs (which control an estimated 80% of U.S. mortgage appraisal volume) for properties in New York State. (note: this why the law is described as “AN ACT to amend the executive law, in relation to registration of real estate appraisal management companies by the department of state”) New York is one of the few “voluntary” licensing states. There is no mandatory licensing so agents and brokers can perform appraisals and BPOs all day long. This was a key point that REVAA was trying to convey to NYSAR (I hold the CRE designation and all CREs in New York are automatically members of NYSAR) a few weeks ago when REVAA was on a mission to stop the law going into effect. REVAA reached out to NYSAR to claim how bad the law was for their agents and brokers but NYSAR wasn’t buying it because they could still perform BPOs and evaluations for local banks – just not for AMCs. Becky Jones shared a story about this situation from one of the CE classes she teaches: “I had an agent work the whole thing in her head out loud during the class and at the end… the agent deduced on her own that she will contact local banks for the BPO work and she was especially thrilled because she realized that she will probably get the listing and therefore an opportunity to make more income. She was so thrilled she “high-fived me during class.”
- A concern shared with me by a friend and appraiser colleague in Virginia was that most of the large AMC platforms, such as CoreLogic, Appraisal Port and Xome, use a portal that strips the report and the appraiser’s invoice is one of the forms that does not get uploaded (because they don’t want the consumer (i.e. mortgage applicant) to see how much the actual cost goes to the person providing a value opinion of their home. If AMCs continue this practice in New York State and are caught, they will lose their ability to do business in the state. They can risk it, but the stakes are high. There is always a concern that oversight of this will be lost in the shuffle so it is imperative that appraisers keep the pressure on.
- Another appraiser colleague and friend I know in Illinois said: “So if you are curious what is happening in Illinois, here’s how we must report our fees. When discussing this issue 10 years ago, we were of the opinion that the invoice could get lost, but pages in the appraisal report don’t get lost. That’s why it must be in the body of the report.” Here’s the Illinois AMC law.
It is ironic that the New York Governor, who was the creator of HVCC when he was NYS Attorney General and was a board member of a former Ohio-based AMC owned by a friend that eventually collapsed, leaving many appraisers unpaid for their work, was the signer of this law. Despite the irony, his concern for the consumer is incredibly appreciated by the appraisal community who have been beaten up by the AMC industry since 2009 under the false narrative that they are embedded in the process to protect the system. In reality, AMCs gave the mortgage system an empty promise that left the consumer and the taxpayer exposed to excessive costs, bureaucracy and a systematic deletion of quality. Even worse, they stole the economic livelihood of the actual market valuation experts and replaced them with form-fillers.
It is nice to see a state pay more than lip service to consumers within the mortgage business.
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I’m sorry, but specifically relating to the disclosure of the appraisers fee, is it me, or do others think this is next to meaningless? If the consumer is getting their dream house, or locking in a 30 year refinance loan, what’s the big story when they get a copy of the appraisal (including the appraisers invoice), no less than 3 days prior to the closing of the loan? Is the borrower even going to read the appraisal to discover the fee breakdown? If discovered, is the borrower going to cancel the deal as protest to the fee split? The consumer doesn’t care about the appraiser, and surely doesn’t care how a $600 appraisal fee gets split as long as their goals are met. Perhaps its a step in the right direction, but call me when the AMC fee is separated out from the appraisal, and perhaps the consumer has a chance to challenge / question that $150 to $500+ AMC fee.
Nothing will change.
Seek the truth.
I agree !!
I agree with you, it is mostly meaningless. It’s not a new idea as many states have had similar rules in place for years now which have done nothing to help consumers or appraisers.
If what you say is true Steve, then what is the objective for AMCs to ask appraisers NOT to include an invoice in their appraisal report, or to use portals that strips the invoice from the report?
How can a consumer even begin to say whether they care or not when they are being deprived of this information?
You also say many states have had similar rules for years. Can you list those states?
@Bill, this bill also states that ONLY appraisers can do inspections for bifurcated appraisals. This law is a big deal!
The banks don’t want the appraiser’s invoice because they may actually pay both invoices since the AMC adds their own invoice to the appraisal. I’ve seen it happen several times, returned the money of course because that’s law for incorrect payment of money.
I don’t think consumer is going to care one bit about the appraiser’s invoice because they don’t have to pay it by the time they see it.
And forget about using it to gather payment from AMC. Individual invoices to AMC are useless. If an AMC requires you to send them an invoice or statement or anything else in order to be paid then stop doing work for them. It’s a trick they use in case they want to delay the payment; they can just tell you the statement must not have been received and therefore it couldn’t be paid. At least stop after the first sad story excuse they give for not paying you though.
Back to the subject though. New Mexico requires the appraiser’s fee and the AMCs retained fee to be included in the report. Other states require just the appraiser’s fee or say the appraiser can’t be prohibited from including their fee in the report. Google the AMC rules by state to find out more.
Steve, the amc fee should not be added to the appraisal report. The fee of any AMC is the LENDER’S COST to do business, NOT the appraiser (by cutting the fee paid to the appraiser and keeping the rest) nor the borrower (by passing the AMC fee on to them at closing and hiding it in the “Appraisal Fee”).
And those states (which are not many) that do require appraisers to disclose their fee somewhere in the report or say the AMC cannot prohibit the appraiser from disclosing the appraisal fee (again somewhere in the report), don’t say anything about AMC prohibiting appraisers from including an INVOICE in the report or portals stripping the invoice from the report.
