There has been a lot of buzz within the industry about the Collateral Risk Network establishing an advocacy group.
At the last Collateral Risk Network meeting on June 29, 2015, I introduced an idea I have had for some time about forming an advocacy group of AMCs under the CRN umbrella. Some of the AMC leaders very positively affirmed the need for such a coalition. Since then, I have continued the dialogue with those companies and also issued a survey to the broader AMC community.
The survey focused on an agenda and viability of such a task. What issues are important to AMCs? What will be the founding principles? There are several groups attempting to form right now. What will make this group different than others?
The CRN is comprised of over 500 members representing every stakeholder within the collateral valuation realm. It is exactly that principle that has made the CRN the success that it is today. CRN is not an advocacy group for any particular constituent. The strength in the CRN comes from the community of diverse business needs, yet with an overarching focus on “doing the right thing”, setting self interests aside. I can’t explain it but those who are members know it simply works.
Because of the strong reputation and branded identity of the Collateral Risk Network within Washington and with State regulators, this advocacy group will be formed within the CRN. It is quite possible that other advocacy groups within the CRN family may form at a later time.
The mission of this yet unnamed coalition will be one of outreach, cooperation and education. Prospective members indicated a desire for industry participation and advocacy and a best practices approach to addressing challenges.
The survey indicated that members had little interest in lobbying and especially in litigating. The immediate goals indicated by participants of the survey were compliance education and training, standardization and uniformity around processes with state regulators, and maintaining an open dialogue with ASC and AARO and appraiser advocacy groups.
Appraisers will be pleased to learn that the very contentious topic of Customary and Reasonable Fees (C&R) is one they want to tackle at the outset. In fact, the Government Relations Committee of the CRN issued a comment letter to the agencies that are members of Federal Financial Institutions Examination Council (FFIEC). There are a number of forces at play that demand attention to this matter.
While none of the details have been established, this group will likely form an advising board comprised of lenders, appraisers and, other stakeholders. The addition of this advisory board would be to promote a balanced perspective.
The next steps will discussed at our first meeting on November 18th in Reston, Virginia. Details can be found at www.collateralrisknetwork.com.
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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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Joan, forgive me if as an appraiser I don’t stand up and rejoice the thought of AMC’s teaming up to help the appraiser. No change in this industry over the past 7 years have benefited the appraiser, but rather the opposite has been true. I’m sure their all interested in customary and reasonable pay issues just as the Dodd/Frank bill was interested in establishing such fees outside of known AMC orders. We all know that no single lender has been penalized the $10,000 per day penalty as indicated within the bill, and its been business as usual. Here’s a thought for your AMC coalition, lets role back the clock 10 years and start with a typical Southern CA appraisal fee from 2005 ($400) and add to it based on the changes in the industry. Based on a simple 2% adjustment per year you can add $100 to the fee. Based on what was accepted at the time (a USPAP compliant report) and what is still acceptable today, the appraisal and appraiser should only need to meet USPAP standards. With the every increasing scope creep (restrictions on location, COE dates, non-required photos, FHA type inspections on traditional loans, demands to provide 2 active / pending sales, and so on and so forth for 10 to 15 pages the fees should be bumped up an additional $100. The unnecessary and not legally required additional data that is now being asked of the appraiser results in an increase in liability (+$100). The demand to turn reports in 50% faster from what was typical 10 years ago should result in rush fees (+$100). Entry into the field now requires a 4 year degree 2.5 years of training, etc. (add ($100). Should we also consider the new TRID restrictions, new tighter FHA guidelines? Its funny how no entity would seriously consider raising the appraisal fee to $1,000 per report (no split with the AMC), but yet the average purchase contract I see is close to $750,000 with 5% commission. Where is the concern when commissions are $37,500 per transaction! The AMC coalition if formed will only key in on other areas where they can increase profits. I look forward to your response Joan.
