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Could a Class Action Lawsuit Finally Unbundle Hidden AMC Fees?

by Isaac Peck, Publisher

Appraisers hoping for the Consumer Financial Protection Bureau (CFPB) to curb the increasing economic leverage of appraisal management companies (AMCs) suffered a setback when new leadership in the White House made clear moves to undermine the CFPB’s rulemaking and enforcement activities in late January 2025.

Many appraisers had looked to the CFPB to issue a ruling that would separate the appraisal fee and the AMC fee on consumer mortgage disclosures, arguing that bundling these two fees into a single “appraisal fee” on disclosures misrepresents the true cost of the appraiser’s services and creates a conflict of interest where AMCs are financially incentivized to shop for the cheapest appraiser, not the highest quality— because they get to keep the difference. This affects consumers’ understanding of appraisal costs, impacts the quality of appraisals, and reduces public trust, the argument goes. (Read “Great Debate on Appraisal Fees“).

With the CFPB unlikely to take action on this issue given its weakened state, a new class action lawsuit, Timmins v. Clear Capital, Core Valuation Management (CVM), and Rocket Mortgage, is forcing the issue to a head in a California courtroom.

Timmins alleges that, because the true cost of appraisal services is obscured and misrepresented on her mortgage disclosures, along with the fact that Clear Capital and CVM took a substantial, undisclosed portion of the “appraisal fee,” that defendants engaged in unfair competition by means of both fraudulent acts and unfair acts, unjust enrichment, and deceptive acts and practices in violation of California’s consumer protection laws.

Against the backdrop of the $418 million settlement the National Association of Realtors (NAR) finalized in late 2024—stemming from a class action lawsuit over price fixing and transparency of compensation in the real estate market—AMCs and lenders are likely approaching this latest challenge to appraisal fee disclosures with heightened caution.

This litigation is important as it challenges the legal basis of the current AMC “fee split” model and presents arguments appraisers have been raising for over a decade.

Will this case lead to material change in the appraiser profession? Only time will tell. Here are the details on what is likely to be just the beginning of a long legal fight over appraisal fees.

Bundled Fees and Transparency
At the heart of Timmins’ lawsuit is the alleged lack of transparency inherent in the way the “appraisal fee” is disclosed to consumers on their initial mortgage disclosures, and even their closing disclosures.

Specifically, a single “appraisal fee” is disclosed to the consumer on the initial mortgage disclosure, but the appraiser is only being paid a portion of that fee, with an AMC, a third-party rarely disclosed to the consumer, typically taking a significant portion of that “appraisal fee.” This single fee, Timmins argues, is “deceptive because a reasonable consumer would conclude that this fee is for the actual appraisal services performed by appraisers.”

Lenders like Rocket Mortgage, Timmins says, enjoy the benefits of using AMCs because it allows them to “receive liability protection” and essentially outsource the entire appraisal procurement function (and its associated costs), while having the borrower pick up the cost of the AMC because it is hidden in the singular “appraisal fee.”

This failure by Rocket Mortgage to differentiate the actual cost of the appraisal and the cost of the AMCs services, and Rocket’s complete omission of the AMC’s involvement in the initial disclosure, misleads the consumer, Timmins asserts—a deception worsened by the low fees paid to the actual appraisers, around 50 percent of the disclosed “appraisal fee.” Timmins cites research suggesting Clear Capital “retained 64-84 percent of the sample appraisal fees charged to borrowers in Florida, Iowa, Minnesota, North Carolina, Oregon, Oklahoma—and California, where Clear Capital retained 66 percent of an appraisal fee earlier this year.”

The language of Timmins’ complaint echoes what many appraisers are thinking: “What services AMCs provide is obscure,” Timmins argues. “It is the appraisers—not AMCs—who contact borrowers, schedule appraisals, conduct appraisals, and prepare appraisal reports. The appraiser’s work can take significant time and includes traveling to the property to examine it, conducting market research on comparable properties, and then preparing a final appraisal report. The AMC receives the appraisal report and forwards it to the lender, but beyond that it is unclear what, if any, role AMCs have in supporting the work to create the appraisal report.”

