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Feds to Reconsider Customary & Reasonable Fees – Maybe
by David Brauner, Editor
Appraisers might have some good news regarding fees after all but it’s hard to tell.
Speaking at the Appraisal Summit last month, the lead enforcement attorney for the Consumer Financial Protection Bureau (CFPB), Anthony Romano, told appraisers that he is aware of the ongoing controversy surrounding low fees and said that his agency intends on looking at the issue more closely in early 2014.
Appraisers at the show seemed genuinely buoyed by Romano’s remarks, which seemed to support the view that the customary and reasonable fee provision of Dodd-Frank is not being properly enforced and that low fees can and do adversely affect quality. A follow up statement issued by his office, however, seemed much less clear (see below).
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RESPA to the Rescue?
At the conference, Romano cited his experience as a mortgage banker to emphasize his understanding and respect for the role appraisers play in the lending process. He stressed his high regard for appraisers throughout his virtual presentation. (Romano was scheduled to speak at the Summit but an illness prevented his travel.)
Romano said lenders should not be cutting corners on appraisals. He noted that appraisals are the last defense against fraud and that consumers deserve quality when participating in what is for many, the largest financial transaction of their lives. He noted that while the agency doesn’t want consumers to pay more for appraisals, it also doesn’t want bad values.
Romano cited RESPA (Real Estate Settlement and Procedures Act) as a possible starting point for addressing low fees. He said that one suggestion is to list appraiser and AMC fees separately on closing documents, something many appraisers have long called for. The CFPB took over the administration and enforcement of RESPA in July 2011. RESPA was passed in 1974.
Romano explained that historically the “Lender Processing Fee” line item on settlement documents included items that were a lender’s expense. Today, lenders continue to collect “lender processing” fees but no longer bear the total cost of these services, which are partly handled by AMCs. Some of these costs now show up in the “Appraisal Fee” line item, which does not provide transparency to consumers- who might reasonably expect the “appraisal fee” to cover the cost of the appraisal. Part of it goes to the appraiser and part covers AMC costs.
Romano made no other substantive statements about how customary and reasonable fees might be achieved, either at the conference or in follow up questions from WRE. At the conference, he did say that whatever actions his agency takes will be phased in slowly so as not to disrupt the marketplace.
At the conference, Romano voiced what many appraisers believe, saying that if more attention had been given to appraisal independence issues it might have helped avoid the real estate collapse. He seemed to be aware of “black” and “do not use” lists but made no comment. Numerous appraisers have complained about not seeing any action to appraiser independence complaints made to the CFPB. In a follow up with WRE, Romano did not answer why this is the case.
A spokesperson for Romano issued the following statement to WRE on his behalf: “The CFPB will continue to look at fees as part of the supervision process to determine whether they are customary and reasonable as specified in Dodd-Frank. Additionally, the Bureau will continue to work within an interagency group to develop proposals to implement the Dodd-Frank Act’s amendments concerning appraisal issues. For information about the CFPB’s regulatory agenda, you can consult the Bureau’s strategic plan at http://files.consumerfinance.gov/f/strategic-plan.pdf, or see our current notices here: http://www.consumerfinance.gov/notice-and-comment/.”
The statement issued by the office also said that Romano’s remarks at the conference were his own opinions and do not necessarily represent the views or plans of the CFPB.
About the Author
David Brauner is Editor of Working RE magazine and Senior Broker at OREP.org, a leading provider of E&O Insurance for appraisers, inspectors and other real estate professionals in 49 states. He has covered the appraisal profession for over 20 years. He can be contacted at firstname.lastname@example.org or (888) 347-5273. Calif. Insurance Lic. #0C89873.