Several years ago I decided no more amc work. You know why? Because none agreed to my invoice in my appraisal report. NOT ONE!
I don’t like doing business or want to associate with crooks!
wontobey has a good point. Why are appraisers asked to cut their price so the lenders can employ AMC’s? Now AMC’s have us pay to upload the reports (technology fee). Sounds like both of these should be their cost of doing business. What’s next? Are they going to deduct the cost of review from us? Why not charge us for their lights and heat?
When these folks suggest a shortage of appraisers, they really mean a shortage of appraisers that will work for nothing!
IF I were ever asked to pay any added costs or fees I would raise my rates to that client and let them know the exact reason for the increase.
These are the same companies that have been lying to Congress about appraisers being responsible for higher fees. These fees are for service costs MANDATED by the GSEs and to meet MISMO developed UCDP requirements.
“Currently all engagement letters for orders located in NY include instructions to NOT include an invoice in the report.”
So amcs doing business in NY can no longer gouge the consumers, AND appraisers who did not include invoices in their report per the amcs instructions, can no longer intentionally and knowingly help in overcharging consumers!
As far as I’m concerned this as a huge win for the consumers and should become law in all states!
I do not hear from other appraisers that the AMC model robs us of our profession by installing a “middle man” who I have found actually profits substantially by using computerized “reviews” of our work and demanding additional work widening the scope and wasting our time!
I strongly believe that appraisers who work for AMCs have experienced a RESTRAINT OF TRADE situation while banks lobby to rid the mortgage market of pesky independent and professional appraisers.
I want to know all the efforts of the AI in states that pushes for the “evaluation platform” mentioned above. After I follow up I intend upon writing the AI because it that and the AMC model are the antithesis of what we are taught and trained to do in our work. At risk is our credibility and our livelihoods. Unfortunately, we are all barely able to continue our practices and working for an AMC is like working for a pimp with no real knowledge of the work or contribution to the safety of our banks; the banks appear to be engineering another bailout when they took the American middle-class’s taxpayer money and profited while still using tactics that will be the demise of our profession. Now we have the degradation of HUD and CFPB because the heads of those offices are held by people meant to destroy former consumer protections. What are we to do? We need a strong union! What other profession has such restraints of trade? Certainly Wall Street will continue to act with reckless regard to the safety of our financial institutions if allowed to perpetuate the myth that appraisers are responsible for bank bailouts!
Call that, and raise. Your move.
What this law also means is that the expansion of hybrids/ bifurcation “appraisals” are not going to make any headway in NY as hoped by Lenders and the AMCs.
Amen! You got it!
Up your a$$ Mark Shiffman and REVAA go stick your hands in some other person’s Pockets you weasels. Scumbags that can’t make a living for their own work they got to steal it from hardworking appraisers you all suck
GOOD. paper pushers taking 30% or more of my fee….these days are coming to a close.
Lenders gain potential energy by simply closing deals. Even if consumers get wise after the fact, It’s going to affect repeat business. Junk fee amc billing, plain and simple. Amc’s have exploited a regulatory loophole which allowed them to bill in ways which would otherwise be illegal for other persons. The hubris as they consistently advertised to appraisers their companies record setting growth, wholly insensitive towards the appraisers they engage with. Jig had to be up sometime, so great job. The fact the amc will only comply where they have to sheds light on their ethic. They’ve been prohibited from prohibiting fee disclosure in states like CO for a long time now.
Requesting the updated FNMA forms have standard data entry lines for total appraisal fee distribution breakdown, as well as total outsourced services third party assistance identification to include individual and company names alike, complete with addresses, dates, services performed, total distribution of all costs and per diem expenses. Citizens should expect basic dignity in lending like not being price gouged along the way or dealing with illusions of quality service when the majority of duties they paid to have completed were actually completed through outsourcing. If appraisers have those old order fax requests which routinely showed the consumers billed amount, please scan them to digital and post them for younger appraisers edification. We’re only asking for transparency in costs, something which used to be an industry standard.
Jonathan, REVAA is comprised of semi-wiley toadstools. No one with half a brain gives them any credibility. OK, I realize that means most amcs and dishonest, greedy lenders fall into that category, but REVAA lost a lot of their limited remaining credibility capital when their muddy buddy Coester went down the toilet.
Coupled with the other great “appraisal innovation” gurus over at Clarocity, Zaio, and Sausage-Plus, AMCs have (or should have) ZERO credibility. They have proven themselves to be greedy, incompetent, dishonest parasites.
ANY legislator, bureaucrat or regulator that cites them as being credible, is a damned fool. No exceptions.
Without including your fees with the report, how can we handle SCOPE CREEP.
Many lenders only require the basic FNMA standard product, several inbetweeners (AMC’s) increase the criteria, and don’t inform the appraiser until he delivers the report.
Increasing the number of comps, asking the appraiser to grid the active listings, asking why other comps were not used, is beyond the scope and should be charged for. The reviewer is inadequate, and does not understand that gridding the active listings leads to misrepresenting the values. As all Appraisers, and agents understand active listings are the most actively changed item in the MLS. Frequently the active are changed 5 or more times, for both good and bad reasons. Market times are not measured from the highest list price only from the most reasonable or nearest the sale listing. The appraiser should include that the values are finale at the delivery, and fees earned.
Don where did you get this information. Never thought of it that way. Thank you