Timmins asserts that misrepresentation permeates AMC’s practices, from calling the fee an “appraisal fee” at all to instructing the actual (low-paid) appraisers to “not include an invoice” in the written appraisals they give to the customer. The Defendants are thus able to “charge borrowers considerably in excess of the actual appraisal cost, with no tangible benefit to borrowers.” The typical dynamics of a free market are not able to help keep prices competitive for consumers because of the lack of transparency, the argument goes. “The only way to make AMCs’ fees subject to the healthy pressure of an efficient market is to inform consumers of the details of the AMCs’ fees. This would give consumers a chance to demand that lenders compete for the borrower’s business by competing with each other on the price their AMC charges. This competition is not happening now because the Defendants are obfuscating that the AMCs receive an excessive middleman fee,” the suit reads.

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Defendants Answer Back
CVM, Clear Capital and Rocket Mortgage all filed demurrers in response to Timmins, essentially asserting that Timmins’ claims are inadequate, unfounded, and should be dismissed before discovery begins or the case is heard any further by the court.

Clear Capital’s filing argues that Timmins has an “apparent lack of awareness about the critical role that AMCs play” and briefly lists out AMCs’ valued activities, including (1) contracting with appraisers to perform assignments (2) reviewing and verifying the work of appraisers, (3) receiving appraisal orders and appraisal reports, (4) submitting completed appraisal reports to creditors, (5) collecting fees from creditors, and (6) forwarding fees to appraisers.

Interestingly, Rocket Mortgage, Clear Capital, and CVM lean heavily on an “it wasn’t me” strategy, with Rocket arguing that if there was any wrongdoing (which they deny), it was done by the AMCs and therefore Rocket cannot be held liable or responsible. Clear Capital and CVM both say that they never communicated anything with Timmins, therefore any claim for misrepresentation or deception has nothing to do with them.

Answering Timmins’ argument about its engagement letter prohibiting appraisers from including an invoice in their report, Clear Capital maintains that their policy precludes only the inclusion of an invoice, and that appraisers can include the amount of the appraisal fee they were paid.

REVAA Statement
Working RE reached out to Mark Schiffman, Executive Director of the Real Estate Valuation Advocacy Association (REVAA), an organization that represents the largest AMCs in the country, for a comment.

REVAA’s position is that the current practices of lenders and AMCs are in compliance with federal and state laws pertaining to the disclosure of appraisal fees. “We do not oppose the disclosure of the AMC and appraiser fee separately in the consumer closing documents at the national level (per the Truth in Lending Act and CFPB) or on the Uniform Residential Appraisal Report (URAR) at the state level. The new URAR from the GSEs has the AMC contact information included and has line items for the AMC and appraiser fee to be included if it is mandated by the state or if a lender requires it,” writes Schiffman.

The challenge for AMCs and lenders, Schiffman relays, is that the appraisal fee is currently in a zero-tolerance category in consumer closing documents. Keeping this fee bundled with the AMC fee “allows lenders the flexibility to adjust the appraiser’s fee, rather than have to redisclose, if needed to accommodate payment of higher fees to the appraiser per Customary and Reasonable Fee requirements,” Schiffman argues.

If the current law were changed to move the appraisal fee from zero-tolerance category to “a category that permits flexibility for lenders to make reasonable disclosure,” then REVAA would support the unbundling of the fee, Schiffman says.

Stakeholder Consensus
Many of the leading appraiser organizations like the Appraisal Institute, the American Society of Appraisers (ASA), and the American Society of Farm Managers and Rural Appraisers (ASFMRA), have been fighting to separate the appraisal fee and AMC fee on consumer disclosures for nearly a decade—including trying to get a bill passed through Congress six years ago (Read “Appraisal Fee Transparency Act of 2019“).

NAR, for its part, is also in favor of separating the fees, with its 2024 President Kevin Sears writing to the CFPB last year that for reasons of “regulatory oversight and enforcement purposes, transparency, and market efficiency, fees charged by AMCs should be identified separately from those charged by appraisers.”

Many state bankers’ associations also wrote the CFPB last year urging separation of AMC and appraisal fees on consumer disclosures. While the national Mortgage Bankers Association itself was silent on the issue in its response to the CFPB’s Request for Information regarding junk fees, it is widely understood that many lenders appreciate the bundled “appraisal fee” because of the zero-tolerance category that appraisal fees are in currently, to REVAA’s point. Flexible AMC earnings per order prevent lenders from needing to redisclose closing costs when appraisal assignments become more complex.

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Morgan & Morgan Investigating
The largest personal injury law firm in the United States is also now paying attention. Morgan & Morgan recently published a consumer-facing article on their website calling out the hidden fees associated with AMCs and encouraging homebuyers who believe they may have been overcharged to come forward. The firm is actively investigating such cases and offering free case evaluations.

