This post was originally published on Appraisal Buzz December 18, 2015.
Here we are 8 years post housing finance crisis and it takes Brad Pitt to save the day. Everyone has battle fatigue from the mortgage debacle. Exhaustion and frayed nerves have now turned to apathy. Congress has failed to deliver a solution to the seemingly perpetual state of purgatory for Fannie Mae and Freddie Mac.
Michael Lewis’ The Big Short was released in movie theaters December 11th and recently won an Oscar for “Best Writing Adapted Screenplay.” The cast is phenomenal. Everyone will be reminded what a colossal cluster we experienced. Yet here we are. In spite of over a trillion in losses, we are no closer to a fix than when we were in the midst of the panic.
How bizarre that it might take a blockbuster movie with Hollywood super stars to get Congress to focus on a solution. The housing finance crisis impacted everyone. Jobs were lost, small businesses collapsed. Builders, lenders, appraisers, real estate agents and all the ancillary services engaged in the housing machine went down in flames.
In December 2008, the New York Attorney General, Andrew Cuomo, attracted everyone’s attention with the Home Valuation Code of Conduct. Now that was dramatic. Appraisal issues became front and center. Ultimately, Appraisal Independence Requirements (AIR) were codified in Title XIV of Dodd Frank. The Home Valuation Code of Conduct (HVCC) and Dodd Frank mandated a dramatic shift in much of the appraisal process.
It was theatre. Surreal. It was exciting and frightening all at the same time. Certainly appraisers, regardless if they were boots on the ground or in the ivory tower at a bank, knew that the hyper-inflated values were neither real nor sustainable. Fannie and Freddie were caught “red handed” by the NYAG. At least from the perspective of those of us in appraisal land, that was the day everything changed.
Appraisers received a true gift with appraisal independence requirements. But that also meant business was about to shift to Appraisal Management Companies. With protections being offered to appraisers from the Customary & Reasonable Fees component of Dodd Frank, all was well. And what appraisers feared most happened next.
After Dodd Frank was enacted the Federal Reserve Board wrote the Interim Final Rule since the CFPB, at the time, had not yet been established. The FRB wrote “presumptions of compliance” that essentially contradicted the law. And because of it, there has been no enforcement at the federal level of Customary and Reasonable fees.
Today there is a reported shortage of appraisers by AMCs. Appraisers would say there is no such shortage, just a shortage of appraisers willing to accept low fees offered by the “lowest bidder” model adopted by many AMCs. For the uninitiated, essentially, the AMC acts as a broker and takes their fee from the appraiser. The lender, the beneficiary of the management services, generally pays nothing to the AMC.
When you hear that appraisal fees have risen, please remember that those fees have indeed gone up to the consumer but to the appraiser in the field they have actually gone down. It is not a sustainable model. How this could happen, in the wake of the largest financial crisis in history, is unfathomable.
My prediction is that in 2016 we will possibly see some class action suits on the C&R issue, and continued state level actions that will have a “trickle up” effect. Things are changing, albeit slowly. Or maybe the Consumer Finance Protection Bureau (CFPB) will surprise everyone. I’ve said all along… “We just need a Martha Stewart” to get everyone to behave.
But me? I am feeling empowered. I’ve got Brad Pitt in my corner now.
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Written by : Joan Trice
Joan N. Trice is the founder and CEO of Allterra Group, LLC, publisher of Appraisal Buzz, and host of the annual Valuation Expo, the largest conference for the valuation community. Joan also hosts the Collateral Risk Network, a members-only group of more than 500 dedicated chief appraisers, collateral risk managers, regulators, and valuation experts who are focused on resolving the many challenges facing our profession.
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All I can say is I long for retirement. This profession is the least respected Opinion based service there is….Even with decades of experience, no one trusts that experience, Lenders, AMC’s and Private sectors as well. They pay you for your “Expertise” and then question you and try to direct your opinions every step of the way. As for AMC’s especially those who still “blast” appraisals so the first one to accept their low fees and totally unreasonable turn times gets that assignment, well they get what they deserve….. low qualified Appraisers. Many more experienced Appraisers are just saying NO to insulting fees thank goodness! I certainly do! TRID is just another sword in our back. If lenders do not estimate FEES for complex properties on the Loan Estimate form, Appraisers are the ones who lose out. The consequence is less qualified Appraisers will accept their estimated fee and that is NOT good for anyone involved in the transaction! Louisiana was successful in suing for R & C. Fees hopefully as you state other States will be successful.