I would also like to hear Joan’s response Bill. I have received a few orders from Clearbox Capital that were well under customary and reasonable fees. I had to laugh though its not funny…$225 for So Cal waterfront….both I declined or ignored. Any appraiser worth there weight would not be working for companies like these when there are AMC’s out there that actually pay a full fee, appreciate quality reporting, allow for a reasonable turn time and do not bog the appraiser down with silly and lengthily revisions. If there is a concern, it is reviewed by a 20+ year veteran. That is the future Joan. Those greedy and short sighted AMC’s of the past will have a hard time filling their panels with qualified, experienced local professionals. The bottom line and what is the most unfair is the fact that consumers are paying a lot of money for an appraisal through some of these larger AMC’s only to get cheap and fast which generally means “sloppy”. Many on their panels have minimal experience, some are just “hacks” and the rest just desperate for work…. for now anyway. Note: You also might want to include NAIFA in your ” AMC dialogue” and maybe working appraisers who actually earn there living in the field . Its not all about the AMC executives on the 85th floor Joan Trice and your background check fees….. Many of us actually love what we do. Be the change Joan Trice….not a AMC wolf in appraiser clothing.
And I agree with Bill Johnson :)
Joan is out of town this weekend but she asked me to comment on here to let you know she will respond individually as soon as she is back in down.
An additional thought Joan. As a business owner who performs appraisals, its obvious from the comment letter what the ultimate goal is. The goal is not to benefit the appraiser, but to ultimately increase the profit margins of the AMC’s. The existing model may have provided a high enough profit margin over the past 7 years ($500 appraisal fee = $200 AMC take) but without increased fees, future AMC profits are capped. Unbundling the fees may give the AMC’s the ability to tell the world they are worth $500 per assignment, but there is no guarantee to the appraiser that our fees will be raised.
There is no doubt that fees to the consumer have gone up while little to none of this goes to the appraiser.
Joan, although I certainly see cases where the number of the week is $495 for an appraisal fee (HUD-1 statement) as compared to $400+/- 10 years ago, I see just as many cases where the entire fee has been stagnant for 10 years. Just based on the 4 year bachelors requirement of today in my state (CA), and the expense to obtain a good education ($80, $90, $100,000+), the increase in typical fees should have exploded to justify the new requirements. To say that the appraisal fee has not gone up in cases where the overall fee is higher today then before, is an insult to our intelligence. The fact is, on weekly basis I receive broadcast orders asking me to do work for 25 To 50% LESS than what considered typical 10 years ago.
Bill if you are looking at the HUD-1 then you are seeing a number that incorporates (1) bank related appraisal surcharges AND (2) AMC fees and lastly (3) appraiser fees that are likely between $300 and $350 when $495 is ‘shown’. By the way, this fee typically includes the $35 to $50 sales fee / commission paid to the AMC sales rep on a per job basis for securing the work (& or the kick back sometimes taken by the bank employee assigning the work). Either constitutes undisclosed fees in conjunction with procuring an assignment-a violation of USPAP.
I agree DiverMike. I would also say in cases where the lender uses a 3rd party delivery portal (AppraisalPort, Mercury Network, etc.) then the appraiser will also need to pay $10 to 30 is additional fees.
I am traveling and having technical problems. I can’t seem to write beyond two sentences without losing my connection.
Customary and Reasonable fees are what the AMC’s say they are. This is what we are paying. Take it or leave it. What is your base fee for this county? Every appraisal must conform with THAT base fee. However, other than in a large tract subdivision no house is the same as your subject. The AMC’s (shotgun) an assignment for a fee and turn time. This is their comp. check. You get to look at the property and decide the scope of work that you think what it’s going to take. You make your “bid” to work; Then you get the 15 pages for the “scope of work” to find out it’s more extensive than what you thought. Now there is no renegotiation for the fee. They tell you they (the AMC) can’t go back to the client and ask for more money (they wont cut their take of your fee). With that “shotgunning” they are searching for the fastest and cheapest chump out there. Until appraisers come together and say in a collective voice NO!!!! We are screwed. This meeting is to change the appraisal industry again. To maximize AMC and banker profits and how to swipe more money from the appraisers. This is what this “meeting” is all about. Make no mistake about it.