We’re always listening: Send your story submission/idea to the Editor: email@example.com.
by Retired Appraiser
Only one response is appropriate here: “Bull Ship they will reconsider fees”-
by Pete Schneider
AMC’s are starting to lose biz as the times get tough. They will not eat the loses and so, turn it on the appraiser. A long term relationship with an AMC who used to pay $360.00 per appraisqal (standard), has now dropped the fee to $250.00 so they can stay in biz. This is one of the reasons AMC’s should be disbanded. 90% of AMC’s have ownership or ties to the lender. I cannot begin to tell of the cloients I am no longer allowed to work with because I stood up to the AMC who always sides with the lender. What the HVCC tried to kill is not only back in full force, but thriving at a different level. I have one particular lender who was giving me appx 20 appraisals per month aat $375.00 each. The lender ‘s underwriteres called me for appraisal questions and aid. The lady who orders the aprpaisal asked me to change an FHA appraisal, which I of course said no. Have not seen a single order from this company, and when questioned, the opperations manager stated “She does all of the ordering, I cannot help you”. I am also in small claims to recover fees from a respectable AMC, who did not like my appraisal because it did not conform to lender’s guidelines. I told them in advance it was impossible to conform and they even increased my fee. I lve 4 homes from teh proerty, and my appraisal was thrown out and the AMC will not pay me because they do not agree with my statements. The property funded by the same lender for full sale price weeks later. We should be independent and answer to the investor/underwriters only. Sales people run the biz again. Welcome back 2005-
by Mark SRA
Appraisers are the problem when it comes to C & R fees. If appraisers would demand more money and require a decent amount of turn time the whole system would be much better off. But, there are bottom feeders in every field and these people will aways leave and go some where else. I demand a decent fees for my work and I get it most of the time. I loose a lot of work but many times these clients call back and some times thing do work out for the better. One of the first things I learned in this business a long time (25+ yrs) ago was there is always work for good appraisers. Just say No to amc’s.-
Customary and Reasonable?? What used to be customary and reasonable is no longer sufficient to maitain any type of decent living. With the excessive asignment conditions of the lender AND the AMC, as well as the required UAD program, these reports take 3 to 4 times as long as they used to (or more). Also, due to the ever present urgency of a contact to schedule an appointment and the requirement of a quick completion after the inspection. Inspections can no longer be grouped together to make the Appraiser more efficient. I have to make a 30 mile (one way drive) for 1 inspection. AND, when the report is completed, you can always count on some ridiculous post completion request or appeal from the lender, no matter how difficult the report was, or how high of quality the final report was. After all of this, we should be happy with “customary” fees? Reasonable is another story and who is to decide that? With all of the extra work and time involved in completing a report for a lender, the fees should be double what WAS customary. They can’t do it without us, but we are always teated like the enemy, even thouhg the Appraiser is the ONLY one involved with a transaction that does not have a horse in the race. The Appraiser’s fee is the same whether the deal closes or not. Not so with everyone esle involved in the deal. It’s just SAD.-
by Rick Stillman
The heat from the comments here is incredible. To sum things up – no, this isn’t the greatest country in the world. I may write a book on how the government can twist things to destroy people’s lives. And I’m not just talking about appraisers. Let’s see how this health plan debacle plays out, as one example. Many people have had their premiums rise over 30% – instantly. Are we outraged over the incompetence and broken promises of the leaders of this once great land ? It’s just one joke after another, and as Beatlejuice said, “and it keeps getting funnier every time I hear it!”-
by Daniel Kandel
Save me a place on the lake bottom, the way things are looking, its only a matter of time. Once the last “live” appraiser gives up, dies, or retires, the AVMs will replace us.-
Its amazing that appraisers still lingering on this b/s! We’ll address it in 2014 so ya’ll know im concerned. Why even report some b/s like this? This isnt info to be used but fluff to keep ya’ll in line! The business is screwed & there’s no turning back. This is the only profession where others have decided the demise of an industry while lining their own pockets. HVCC was the downfall, frank Dodd was the savior yet in still “fees” are still being discussed years later with no signs of improvement! Can you say take it in the rear slow b/c that is what has happened! Its too good at the top so why fix it if apprsisers are still bending over? Im officially out of the business by way of the crooked GREAB & their extortion tactics but still see appraisers getting extorted by the Boards & Regulators and nothing is still being done to correct it but TALK!-
by Mike DeLuca
I agree, as long as the lenders are making the rules there isn’t any hope of changing the system. The independence many of use find attractive about the appraisal profession, is an advantage to the lender. If they want to get a handle on appraisal fees it should be as simple as requiring the appraisers original invoice on all reports.-
by j kuhns
I am with the government and I am here to help! They are inept, incompetent and everything they touch………………..-
by Mike Ford
Aside from not trusting our independence (name ANY other profession where the professional opinions are distrusted as much-other than lawyers), the lenders have become used to not hiring and maintaining their own appraisal departments any longer. THAT is our biggest hurdle. Lenders think of appraisal departments as impediments to profit. Title companies are ONLY concerned with appraisers as NET profit centers. Profit ALWAYS comes before quality with them.