DON’T RETIRE
JUST DO WHAT’S JUST FOR YOU ON YOUR TIME AND CONDITIONS
ENJOY APPRAISING
I DID NOT STOPPED – YET
EVEN WHEN I HAVE HAD TO FIGHT EVIL
REMEMBER- IF YOU COULD SLEEP WELL AT NIGHT
YOU HAVE DONE A GOOD DEED THAT DAY
Thanks SANDOR. One good thing about this profession you can back off as much or as little as you want. I used to LOVE Appraising, I have to get back in that frame of mind to survive. I do sleep well at night and funny that you said that….I do remember long ago that one of my lender/broker clients told me that HE sleeps well at night knowing I have completed the report as he knows I would never Over inflate values. Thanks for the pep talk I needed that. Merry Christmas!
Merry Christmas and a Better New Year to you and all Independent appraisers that do rest well at night. Never be afraid as long as you remain unbiased and have the data to support your conclusions and reasoning. I am here for any appraiser that wants to exchange an idea or has questions to be discuses and find a correct approach and resolve- recently I went over the last 2014-2015 USPAP’s and I woke up again when I read that an appraiser’s credentials are overridden by the USPA’s !! just like Jurisdictional exemption,- – – in few words, means that even I graduated a 5 years college as a general engineer [ foreign studies] – and took upon Valuation/ appraisal/ estimating/ Assessing real estate, of all uses, etc all my professional life- IT don’t matter now in such light, the new- young appraiser’s willing to advance must take college courses, pass and get certified .
Best to all
You say: “For the uninitiated, essentially, the AMC acts as a broker and takes their fee from the appraiser.”
One man’s “broker” is another man’s extortion collection agent. If you’re paying excessive monthly kickback payments to banks (via their AMC subsidiaries) in exchange for appraisal orders you’re a victim of extortion folks. The only difference is they don’t threaten to break your arm or kill your wife if you stop paying them.
2014-2015 USPAP’S PERMITS ‘PAYMENTS’ TO ANYONE FOR PROCUREMENT OF ASSIGNMENTS !!! ANS SHOULD BE DISCLOSED. NO – NOT THE AMOUNT
SO IS ‘ A LOOP HOLE’ AS BIG AS THE MOON AND CAN’T DO MUCH ABOUT IT
I expect that just as we are about to get our due, technology will do away with us.
THE GOOD INTENT AND BELIEVE THAT USING DATA FROM ,MLS, SOURCES IS THE BEST – NO IS WRONG BECAUSE MISSES ALL PRIVATE SALES NOT SIGNED UP WITH MLS
ALSO, IN THE NYC METRO AREA PHYSICAL CHARACTERISTICS ARE NOT RECORDED BY NYC-PROPERY/FINACE CORECTLY , VIOLATING REPORTING RULES-USPAS, AND WITH INACCURATE DATA ONLY A NOT CREDIBLE VALUE OPINION IS REPORTED
BUT WHO CARES, THEY INCLUDE THE ALL BASEMENTS INTO GLA [ NOT GBA] WITH ‘SALES’ FROM UP TO 2 -3 MILES AWAY, NO ADJUSTMENT FR=OR ANY LINE ITEM, JUST USING V HIGH SALES, AND LAYMEN TAXPAYERS PAY TAXES BASED ON SUCH DESPICABLE ANALYSIS- ASSESSORS KNOW – THEY TOOK ALL YOUR COURSES AND MORE, BUT THEY ONLY ARGUE WITH THE MANAGERS PLUG IN NUMBERS AND AT NEW TAX YEAR – ALL RE TAXES ON PROPERTIES 1-3 FAMS ARE AUTOMATICALLY ADJUSTED BY [1+5.9999999%]
HARD FOR APPRAISERS, BECAUSE DATA HAS TO BE RE-VERIFIED FOR ALL COMPS/LISTINGS.
WHY REALTOR.COM OR MLS- LISTINGS AFTER 30 YRS DO NOT PROVIDE AN UNIFORMED PROPERTY CHARACTERISTICS PRESENTATION ON A CLEAR FORMAT STARTING WITH BLOCK-LOT, BUILDING DIMENSION PER FLOOR, ROOM COUNT PER FLOOR, ETC REMEMBER THE BROKERS JUST GET PAID 10 TIMES FOLD- MORE THAN YOU, AND NOW YOU HAVE TO DO THEIR WORK TOO. WHEN DID THEY PROVIDED YOU WITH A CMA OR REAL COMPARABLE ? R AR E L L Y OR NEVER AT LEAST IS MY EXPERIENCE IN 30 YRS, WHEN I ASK THEY DISAPPEAR – NO MORE EMALS OR RETURNED CALL
KEEP THE GOOD UP THE GOOD WORK
don’t go that way. Courts do not accept it because all rules and valuations for taxpayers are based on typical layman ‘intellect’ or HS education level. we are talking residential now. I understand that is not easy, because It took me 2 weeks just to start the 1988 excel or word at a NYC agency – no one helped me- I learned it on my own I do/ calculation and type my reports narratives or forms. Take the pdf of a any form and convert it to ‘word’ document. than edit it add what you need to have all angles covered and you have your narrative. Forms are just like the IRS income tax returns: know what it means and report accurately with ‘receipts, etc. sounds easy, not everyone could do it – for many reasons. If you like go ahead – good luck
good stuff !
