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Comment on Financial Reform Implementation

November 16, 2010

Dear Sir/Madam:

I am writing you regarding my experience with Appraisal Management Companies
(AMC’s) and the requirement for reasonable and customary fees. I have been an
appraiser in South Florida for over 20 years. During this time I built a sold business and
professional reputation by providing clients with unbiased, high quality appraisals with
excellent customer service. I never gave into lender pressure to over inflate a property
value, over look a repair or other issues, my integrity was far more important in the long
run than making a single customer happy for an appraisal fee. During the majority of the
past 20 years I have been able to make an honest living that supports my family,
employed support staff and even trained new appraisers. Since the implementation of
HVCC, which has basically took away all of my clients and have been forced me to
accept work from AMCs, I have lay off all of my staff and trainee appraisers and can no
longer make a reasonable living or support my family.

The AMCs were given more than 85 percent of the appraisal assignments over night
because of the implementation of HVCC. Because they control nearly all of the appraisal
assignments they are forcing appraisers to accept lower and lower fees while requiring
quicker turn times and more irrelevant work. The AMC’s know that because they control
almost all of the appraisals they can offer any fee and there are appraisers that will
accept it. This is primarily due to the economy, as most appraisers have been financially
ruined by the implementation of HVCC and any work, at any fee helps put food on the
table. Many appraisers including myself are considering a new career because of this;
however, the job market is very week, which is forcing us to continue to work as
appraisers at fees we can not make an honest living at.

Unfortunately not only is the appraiser getting hurt by this, the consumer, the lenders
and the US public is also seriously impacted by this. The unreasonably low fees and
unreasonable turn time demands by the AMCs has forced appraisers to take short cuts
in order to complete their appraisals. It has also forced many of the experienced
appraisers to leave the industry leaving mostly inexperienced appraisers who are willing
to take numerous shortcuts in order to make a minimal living. This is a recipe for
disaster. Every week I get new emails from AMCs stating that they are lowering fees.
With inexperienced appraisers rushing through appraisals assignments, cutting corners
and even committing fraud to complete them as fast as possible, the consumer, who is
paying from $450 to $650 for the appraisal is getting a worthless valuation. The lenders
are making loan decisions based on these worthless appraisals which will ultimately
require the US public to bail out the big lenders again. This does not take into account
the lack of good, sound transactions that are being denied because of poor appraisals.
New sales are suffering, home owner’s equity is being eroded and property values will
continue to decline because of poor quality, cheep and fast appraisals. Many of the
appraisers I know that do AMC work state that they are simply throwing together the
easiest fastest appraisal they can in order to be able to make any money at the fees the
AMC’s are paying. They do no care if the sales used were foreclosures, short sales,
distress sales, in poor condition etc.; they do not have time to verify this information. I
have heard several appraisers’ state that they purposely try and under value a property
because they are so disgruntled with the AMCs and the fees they pay. The purposely
choose the lowest sales in the market, as they are generally the easiest to find, least
hassle and they can not be accused of over valuing the property.

The largest lenders, who all own AMCs, do not seem to care because this is a huge
profit center for them. They are making $100’s of dollars on each loan application
regardless if the consumer ever gets a loan I know first hand of several large lenders
that are charging the borrower $500 for an appraisal and are paying the appraiser $165.
This puts $335, over twice what the actual appraiser is making, in the pockets of the
lender owned AMC who is simply passing an order down to the appraiser.

Prior to HVCC the standard/base fee for an appraisal in South Florida was $350 to $400.
This did not include all of the new requirements implemented by HUD and FNMA such
as 2-3 additional comparable sales and listings, the new 1004MC Market Conditions
Report, additional photographs included in the report, not to mention all of the individual
lender and AMC’s additional requirements. Since HVCC most of the AMCs have
reduced their fees to as low as $150 and a high of $225 for an appraisal. I know of one
AMC that has recently reduced their fee to $125 fro a full single family appraisal with all
of the above addendums. In addition they want the appraisal completed in 48 hours. I
have an AMC that requires me to accept the appraisal within 1 hour of being email the
order, I am required to call the borrower within 4 hours of receiving the appraisal
request, set the appointment with the borrower within the next 24 hours and have the
completed appraisal delivered within 8 hours of the inspection. How can an appraiser do
a quality appraisal with these time constraints at any fee, let alone at the $125 to $225
the AMC’s are paying?

I beg you to make it mandatory that all lenders and AMC abide by the reasonable and
customary fee requirements mandated by the new Financial Reform Bill. Not only does
this need to be implemented, it needs to be enforced. I have discussed this with several
AMC clients and they have all stated that they do not have to abide by this new
requirement. They maintain that they have been paying reasonable and customary fees.
Their claim is that if appraisers accept the fee they offer, then it is reasonable and
customary. This would only be true in a true open market, like the market prior to HVCC,
when appraisers could choose to work or not to work for AMCs. However, they are
taking advantage of appraisers, the economy and the fact that they were simply given
over 85 percent of all the appraisal assignments. This does not meet the definition of a
free market. In the past the American public has been protected from abuse with
minimum wage requirements, child labor laws, OSHA and other labor laws, this
reasonable and customary fee requirement is an equally important law.

I appreciate you taking the time to read my letter and hope that it helps you establish a
reasonable and customary fee for all appraisals in order to maintain quality appraisers
and quality appraisals. I am not aware of any other profession that the purchaser of a
service would strictly use the services of the cheapest and fastest provider, with no
regard for quality, competency or experience. I would not use the cheapest and fastest
heart surgeon, accountant, attorney, auto mechanic, plumber, electrician, etc. and I
doubt that any reasonable person would either. Likewise I doubt that the typical
borrower/buyer of a home knows that they are paying $500 for an appraisal and are
getting a worthless appraisal that the lender only paid $165 for and pocketed the
balance. I know if I were charged $500 for a service and found out that the person I paid
found the cheapest person to do the job and kept most of the fee for basically doing
nothing I would feel very cheated.

If you have any questions please feel free to call me anytime.

David Nyitray

Last Updated 11/19/2010 FinReformComments@fdic.gov