Its good to actually see some transparency finally on who is aligned together. Appraisers sometimes forget that AMC use is optional. Lots of direct lenders out there deal with appraisers directly. Hence, AMC’s and independent appraisers are competitors in the valuation services industry. Independent field appraisers should view there engagement agreements with AMC’s with this view point. If you are going to accept work from your competitor you really need to think about what is a fair engagement agreement.
AMC’s have almost always had trade organizations. It appears now that independent appraisers are starting to join coalitions in their state some paranoia is taking place in the AMC world. Probably should have treated appraisers better from the start when this part of valuation industry was simply given to them. Things could change in the future and as independent appraisers may be relieved of the burden of making sure our competitors remain profitable at our own peril.
Tim, I agree that AMC’s should have treated the appraiser better from the start, but had they done so, their footprint would not be the 80% it is today. If you click on Joan’s comment letter above, the attempt to try and enforce the regulations as written in the Dodd/Frank bill today is 5 years to late. Where were the AMC’s and Joan’s of the world years ago when we were letting the world know of the issues by way of petitions, etc.
Bill, You got it. If anything the CRN is shedding crocodile tears. This is not going to fix anything for the appraiser. But, I must admit that appraisers can’t seem to advance their own interests, which enriches the environment for predatory activity from AMCs.
Bill, I was part of the petitions back when this started. I was a supporter of my state coalition (still am, by the way); and a frequent correspondent of my long gone Congresswoman who NEVER RESPONDED ONCE! While the coalitions were learning how to fight big government, the AMCs that paid the likes of Cuomo and his like minded cronies already KNEW how to lobby effectively.
The one major appraisal group that COULD have done something, did not. Well, that’s not completely accurate. They DID start carving out turf and exceptions for themselves. Now many of their designated members OWN AMCs across the country, and treat residential appraisers like the ugly stepchild. Even their own residential appraisers.
THAT is why after four years I searched for a union. Definitely did not want SEIU or anything like them. What I found was an Appraisers Guild whose president is an unpaid volunteer; and a parent union partnership of Americas oldest unions OPEIU / AFL-CIO. They KNOW how to fight city hall.
They just did it in California with AB 624. Imagine. A labor union in a democratic controlled state helping out as a result of a republican union organizer’s plea for assistance.
Exactly, and etcetera etcetera, etcetera. The transparency created an epiphany that is obscene when it comes to perpetuating, let alone improving the process of appraising of residences for mortgages.
This is why I choose to work directly for lenders. There are very few AMC’s I work for. They pay my fee or go elsewhere. I do not negotiate. As for Joan Trice, I have never thought she is on the side of appraisers. She has her own Clearbox which costs money for a background check and supposedly you will could get work from other AMC’s that use it. I belonged to it for 2 years and never received even an inquiry for work. She makes money for doing nothing!
Dear Joan. Please forgive appraisers who don’t see the positive aspects of AMC’s organizing. Do they feel they need to empower themselves even more? They’ve already taken most of our fees away while providing no useful services to the appraiser. It’s just business as usual. Anyone who’s been around for 30 or 40 years or more can tell you that treatment of the appraiser for the past 1/2 century has not changed much except for the drastic decline in appraisal fees since the advent of the AMC(not a positive occurrence to most of us). A group of mortgage bankers got together in the days before FIRREA, USPAP, URAR, AMC’s, etc, and one speaker at this meeting(I believe it was head of Transamerica)stated that “The appraisal is the greatest impediment to the loan process.” Guess what, folks, doesn’t that have a familiar ring to it? Why do you think AVM’s are so popular in the lending industry? Why are massive regression programs being considered so important now instead of analysis of truly relevant market data? These methods are ways of “proving” to the uninitiated that educated, experienced appraisers are superfluous baggage that must be removed so the lending process can become more “up to date”. The more things change, the more they stay the same.
Excellent comments re regression Russell! That’s a con job only second to Cuomo’s proposal for AMCs themselves! A limited benefit tool in the arsenal, now being touted as the end all-cure all of appraiser ills. Much like Marshal & Swift used to be for cost estimating. Both decent tools whose importance and relevance was allowed to be overblown.