This is for anyone who is an apologist for the way AMC’s rape the appraiser. I just received an order from a reliable AMC with competitive fees(by today’s standards), however, when I called the borrower(it’s a refi)he indicated that he wanted to postpone the inspection date until he has loan approval because the $800 appraisal fee was non-refundable. My cut of this fee is $480. The AMC is keeping $320(40%)of the fee for being a clearing house and nothing more! We may be independent, but we are merely AMC whores(with sincere apologies to those in the world’s oldest profession)in the eyes of everyone because only those actually working in our business are truly aware of how much of the appraisal fee our “pimps” get. Let’s solve it this way. The AMC gets a commission of 10%(paid by the lender)and the appraiser gets the full Customary and Reasonable fee. Nothing else is equitable. The AMC’s were allegedly designed to foster appraiser independence by eliminating influence on appraisers by the lenders. Since the lenders needed to be regulated and restrained, let them pay the fee for this, not the victims of their pressure!
$480 is a good fee. The AMC is doing a well also. Could be worse. Maybe they need the dough to market their services.. Thanks
So as long as the appraiser gets a “good fee”, any additional monies charged to the consumer as “appraisal fee” is okay? What is wrong with this logic? Everything!
AMCs are not appraisers. The job of AMCs is NOT appraisal, it’s management. AMCs are not certified or licensed as appraisers. The borrower obviously does not know the $800 appraisal fee gets split. In law, commingling funds breaches the fiduciary duty of making it clear which monies or funds belong to which party. Yet, somehow, this illegal activity of mixing AMC and Appraiser invoices is permitted for the reporting of “appraisal fees” for lending. Making this even more of an complete Charlie Foxtrot, somehow overnight charges, tax certifications, inspection fees, and other charges somehow get their own line item. Even the selling brokerage and listing brokerage get separate line items for their commissions. Go figure.
I really don’t care how much an AMC charges. But I do care that it is somehow okay to report and deceive the public into thinking the appraiser gets the full “appraisal fee.” This practice needs to stop! Any consumer seeing an $800 appraisal fee and then hearing appraisers are not being paid Customary and Reasonable Fees will simply find too hard to swallow. However, if they were told that the appraisal fee was split, the natural next question would be, who got what?
The 60/40 split would then be known to the consumer. Then it could be tested as reasonable or not, even though it seems completely unreasonable to me and most other appraisers. To say it “could be worst” sounds like an AMC apologist. Yes, 50/50 is worst. However, if there is no disclosure of fee splits, there can never be a functioning, competitive market, free, or otherwise.
You are correct sir. All splits ought to listed on the report & the LOA. Perhaps the AMCs can fully disclose their Profit & Loss and income/expenses to the public. This would be a great way to determine who the worst offenders are in the industry. Who decides what R&C fee is today? I William Fall offers $200 on a $450 fee. That is pathetic. Frankly, I do not care for the AMCs myself
APPRAISERS: I am an 85 year old retired school teacher with a son who still appraises and will not get out of his profession because of Fear! I am profoundly astounded that anyone would appraise for AMC’s/Lenders/GSEs anymore. My grandson is just too scared to quit and not brave enough to stand up for his inalienable rights. Appraisers, if you are an employee of a AMC pimp, quit. Why? Let’s see. Concluding what I have read so far in this blog, the “powers that be” can alter an appraiser’s report with the old “.pdf/MS Word conversion” trick if they want to get her/him in serious civil and/or criminal trouble when the appraiser does not behave the way they want and remain a loyal appraiser vendor whore. If you don’t allow them to extort you, they will not go after your wife or break your arm, as one blogger stated, but they will go after your career, your personal wealth, and your freedom.
Embargo! ALL APPRAISERS STRIKE NOW !!!
I certainly like not having to prostitute my self to real estate agents, bankers , and mortgage brokers , any of whom would drop me if I sent in an honest report. Glad I don’t have to order those stupid pens with your name on it and spend all day Friday giving them out to real estate agents who have dozens of pens anyway. Now they just report me and tell the AMC how unprofessional I am if I give them a “low appraisal”. Amazing how professional I get if the report is “high”.