Most of us never had a problem standing up to abusive lenders OR loan officers. Anyone from the 1980’s or early 1990’s knows how to say “no”-most of us an do it without losing the client, but in rare cases where we did lose one, we considered ourselves lucky-at least until they came back six months later. HVCC killed 20 to 25+ years of business relationships that we cannot recover in less than ten more years even of everything changed overnight back to how it was. Our contacts are now gone. The ‘chain of trust’ has been broken.-
by Mike Ford
You’re right. Question is what do we do about it? Some have quit. Some are just rolling with the flow; letting the tide take them wherever it will. I’m no quitter. Been at this since mid 1986 and have no desire to reinvent myself at this late stage of the game. We all know what needs to be done. What FEW know, is how to deal with federal agencies; or how they operate. At BEST they are very cumbersome. It has taken us FIVE YEARS to get to this point, where the feds are even paying lip service to the fee issue. Lets not give up now. If it takes another five years, we still have few alternative options.-
by Mike Ford
Paul, the ‘government’ used to pay me $93,140 a year as an appraiser (plus benefits). Trust me when I say I’d rather have THEIR idea of how much appraisals should cost than an AMCs. I think we all agree with you in principle but those days of being selected because of our superior reputations for quality are long gone. Respectfully, NO residential appraiser with 5 or more years experience should be getting paid less than $60k a year. No commercial appraiser with similar time should earn less than $75k. Paul, we were already regulated. Damn near to the point of being driven out of business under Cuomo’s HVCC. Right now WE are one of the few professional areas of the loan chain that IS regulated. We already have the burden of regulation-its time we have the compensation! Right now VA assignments are paid fairly close to reasonable fees and they are regulated fees. FHA appraisal fees are not regulated and follow the same trends as the rest of the AMC work.-
by Mike Ford
Disagree Sabu. When quality meant something I’d have agreed with you. Now that we KNOW AMCs shop the lowest fees rather than the most qualified, I don’t care if the less experienced appraiser earns the same $650 I should be getting for a non complex, FNMA conforming loan appraisal. That’s a LOT better than me having to accept $350 for the same assignment. BTW-I do honest highest and best use analyses on each assignment; honest cost approaches with supportable land values and depreciation estimates; and when the 1004MC addenda makes no sense (90% of the time) I take the steps necessary to refute and replace its indications. IMHO NONE of us should be accepting less than $650 for a UAD USPAP compliant non complex, conforming loan FNMA appraisal.-
by Mike Ford
David, we can make an enemy of him, or we can try to enlist his aid to whatever extent he is permitted to render that aid. I’d rather have him as an ally, than as another entrenched bureaucrat made angry by bitter appraisers.-
by Mike Ford
Having been a Sr. R.E. appraiser in the Treasury Dept. (IRS), I believe I can tell when someone has been ‘slapped down’ for having been too candid. Sure sounds like Mr. Romano was ‘counseled’ about suggesting either pro or con positions before twelve dozen different agency managers review his opinion; it’s verbiage and then approve or confirm any resulting policy directions that would be indicated by it. The “inter-agency coordination” is bureaucratese for saying until the vested interest parties have been heard from, no decisions will be made one way or another. The MBIA and all the AMCs can be expected to mount significant opposition to any meaningful changes. I submit the best we can do is to inundate Mr. Romano with the ammunition he will need to present our case. His remarks sure sounded like an honest guy wanting to do a good job, but never assume he will be permitted to do what is right for its own sake alone. We need to literally bury him in emails (RESPECTFUL ones!), that he can take to his bosses to reinforce the view that change is needed in the first place. Bureaucrats are not fond of change.-
by David Eaton
This gut Ramona is only a spokeshole for the consumer beaure. What right does this guy have in stating he doesn’t want consumers paying more for appraisal fees. Oh…so it’s OK for the banks, etc. to pay less to the appraisers but doesn’t want consumers to pay more. What kind of logic is that. Maybe he should be addressing this to the banks who are paying less (most own their own AMC’s) while also making a profit. This guy is never going to do anything and no one should think otherwise. Customary fees nor reasonable fees where never originally addressed because of pressure from the bankers and their AMC allies. These pressure groups will never address this problem because to do otherwise would jeopardize their profits. Appraisers are too disorganized to fight this so everyone might just as well settle down and accept what you can get. To get angry about this is fruitless. Those who have the gold make the rules, period. See DesiG article above.-