Joan, respectfully, but you’re headed 180 out if you think an AMC coalition will have anything to do with improving the circumstances of appraisers. I’m disappointed—again, and skeptical for sure. Just look at your membership role and you’ll see who can afford to join. I’m sure that not many are residential appraisers being paid a customary and reasonable fee. Tackle the problems if you will and more power to you, but my bet is that your coalition will hasten the end of appraisers in the secondary mortgage market having anything at all to do with valuing real estate. AMCs see only short term profits to line their pockets and have had ABSOLUTELY NOTHING TO DO WITH NURTURING APPRAISERS OR WITH IMPROVING THE PROCESS OF APPRAISING!!!!! An AMC coalition will focus exclusively on improving the lot of AMCs while biting the hand that feeds them. It is amazing to me that you apparently don’t understand that already.
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Suggested Convention Site I
Nellis Air Force Bombing Range
Alternative Convention Site II
Guyana and under the leadership of a descendant of Jim Jones. If you’re looking to make news you can’t beat a mass suicide.
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Anywhere wiithin Galaxy MACS0647-JD (the most distant known point in the universe)
Joan, I have two choices. To take the CRN at face value and accept that they are truly ‘open’ to discussing the issue with appraisers; or 2. Rejecting everything they say out of hand. I’ll assume they are open to discussion.
Lets start with two premises: (1) AMCs are here to stay whether we like it or not. (2) as a result of foolish national competition among AMCs, banks now require (or strongly prefer) one size fits all national pricing agreements.
I just completed a draft proposal for “REASONABLE” national MINIMUM appraisal fees based upon the Federal Civil Service GS pay scale for comparably skilled and educated appraisers; plus an allowance for parity with federal benefits; nationally recognized regional cost of living differences and office overhead that federal employees do not have to pay.
The reason for selection of the GS pay scale as a model is that it allows for national / regional differences in cost of living; and the rates have already been vetted by the Office of Personnel Management (OPM) as being “reasonable”. No professional appraiser should be required to work for less than the [adjusted] salaries that taxpayers currently pay federal appraisers in their jurisdictions. THAT is reasonable pricing.
The MINIMUM reasonable fee for a non certified licensed appraiser with only three years experience would be approximately $520 for a non complex conforming loan limit FNMA appraisal. For more than five years (licensed) it would run about $585. A complex SFR appraisal & report under a million dollars (including FHA) would run from around $682 to $767 [FHA] for a certified appraiser with 5 years experience. With ten years it would run $794. Over a million would/could be on a bid basis related to anticipated hours required for completion. SFRs on commercially zoned sites requiring a general certified appraiser would run about $916 to $1,050. Two to four units would also be substantially higher than is currently allowed in Bank-to-AMC pricing.
The low end area location multiplier is 14+%. The high is about 35%. The above was calculated at a moderate 27.15% level (Los Angeles-Riverside, California). Lower cost areas COULD be 13% lower however THEN no national fee would be supported and ALL fees would have to be bid on the Federal Location Scales. New York City; San Jose California, Alaska and Hawaii may require higher pricing models (5% to 10%+- more).
Clear cut policies for fee increases based on “changed conditions” as per TRID requirements would have to be defined & implemented as well.
There are about 25 pages of back up charts and explanations that are available in support of this proposal. It addresses the bank to AMC practice of a one size fits all national fee quotes though it MUST be understood these are MINIMUM fees and an hourly based premium ABOVE eight hours expected work is also applicable. Scope creep can also be calculated on an hourly basis.
Anyone that wants a copy of the full (draft) proposal contact Mike Ford, Nat’l. Appraiser Peer Review Committee Chairman, American Guild of Appraisers (AGA) OPEIU/AFL-CIO. You can email me at mike@mfford.com or call me at (714) 366 9404. For those that want more information on AGA please contact JanBellas@appraisersguild.org
For what it is worth CRN and all other AMCs CAN anticipate a huge fight if anything LESS than the proposed National Minimums are promoted as alternatives. On the other side of the coin, we may well support you in seeking a cost plus pricing model from the banks and other lenders that hire AMCs.