In plain language aimed at consumers, the firm echoes the language of Timmins, arguing that AMCs “bundle their fees with the cost of the appraisal, leaving homebuyers unaware of the inflated charges … This lack of transparency,” they write, “makes it difficult to identify how much of the fee actually goes to the appraiser versus the AMC.”

While not a party to the Timmins lawsuit, Morgan & Morgan’s public engagement on the issue signals growing legal interest in the AMC business model—and suggests that more consumer litigation could be on the horizon. With the ink barely dry on the National Association of Realtors’ $418 million settlement over price fixing and fee transparency, the legal spotlight is clearly shifting toward other corners of the housing industry where similar dynamics are in play. In this climate, the issue of the bundled “appraisal fee” and undisclosed AMC markups is gaining traction as a potential next front in consumer protection litigation.

In speaking with HousingWire, Morgan & Morgan attorney John Yanchunis explains that the firm’s interest in fee practices began over a year ago when two consumers came forward with concerns. That prompted an ongoing investigation into how widespread the issue really is. Yanchunis says one suit is likely on the horizon. With the CFPB weakened and unlikely to act, he says private litigation can step in to fill the gap. “The drama at the CFPB just creates a greater importance for consumer lawyers like me in my firm,” Yanchunis said. “We’re going to be busier because of it. I’m a big supporter of the CFPB and their absence is not going to be helpful to consumers, and we’re ready to fill the void.” For supporters of fee transparency and consumer awareness, such legal pressure may be the only path left forward.

How Big Is Too Big?
Another question that some industry insiders are posing is how big is too big in terms of the size and power of the largest AMCs in the valuation space. While Clear Capital has not published any specific numbers pertaining to its footprint, it is widely regarded as one of the “Top 5” largest AMCs in the United States and is one of only a handful of vendors approved with Fannie Mae and Freddie Mac for hybrid appraisals.

Because the leading AMCs in the country are privately held, hard data about the size and market position is not available. Class Valuation, which touts itself as the nation’s largest AMC on its own website, has completed nearly 20 acquisitions of other AMCs over the last 10 years and has published some data that provides insight into its market presence. In an email put out by Chad Stanius, SVP of Staff Appraisers at Class, Stanius boasts that “by the end of 2023, our remarkable group of staff appraisers completed over 60,000 appraisals for Class Valuation.”

According to data put out by the American Enterprise Institute (AEI), there were roughly 1,650,000 traditional appraisals ordered through Fannie Mae and Freddie Mac in 2023. It is unclear whether Stanius is referencing the total number of appraisals completed by its staff appraisers since the beginning of Class’s staff appraiser division, or if he is referencing what their staff appraisers had completed just in the year 2023. If specific to just the year 2023, this would mean Class Valuation has a pretty substantial portion of total market share in the valuation space. In private conversations, the GSEs have denied that any single AMC has over 5 percent of market share—so definitive data on the market share of the largest AMCs remains unclear.

Conclusion
Will Timmins’ legal challenge to the bundled “appraisal fee” survive? Only time will tell.

It is clear that increased scrutiny is being placed on transparency around fees that are being charged to consumers, specifically in the real estate market. With consumer advocacy law firms circling and appraisal organizations rallying behind greater fee transparency, the fight over what constitutes a fair and fully disclosed “appraisal fee” is hopefully not over yet. Whether through court rulings, regulatory reforms, or sheer consumer pushback, the bundled fee model is facing more heat now than at any time in its two-decade run.

For working appraisers, the stakes couldn’t be higher. The bundled appraisal fee allows a fundamental conflict of interest to continue, i.e. AMCs profit more by paying appraisers less. The risk here is a race to the bottom where the cheapest appraiser is prioritized, not the most qualified. Appraisers will be watching closely, as the future of their compensation model—and their visibility in the real estate transaction—hangs in the balance.

About the Author
Isaac Peck is the Publisher of Working RE magazine and the President of OREP Insurance, a leading provider of E&O insurance for real estate professionals. OREP serves over 10,000 appraisers with comprehensive E&O coverage, competitive rates, and 14 hours of CE at no charge for OREP Members (CE not approved in IL, MN, GA). Visit OREP.org to learn more. Reach Isaac at isaac@orep.org or (888) 347-5273. CA License #4116465.

OREP Insurance Services, LLC. Calif. License #0K99465