I am firmly against government mandated fees, because then the lowest quality appraisers will be paid the same as the best. However, breaking down the fee in the closing statement (ie transparency for the end user) is definitely needed. When the end user sees that the appraisal fee was $200 and the “management fee” was $400, there might be some push back.-
by Paul Kressin
Point 1) There is only one person who should set the fee for an appraisal; the appraiser who accepts and completes the assignment. No one else, in a free society, should call the shots, especially the Federal government or AMCs. Clients should be allowed to choose the best appraiser, not the cheapest or fastest and appraisers should be able to set their own fees.-
2) The corollary to this is: If the Federal Government sets ‘reasonable and customary fees’ then no natter how complex or simple the appraisal is, the appraiser will only get whatever the government mandated fee happens to be. As a ‘regulation’ it will be problematic, if not impossible to change, despite changing conditions and the inevitable inflation. Conclusion: This is just one more attempt to regulate appraisers into complete control and eliminate professionalism.
Example in history: Doctors fees paid by Medicare. Now congress is the only one to set what they get paid for their work no matter how complex or simple the medical problem is.
by Rick Stillman
I’m glad Lore saw something in this article to be happy about – I sure didn’t. Even if we did have respect – choke/gag – that does not improve our situation as being the most overtaken profession in history, that has been thrown under the bus and screwed over so many times I don’t even keep score anymore. All this article says is that someone – sometime in the future – will look at things – and maybe do something – but if they do anything, it will be phased in slowly as to not disrupt the status quo. Who is happy with that, except the AMCs? This is just a lot of hot air, and time wasted. Nothing has been said – nothing is planned to be accomplished – and we are all stupid if we think otherwise. Grow up and recognize a kick in the teeth when you see it people. It’s been happening since 2007, and if you don’t have it figured out by now, you may be beyond hope.-
by Rick Stillman
I am surprised by all of the appraisers here calling it as it is, with the noted exception of Lore, who is glad we are finally being listened to, and being given respect. I only wish I could afford what Lore is taking/smoking, then I too could feel good. But, this article is a joke, as has been the profession for the past 6 years. So things are going to be “looked into” and any changes will be “slow.” And the speaker is “aware” of problems and issues. I can’t say I read anything in this article that impressed me one iota. It’s more rhetoric designed to keep the few, the proud, and the stupid, hanging on – again – and again – hoping for something – anything – to change for the better. Fool me once, twice, and up to ten times, shame on you – fool me over and over again, shame on me. There is nothing being held out – or offered – or even a plan – in this article, at all. Empty wind is all this amounts to – hot air expelled and time wasted – once again. This is nothing.-
OMG, how ignorant and gullable can one be……the appraisers low balled cut throwth fees will never end unless we make it illegal for monopolized AMC’s to steel, i mean take, a large portion of the appraisers income. We need to work as independent busness people, find our own business clients on quality and service like Mr. lawyer would. This industry has become a joke along with all the summit and meetings.-
I have been an appraiser for 15+ years, currently wrapping up a chapter 7 bankruptcy and foreclosure. This has been due to the HVCC and the change in fees. This has been a ridiculous few years. Anyone who thinks the quality of appraisals is better now has to be smoking crack. I would love to have an audit of all these files done. The funny thing is the audit would go to an AMC who would “shop” for the lowest fee and then the least qualified appraisers would do the audit. This whole thing has turned this industry into a joke. The fee issue is quite simple. We are being paid 50% of the fees from 1999. Could anyone else besides these clowns not see that this IS NOT fair and reasonable? What do these words even mean? AMC are making money on things like completion certificates/442 and trip fees. Disgusting.-
by Kevin Talbott, SRA
The fees do affect the quality of the appraisal. This can be seen by the FDIC lawsuit against LSI and Eappraiseit. Google it for more info. The consumer is paying for a superior product but actually getting the cheapest product. This system is not just unfair to the appraisers, but also the consumer. The adage you get what you pay for is not true in this case, from the consumers part, who is actually paying.-
by Daniel Kandel
David- These are encouraging comments concerning C & R and Blacklisting. IMHO, I think the blacklisting is more devastating because it is created in secrecy, based on hidden facts/agendas, and ONLY used to damage/ruin appraiser reputations and livelyhoods. I checked the definition of the word “Libel”. It would “appear” that by creating and publishing these lists meets the definition of libel against all the appraisers on the list. Apparently, when reading recent comments, there is little that an appraiser individually can do. Why couldn’t there be a class action suit brought against lenders such as, Flagstar Bank and others that have created and/or possessed these lists for many years. Also when one lender passes this information on to “others”, this further spreads the damages from the libel. Aren;t there laws against this? I wish I personally had the money to offer some leaker a bounty for a “verifiable blacklist” to be provided to any authorized representative on behalf of all appraisers as a class action. Any ideas as to how many appraisers nationally there are who have “actually” been blacklisted and can provide evidence and damages. Thank you.-
by Colin Taylor
could not have said that better myself! TOUCHE!-
by Colin Taylor
I, like many appraisers in this industry, have suffered greatly during this so called correction. The fees currently being offered as compensation for what is a more highly complex report, promulgated by industry leaders, are far below what would be considered reasonable by most any seasoned appraiser currently in business. Why is it so hard to understand that current compensation is inadequate? All one has to do is simply look back prior to 2008 and I believe it will become abundantly clear to anyone that appraisers are not being compensated fairly. I, being in this business for the past 27 years, can tell you from experience that the fees currently being offered represent fees from the early years of the millennium. They can regulate all they want. The bottom line is appraisers are going to do whatever it takes to make a living. Hell, appraisers have had their livelihood ripped out from underneath them. And industry leader expect the highest standard of quality? Get real. If something doesn’t change soon I, like many others that have been in the (so called) profession for over 20 years, will be looking for another way to pay my bills because I personally am sinking like a rock.-
by Barry Kimmel
Why don’t we just get rid of all the AMC’s and give back the appraiser’s independence? What good has come of these groups, other than problems for lenders, appraisers and consumers.-
by Derek Eisenberg
If the AMC’s achieved their dominance by market forces, I would have no issue with free market fees. However, since regulation basically fueled their industry, the give back should be protecting appraiser fees. In other words their buying power and market dominance was not self earned. It was handed to them.
Appraisers, if you are worried about customary and reasonable fees it is time you found another line of work. If you are counting on the federal government to provide you satisfaction you have already lost the war. Government is an obstruction to your business not your friend! You must be paid an equitable fee to stay in business, and if you can’t collect that equitable fee then it is time to find another line of work. As an appraiser you have skills, and they can be used in a wide variety of business opportunities; so find another line of work. If appraisers would all embrace the concept that as a business person you must receive an equitable fee or no appraisal, it would be soon enough that fees increase and are neither customary or reasonable but absurdly high, and then you as an appraiser have control of your destiny and can laugh all the way to the bank as you deposit your outrageously equitable fees. What are you worth? Either you take control of your destiny or someone else will do it for you! Your choice!-
by Lore DeAstra
Great coverage David. The appraisal industry has transformed over the past +20 years (since NAR and AI/Society disassociated). Your article offers proof of respect for us, our industry, and the + changes in the future. Thanks so much!-